Optimal Strategies for Bidding on Perfect Substitutes in Simultaneous Vickrey Auctions

We derive optimal bidding strategies for a global bidder who participates in multiple, simultaneous second-price auctions with perfect substitutes. We first consider a model where all other bidders are local and participate in a single auction. For this case, we prove, somewhat surprisingly, that the global bidder should always place non-zero bids in all available auctions, irrespective of the local bidders’ valuation distribution. The optimal strategy is then to bid high in one auction and equal or lower in all other auctions. In addition, by combining analytical and simulation results, we demonstrate that similar results hold in the case of several global bidders, provided that the market consists of both global and local bidders. In the case of global bidders only, there is no stable solution.