In a Two basic types of auctions are regularly applied to allocat..., one bidder may enter more than one project into the An auction is a market mechanism with the aims of allocating... More. In fact, this is quite likely unless the policy maker specifically prohibits multiple projects per bidder. In a multiple-item auction, one bidder may enter more than o... More are not a problem when competition is high. However, in cases of low competition, they can be problematic under a Determining the final price from the set of bids can be done... rule, as they may have incentives to overbid or to undertake strategic supply reduction: For a bidder with multiple projects, it is optimal to bid at true cost for his lowest cost project, but to overbid for the second lowest and the following bids in a multi-unit An auction is a market mechanism with the aims of allocating... More. There is a positive probability that one of the higher bids is price determining, i.e. that it determines the Just like administratively set support, auction-allocated su... More level for all winning bids. If the competition increases, both the probability to determine the price and the probability to be awarded decrease. Thus, the incentive to overbid decreases as well (Engelbrecht-Wiggans & Kahn, 1998). The risk of strategic supply reduction is also affected by the competition level. A multi-project bidder might withhold some of his projects to gain a higher price for the remaining ones. The incentive for this behaviour decreases with a higher competition as the impact of the supply reduction decreases the more other bids are submitted (Ausubel, et al., 2014).
Ausubel, L. M. et al., 2014. Demand Reduction and Inefficiency in Multi-Unit Auctions. Review of Economic Studies.
Engelbrecht-Wiggans, R. & Kahn, C. M., 1998. Multi-unit auctions with uniform prices. Economic Theory, Vol. 12, No. 2, pp. 227-258.