[R-390] R-389 Sold For $3550.00 on eBay

[2002tii]

Andy wrote:

> I have a fundamental gripe about the way
> that ebay operates.
> In any conventional auction, the bidding proceeds until the final
> highest bid is placed. The auctioneer goes into the
> going-three-times routine, but if further last-minute bids are
> made, the auction continues.  eBay's system of timed ending
> leaves everyone vulnerable to last-second sniping.

Yes, BUT....  This wouldn't be true if the early bidders all bid the
highest amount they were willing to pay, which is how a BLIND auction is
supposed to work.  Either they will win even though bidders in the
"lightning round" raise the price, or the item will go to someone who is
willing to pay more.  In other words, it's not really fair for an early
bidder to blame the person who wins with a last-minute bid if the early
bidder didn't bid what he was willing to pay.  Don't think of eBay as a
live auction -- it's not.  In some ways, it's more like submitting sealed
bids.  Remember, the current "bid price" is not the actual high bid -- it's
one bid increment over the second-highest bid.

Now, this "bid the maximum you would be willing to pay" thing is contrary
to human psychology.  We are not by nature rationally-self-interested
beings, we are emotional.  Just as a two-year-old has no interest in a toy
truck until another kid starts playing with it, what we are willing to pay
can be influenced by what someone else is willing to pay.  And this is the
very reason some of us snipe!

Let's say an early bidder has bid $200 on an item with a $99 opening bid,
so the bid price is at $99 but it will take a bid of over $200 to be high
bidder.  If, apart from other bidders, I am willing to pay up to $500 for
the item, but no more (i.e., if it were in a store with a $500 or lower
price tag I'd buy it, but I'd walk away if the tag said $515), and another
bidder is willing to pay $350, but no more, then regardless of when we bid
I SHOULD win the item for one bid increment over $350.  However, in
reality, if I put my $500 bid in with 3 days left, the other bidder will
see a $200 bid price and put in his $350 bid, but he won't become the high
bidder -- he will have bumped my bid to one increment over $350 and will be
staring at the dreaded red X that means "you have been outbid."
Psychologically, people don't like being denied, so even though the item
was really only worth $350 to him -- that is, if it were in a store with a
$365 price tag he would have walked away -- he may well bid $375, then
$400, then $425 before he gives up, forcing me to pay one increment over
$425 instead of one increment over $350.  As I see it, this is an
artificially high price brought about by human nature and the auction
format.

On the other hand, if I don't bid, the other bidder will put in his $350
bid and be winning the auction at one increment over $200, so he will stop
bidding.  I can then drop in at the last minute (when nobody has a chance
to react to my bid) with my $500 bid and win the item for one increment
over what the item was REALLY worth to the next-highest bidder, not what he
thought it was worth to him in the heat of competition.  In my view,
sniping is the only thing that makes eBay work the way it claims to work
(i.e., the winning bidder pays one increment over what the next-highest
bidder is willing to pay).

So: If you always bid the maximum you would be willing to pay, it doesn't
matter when you or anybody else bids -- you will either win the item for a
price you are willing to pay, or lose it to someone who is willing to pay
more.  However, if you bid early, you may end up paying more than you
otherwise would have had to pay.

FWIW, I just lost an auction tonight where all 14 bids were placed in the
last 15 seconds.  The item had a $250 opening bid and went for nearly $750.
But I bid what I was willing to pay, so I have no regrets.

Best regards,

Charles