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Basic theory question: how does bid work?


Hi guys!
I've been doing some tests with bid and got some questions and would like to discuss them with you

So, in theory we know that bid affects quantity of traffic you get from source
Also I heard it determines thequality (like the higher price = the better traffic from site?)

So, let's imagine you have 5 copies of the same campaign in one traffic source (let's say Propellerads)

If I set the bid to: 0.0005, 0.0004, 3, 2 and 1 in tier3 geo for each of them, I'll probably get no or almost no views for the last one and will get some views for the 1st one

But is it smart to do so and test, or shall I compete with myself?
Sbould I increase the bid to get higher quality sites, or I will just overpay for the same traffic?

And how
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