Biodiesel auctions in Brazil: Symmetry of bids and informational paradigm

Abstract

In this paper, we examine the winning bids of the biodiesel auctions conducted by the National Regulatory Agency for Oil, Gas, and Biofuels (ANP) in Brazil from 2012 to 2019. The public policy to develop the Brazilian biodiesel market had on the auction a fundamental pillar, providing stability for both suppliers and demanders. During the study period, the auction design had a stable framework of rules, enabling conditions for understanding competitors' behavior by studying their bids. Initially, we present an overview of the state of the art on the biodiesel program in Brazil and highlight the scarcity of published studies on biodiesel auctions. In sequence, we classify the auction according to the economic theory, showing that it fits the multiunit, sequential, first-price English auction design, and we review the specific literature for this auction model. Then, we analyze the database structure and investigate the presence of information asymmetries among bidders, using cumulative probability comparison as well as the two-sample Kolmogorov-Smirnov test and the t-statistic test for means. Results offer strong evidence in favor of information symmetry. Later, we check the hypothesis of common values on the data, applying a parametric test to verify the presence of the winner's curse. Results corroborate the existence of the winner's curse and the common values paradigm, discarding the application of the independent private-values paradigm to the data. Finally, we comment on the possibility of further studies on the topic.