ON STRATEGIC QUANTITY BIDDING IN MULTIPLE-UNIT AUCTIONS

Standard studies of multiple unit auctions generally overlook the stra tegic 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 bidd ers have a stronger strategic incentive to bid for fewer units in comp etitive auctions. Since under competition a bidder pays the lowest acc epted price for each unit she gets, she may benefit from dropping her quantity to let lower-valuing bidders enter the set of winners. This p rediction is consistent with empirical observations from foreign curre ncy and spectrum auctions.