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.
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