On Strategic Quantity Bidding in Multiple Unit Auctions

Rafael Tenorio

Journal of Industrial Economics, 1997, vol. 45, issue 2, 207-217

Abstract: Standard studies of multiple unit auctions generally overlook the strategic role of bidders' quantity decisions. Using a simple equilibrium model of bidding I analyze bidders' incentives to choose quantities in discriminatory and competitive auctions. The main result is that bidders have a stronger strategic incentive to bid for fewer units in competitive auctions. Since under competition a bidder pays the lowest accepted price for each unit she gets, she may benefit from dropping her quantity to let lower‐valuing bidders enter the set of winners. This prediction is consistent with empirical observations from foreign currency and spectrum auctions.

Date: 1997
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