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Bidding on eBay

When we were learning about auctions, the first thing that popped into my mind was eBay. I have used eBay a few times, but I’ve never really figured out how the bidding system worked before. This article talks about the different ways people try to use eBay. The first strategy it discusses is something called “Bid Sniping”, where you bid as close as possible to the end of the bid, so you can be the last bid while having a lower price because you did not give competing bidders a chance to bid on the item after you. This was what I thought would be a viable strategy at first as well, but I remember bidding, and all of a sudden some automatic bid placed a bid higher than mine. Me, thinking that it was unfair how the automatic bid could bid right after me so I could never snipe an item, decided to use Amazon instead.

However, it turns out the automatic bidding is an eBay feature called “Proxy Bidding”, where you are able to input a value, and every time someone else bids, it will automatically bid for you by incrementing their bid by a little. This ensures that you are winning the bid, up until the value that you have inputted. This is a second price auction because you are paying the second highest price (aka how high the second highest bidder was willing to bid up to). This means the dominant strategy here is to just input your true value when you are proxy bidding. You are paying slightly more than the second highest bid, because you have to increment it by a little, however your own value that you input does not affect this price, and the incremented price will never exceed your own value as well, so the dominant strategy is still to bid your true value.


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October 2018