THIS paper examines economic determinants of bidding behavior in petroleum lease sales on the United States Outer Continental Shelf (OCS). Factors which presumably condition the magnitude of a firm's bid include: the expected economic value of the potential resource; the degree of uncertainty which surrounds this value; the anticipated degree of competition to acquire the tract in question; and the firm's capacity to bear significant financial risks. We show below that systematic differences in these factors do significantly account for observed fluctuations in the magnitude of tendered bids. Economic factors that impact bidding behavior are of considerable interest to auction participants and to the federal government, which administers the auction procedure. The interest of participants stems from their desire to formulate successful bidding strategies appropriate to their individual circumstances. The government's interest derives from the legal responsibility to design an auction procedure and adopt policies that elicit "fair" bids from the participants. Many of the leasing policy alternatives that we presently face (e.g., royalty bidding, profit-share bidding, and bonus bidding with sliding scale royalties) can be expected to affect underlying factors (i.e., prospective risks and resource values, and the degree of competition) that influence bidding behavior. An informed choice between current policy options requires some empirical knowledge of the impact which these factors exert on the strategic bidding behavior of firms.