Reader Mailbag: Competing Auction Snipers
Filed Under Bidders' Tips | 1 Comment
Reader Peggy asks:
I’m new to eBay & was just frustratingly introduced to the process of “sniping” & then the discovery that there’s software to do this! I just read Doug Feiring’s article & wonder – what if 2 or more bidders are using snipe software? Who wins, how, & what is then the advantage??
Thanks for the question Peggy.
If two or more bidders are employing auctions sniping techniques in the closing moments of an eBay auction, the winner will be the individual who set their bid price at the highest amount. Let me explain…
eBay auctions are what is known as “second price auctions.” This basically means that the highest bid wins, but the bidder does not necessarily pay that amount. The winning bidder pays the highest bid of the second place bidder plus whatever the minimum bid increment is for that particular auction. Bid increments on eBay are determined by the current price of the item being auctioned. For example, the bid increment for an item for which the current bid is under a dollar is 5 cents. For items between one and five dollars, the bid increment is 25 cents.
Here’s a scenario that I hope explains the concept.
I’ve got my heart set on an iPod nano auction that has bids and current price of $28.00. I decide to bid using an auction sniping service like AuctionStealer and place a bid scheduled to occur in the final 10 seconds of the auction for $32.00 – the most I’m willing to pay for the item.
If no other bids are placed (and the current bid of $28.00 is also that bidder’s maximum bid), I will win the auction and only pay $29.00 — the amount of the next highest bidder’s maximum bid plus the $1.00 bid increment for items between $25.00 – $99.00. This is less than the $32.00 I was willing to pay and submitted as my maximum bid.
Now, if you also have your heart set on winning that same auction and schedule a $38.00 bid using auction sniping software for the final seconds of the auction, you will win and pay $33.00. That final price is determined by my (second best) maximum bid of $32.00 plus the $1.00 bid increment.
If, by coincidence, we both placed bids for the same amount, the winner would be the bid that was placed first.
The advantages of auction sniping software are reduced when multiple bidders are employing them for the same auction. You still have some protection from naive bidders who might be prone to engage emotional bidding wars and it offers you some protection against shill bidding – a type of eBay fraud where the seller employs multiple eBay ID’s to bid on their auctions in order to run up the closing bid price.
Have you got a question for AuctionInsights? Use the contact form to send it in.
Understanding Bid Increments and Proxy Bidding Part III
Filed Under Bidders' Tips, Miscellaneous | 1 Comment
This is the third part in our series on Understanding Bid Increments and Proxy Bidding
Proxy Bidding Can Protect Against Snipers
In the previous post, I discussed a proxy bidding scenario in which I placed a bid on an item and declared my maximum bid to be $7.00. A competing bidder came along and placed a bid with a maximum price of $6.00. A round of proxy bidding ensued and, upon completion, I was the high bidder with the current bid standing at $6.50.
It’s worth reemphasizing it the fact that although I entered a maximum bid of $7.00, if the auction closed with no additional competing bids, I would only pay $6.50 for the ball cap. This is an important point. Always enter the maximum amount you are willing to pay for the item being auctioned – you won’t be forced to pay your maximum bid unless a competing bidder forces the price to that level.
How it Works
Your max bid is not necessarily the amount you will have to pay, but will protect you from eBay snipers swoop in at the last second and ad outbid you because you had no time to react with a manual counter bid.
I’ve received scores of comments from bidders who have lost auctions to snipers who ultimately paid less that the losing bidder was willing to pay for that item. That’s often because the losing bidder was confused about the concept of proxy bidding and thought they would end up paying their maximum bid at auction’s close if they won.
The original bid was just enough to make them the high bidder at the time they made the bid. Because sniping involves submitting a bid extremely late in the auction, the losing bidder did not have the opportunity to manually enter a counter bid and they can’t win. Proxy bidding is the simple solution to this dilemma. Even if you don’t win (because the sniper entered a higher maximum price than you), you can get some satisfaction in the knowledge that you forced the sniper to bid more than they had probably hoped for.
Practice Proxy Bidding
eBay actually has a page where you can practice with the proxy bidding system without actually logging in and placing a real bid. Here’s the link:
http://pages.ebay.com/education/tutorial/course1/bidding/index.html
The page details the current bid and asks you for your maximum bid. After clicking enter – the proxy bidding happens instantly and you learn if you’ve been able to outbid the current high bidder’s secret maximum bid. If not, your are provided the opportunity to bid again (try bidding significantly higher this time) and you can see how you will be become the high bidder without reaching your revised maximum bid.
So now that you understand the proxy bidding, don’t be afraid to enter the maximum you are willing to spend on that auction next time you make a bid on eBay
This is the second part of the series on Understanding Bid Increments and Proxy Bidding.
- Part I discusses bid increments in detail
- Part III discusses protecting yourself from snipers with Proxy Bidding
Understanding Proxy Bidding
Proxy bidding is where eBay’s server automatically places counter-bids for you (up to the maximum price you predetermined) when a competing bidder places a bid on an auction you’re attempting to win. The proxy system will place bids on your behalf using the lowest possible bid increment required to out-bid your competitors.
Proxy Bidding Example
I’ve got my eye on a new John Deere ball cap and find one just listed on eBay with a starting price of $3.00. I decide to bid and resolve that the most I am willing to pay is $7.00. I enter a bid and set my maximum price as $7.00.
Two days later, my wife decides to finally break down and get me the John Deere cap for my birthday that I’ve been hinting about for a month. By some ironic coincidence, she decides to buy it on eBay and happens to bid on the same listing I’ve bid on (suspend disbelief for a moment and assume that she does not recognize my eBay user ID). Not placing the same value on a John Deer ball cap as I do, she enters a maximum bid of only $6.00. eBay’s proxy bidding system will now automatically start entering competing bids for each us until one of us is outbid.
The bids are increased by the bid increments detailed in the previous post’s chart. So, the first proxy bid placed for my wife is for $3.25 (because the bid increment for auctions with a current price between $1.00 – $4.99 is $0.25).
The next proxy bid is placed on my behalf in the amount of $3.50 ($0.25 over my wife’s proxy bid).
The proxy bidder automatically places another three $0.25 bids for each bidder until the auction price reaches $5.00. At this point, the bid increment increases to $0.50. The proxy bidder increases both my wife’s and my bids accordingly and the automatic bidding continues until my wife is finally outbid.
This round of bidding ends with me still the high bidder and the current bid standing at $6.50 – my wife’s maximum and final bid ($6.00) plus the minimum increment required to outbid her ($0.50). Notice that if the auction ended at this point, I would not have to pay my maximum bid ($7.00). I would only pay the minimum required to win the auction.
The proxy bidding process happens almost instantly. In the scenario above, my wife would have learned that she was outbid immediately after clicking the place my bid button.
Your Maximum Bid is Secret
The maximum price a bidder enters is kept secret from other bidders and the seller. In the example above, my wife would have no idea what my my maximum bid was (other than the fact that it exceeded hers). She would not know that she would only need to bid another $0.51 to surpass me as the high bidder.
Ties are awarded to the buyer who bid the earliest – if my wife bid only $0.50 more, for a total of $7.00, I would still be the high bidder because I placed my max bid of $7.00 before she did.
Part III of this series will discuss how proxy bidding can protect you from auction snipers.
This is the third part in our series on Understanding Bid Increments and Proxy Bidding
Many bidders who fall prey to eBay snipers and lose auctions because they do not understand the proxy bid system. This can sometimes be confusing to beginners and experienced auction users alike. Unfortunately, eBay doesn’t do a terrific job of explaining how this system works and the consequences of not understanding it can mean the difference between winning and losing an auction or paying more than you should have. To understand eBay’s proxy bidding system, you first need to have a good grasp of bid increments.
Bid Increments
On eBay, a bid increment is the minimum amount the current bid must increase in order to outbid the previous high-bid.
Any new bid must be greater (by a certain amount) than the current high-bid. The additional amount you must bid depends on the current price of the item being auctioned. In other words, bid increments are determined by the item’s price. For example, if you want a leather iPod case with a current bid price of $16.00, you must place a bid of at least $16.50 to out-bid the current bidder.
eBay’s Bid Increments are detailed in the chart below:
| Current Price | Bid Increment |
| $ 0.01 – $ 0.99 | $ 0.05 |
| $ 1.00 – $ 4.99 | $ 0.25 |
| $ 5.00 – $ 24.99 | $ 0.50 |
| $ 25.00 – $ 99.99 | $ 1.00 |
| $ 100.00 – $ 249.99 | $ 2.50 |
| $ 250.00 – $ 499.99 | $ 5.00 |
| $ 500.00 – $ 999.99 | $ 10.00 |
| $ 1000.00 – $ 2499.99 | $ 25.00 |
| $ 2500.00 – $ 4999.99 | $ 50.00 |
| $ 5000.00 and up | $ 100.00 |
The next article in this short series will delve into the details of eBay’s Bid Proxy system and explain how bidders can use it to defend themselves against auction snipers.