Hello,

Does reducing ad units increase auction pressure

Yes, but I guess it might vary from one niche to another.

Reducing the number of ad units has several advantages (which might or not result in higher earnings, you can only tell my testing).

With less ad units, as you guessed, there is a higher pressure on the auction. This is also speeding-up your page loading, and improving user experience, which might enhance your traffic.

I repeat, all this are hypothesis, each site is different, so there are no universal answers. Test, and see what happens.

The question is : is it better to expose more your users to ads, with the chance of them clicking in one, or is it better to lower the number of ads (and so the chances of getting clicked), but with a far better CPC?

No one can answer this to you. Test it.

@Jori: Yes, I can know for sure only by testing, but will reducing units more likely than not increase the CPCs? Since advertisers will have a lesser number of auctions to compete won't the bids go up?

I understand that the impact on overall earnings, which I know can be found only by testing. But CPCs?

I feel like I'm repeating myself with this answer:

In theory if you reduce supply (fewer ad slots) price will go up. But! at the same time you will reduce your revenue generated by the ad unit that you removed, and in my experience the marginal gain in impression RPM achieved by reducing supply was not enough to compensate for the revenue lost from the removed ad unit. When I did this I went from 3 ads to 2.

You can now turn this whole premise on its head, if by eliminating one ad it reduces revenue, then adding more ads per page should increase revenue. This may in fact be true, but with diminishing returns. In other words, one more ad may increase page RPM by $1, adding 2 by $0.50 and adding 3 maybe nothing (values are arbitrary, simply to illustrate diminishing returns*). So if you have 4 or 5 ads per page, then removing one could increase revenue.

The other aspect to consider is that too many ads on a page may cause Google to reduce your ranking in the SERPs, thus reducing traffic, so you will earn more per page impression but have fewer page impressions and of course the opposite would then be true too. The issue with this is attribution, traffic can change for a wide variety of reasons so can one really be sure that adding/removing ads resulted in a drop/rise of traffic.

And there is also the impact on active view viewable, but that was the point of my last post on this topic here:
[webmasterworld.com...]

*Diminishing returns explained in full economic nerdiness:
[en.wikipedia.org...]

Here is a link from AdSense support that provides a detailed explanation of the ad-auction process. It doesn't really answer the question but provides a good basis for understanding the process in general.
[support.google.com...]

@NickMNS Thanks a lot. That was very informative. I will go through the links you had provided.

From my tests. Less units less money. CPM CPC wasn't affected at all by reducing ad density.
If you have room for a unit put a unit. Your earnings will only increase.
Remove a unit earnings will go down.