Phil's No BS Late Bidding (aka "Snipe") Page

I apologize in advance for the length of this. I've tried to make it as readable as possible. It's an unfortunate fact of life that a mistaken notion can be stated in few words, but it usually requires a lot of exposition to show why it's mistaken.

Formatting note: After I reread this yet again, it occurred to me that there's the potential for confusion between the actors. (He did this, he did that -- which he is which?). Therefore this change: I've made all the snipers female. Hopefully, this will help you to tell people apart.

Usually, when somebody says "real auction", they really mean a traditional live auction, sometimes called an "outcry" auction, where each item sale ends in "Going once, going twice, gone!" It's certainly the kind of auction that most people have in mind.

However, there are a lot of auction formats that are different than "Going, going, gone!" Some are:

• Sealed bid -- All bids are submitted privately. Nobody knows what anybody else has bid. All bids must be in by a certain time. Bids are then opened and compared, and the high bid wins.
• Silent Auction -- Often found in an art fair. Bids are written, one after the other, on a sheet of paper next to the item. The auction ends at a certain time, and the highest bid on the paper wins.
• "Television" auction -- Often found as a public television fundraiser. Bids are taken on an item for a fairly short time. High bid when the time runs out wins.

Obviously, eBay is closer to these auctions than it is to the outcry format. Timed auctions are better suited for the 24 x 7 x 365 environment of the world-wide Internet. (In fact, ebay uses a slightly modified version of the Vickery second sealed-price auction. More info can be found at this Wikipedia article.)

Here are some problems that occur in an automatic-extension environment:

• Everyone is now forced to be at his machine at the end of the auction, which is not required now if bidders have entered a maximum bid. This penalizes people who cannot be at their machines due to other responsibilities, such as work or sleep. To eliminate sniping, you've made everybody into snipers.
• An implicit assumption with changing to the auto-extend format is that the proponent thinks everybody's behaviour will remain the same, except that sniping will cease being a factor. This is hopelessly optimistic. More likely, bidders will start out bidding lower and spend all their time bidding incrementally, hoping to outlast the other guys. It's highly unlikely that everybody will bid their max at any time. Whether or not this ends up in an increased closing price for the seller is speculation at best.
• Auction endings will tend to migrate into times when the majority of people will be on line - starting about 7:00pm EST and ending about 11:00pm PST. This migration of auction times will dramatically increase the peak load on ebay's servers and communications lines, increasing the possibilities of outages. Further increasing the traffic would be all the people who were not sniping before but now have to, constantly reloading their auction pages. Also, this further penalizes people outside of the U.S. time zones.
• If extensions can be added indefinitely, this could lead to an all-night bidding session. (I participated in an auto-extend auction on surplusauction.com that lasted at least 4 hours past the nominal end time before everybody gave up.) Given that eBay is world-wide, this again is manifestly unfair to people unable to be at their machines due to other obligations, such as sleep or work.

  If extensions are NOT added indefinitely, then sniping is still possible (but more complex). You snipe in a bid that is just enough to take the lead, just prior to the beginning of the extension window. You then monitor the auction during the extension period, and snipe in another bid just prior to the end of the auction.

Another difference between the eBay and outcry formats is that outcry auctions are over in a matter of seconds to minutes. eBay auctions take three to ten days. The prospective bidder has ample time to research the item and consider his bid.

In order to allow bidders to not be present at the end of the auction (which could occur when the bidder would normally be asleep or away from his computer), the eBay designers put in the proxy bidding system.

For more in-depth on the problems with an auto-extend auction, take a look at this page.

Imagine an auction with a 30 minute blind period starting at 4:30. A sniper bids at exactly 4:29:55. The auction could end anywhere between 4:30 and 5:00. The other bidder is now forced to be at his machine as well, in order to respond to the bid. And, he'd have to be there for a half hour, refreshing his browser every few seconds. If a higher bid comes in, he'd have to enter a response bid as fast as possible, because he doesn't know how much longer the auction has to run.

Once again, you've created another sniper: the person who got outbid. Worse, because of the ending time uncertainty, the bidder's stress would be significantly worse than it is now. Certainly you have not solved the original problem, which was to make sniping irrelevant. In fact, this idea has pretty much the same set of problems that you get with auto-extend auctions.

On this topic, eBay member mttlg writes:

Without an end time, how do I know which of two similar items to try bidding on first? With an end time, I know exactly when the auction ends, so I only need to watch one auction of a specific item at a time. Since I don't care if I get outbid, I can always move on to the next available item. Without an end time, things would be much more confusing. Let's say two similar items end on the same day with the same opening bid and no reserve, but the time is unknown. I'll pick one and place a bid. The other auction ends without bids, but there are other people who wanted to bid on it, so they instead bid on the same item I bid on. One seller makes a killing, another has no sale. One bidder pays a lot for the item, the others kick themselves for not bidding on the other item. The unsold item could get relisted, but the demand could disappear by the time the relisted auction ends. A deal could be made outside of eBay, but eBay frowns on that (because they don't get a cut). Buyers lose, sellers lose, eBay loses.

eBay's current system does not require the bidder to be present. All he has to do is to enter an appropriate proxy bid one time, whenever he chooses to bid.

Now, if the other bidder is not properly proxy bidding, then he's in a very poor position and will likely lose the auction to a last-second bid.

When a new member arrives on eBay, if he hears the word "auction" and then assumes that things are going to be the way he thinks an auction works (probably based on the outcry format), he's set himself up for a rude shock. It's the responsibility of the new member to learn about the environment before he jumps in. That doesn't mean that he has to learn how to snipe. There are no secrets here, but there are subtleties. And there's a huge user population, many of which already understand those subtleties. If nothing else, the new eBay member should realize that he is confronted with a learning curve before he completely understands what's going on. If he doesn't take the time to learn about his new environment, or if he refuses to learn, then he shouldn't be surprised when he bangs into an unforseen rock.

While it isn't the obligation of the existing members to teach a new member, many will gladly give advice and help. And the eBay documentation is pretty good.

If a seller needs to "control" the price, he can use a reserve or set an appropriate opening price.

The people who use this argument are thinking in terms of the outcry form described above. They think that when they bid, they need to enter just enough to become high bidder. When you bid like that, you won't have time to respond to a bid that comes three seconds before the end of the auction. Thus, you can't compete with the sniper.

The proxy bidding system eliminates this problem. By entering the maximum you are willing to pay into the proxy system, you let the eBay computer bid for you. It's much faster than any sniper.

So, the logic of this objection fails. The sniper isn't competing against the other bidder; she's competing against the proxy. If the other bidder didn't enter his maximum bid into the proxy, then he's deliberately crippled himself.

Another way of looking at this objection is to compare it to a sports game. In basketball, it's a common tactic for a team that's one point behind to hang onto the ball in order to take the last shot. Hopefully, they will take the lead with so little time left that the other team doesn't get a chance to make a return shot. It's obviously silly to call this tactic 'anti-competitive'.

So, if eBay is a competition, why should the sniper do anything other than what she's doing? Should a bidder deliberately bid to lose an auction? Why should the sniper improve everybody else's odds of winning, at the expence of her own chance? Sounds like the complainer is the one being anti-competitive to me.

If the sniper wins, it was because her bid was higher than everybody else's bid.

Remember, the sniper doesn't give anybody else a chance to respond to her bid. This means the sniper doesn't have a chance to respond to her own bid, if it happens to be too low.

If you're playing poker, do you lay your cards down on the table so everybody else can see them? No? Are you chicken?

As far as the "race" scenario goes, well, bad analogies lead to bad analysis. An eBay auction is nothing like a race, so trying to make comparisons using the logic of a race is doomed to failure.

On this topic, eBay member 32bituser writes:

Anyway, eBay does not place any requirements on bidders other than to place a bid during the auction (and pay for it if you win). That's it. Nothing else. You are not required to bid your max, you are not required to bid by a certain point in the auction. All you are required to do (if you wish to be considered a participant) is to place a valid bid sometime before the auction ends. There is no moral or social component (good or bad) to what you bid or when you bid it.

Further, if you're bidding for the enjoyment of the experience, well snipers are doing nothing to prevent you from bidding. So bid away and enjoy yourself!

Even so, the dynamics of an auction are that the person who wants it most pays the most. Somebody who enters a ludicrous bid to win is going to end up paying the most. If you entered your maximum bid into the proxy against somebody using this technique, then she's going to pay more than you. Doesn't matter if she snipes it or not.

It's just as easy to claim that what costs the sellers money are bidders who don't understand or use the proxy system effectively. To be sure, a sniper gets the seller more money simply because it's another higher bid, where it's only speculation that an automatic extension would result in more money.

Remember - in ebay, it's not the winner who sets the final price. Rather, since the winner always wins by one increment over the second-highest bidder, it's the second highest bidder that set the winning price. If the second-highest bidder tried to get the item by lowballing, then the winning price will be low. This philosophy is often summarized thus: Lowballers bid for a bargain and hope for a win; snipers bid for a win and hope for a bargain.

It's a fact that lowball bidders cost the seller money. The fix for that is partially in the seller's hands -- the seller can enter an appropriate minimum bid, or use a reserve. If the seller counts on an auction frenzy to drive the bid up to a reasonable amount, the seller runs the risk of being disappointed.

In auction sites where automatic bidding extension is available (Yahoo Auctions for one, where it's a seller's option), it's seldom used. If the sellers there thought they would get more money, they'd use it more often.

Also, is ebay really in here to maximize the seller's income? It seems more reasonable to work for a balance between seller and buyer.

And, eBay says that the reason they don't use automatically extended auctions is so sellers know for sure when their auctions are going to end.

There is one circumstance where it could appear that somebody is out to get you. If you are concentrating on a particular narrow area, you could easily run into a sniper, perhaps a dealer, concentrating in the same area. If the other bidder has a bigger pocketbook than you do, she could easily snipe you on a number of items you were bidding on. In that case, it might seem that she was actively pursuing you, where it was just a coincidence.

I've actually been in that situation. I was aggressively purchasing multiples of the same item, for a project I am working on. I was persistently outbidding the same two or three people. I'm sure they thought I was out to get them.

From where I sit, the community spirit of ebay is to bid on auctions and win them if I can. That's what auctions are all about.

• Everybody has some idea of their maximum. Would you bid $10,000 for a jar of peanuts? If not, you've already got some limits in mind.
• In the eBay world, you've got days to figure your maximum bid. You have all the research facilities of the Internet available to you. If you don't know what your maximum is when you first find an item, you've certainly got time to figure it out.
• You're claiming that an auto-extended close time will help your chances in the auction, because you didn't know you could bid that high. Well, if you can't figure your maximum bid out for the 3, 5, 7, or 10 days the auction is running already, what makes you think that an extra 10 minutes will make any difference?
• As somebody on the eBay boards pointed out, if you don't know what you're willing to pay for something, you're operating at a pretty severe disadvantage both in eBay and in the real world.
• Finally, obviously somebody must know what their maximum is: the sniper. A last-second bidder doesn't have time to go back and increase her bid, so she has to bid her maximum.

All kidding aside, snipers do indeed follow the Golden Rule. Snipers are perfectly willing to go head to head with anybody. We just don't feel any obligation to restrict our bidding technique because somebody else wasn't willing to use the proxy system properly.

Ask yourself how many of the anti-sniping campaigners are helping people figure out how to use eBay better.

Certainly it's fair in that the time limit and the bidding rules are known by all. The incremental bidder is complaining because he did not use all the features of the system available to him. It's not fair for all the other bidders to cripple themselves down to the level of the poor guy who couldn't use the site, is it?

Suppose I decide to let my pet chicken place my bids for me. I will definitely be at a disadvantage to those who don't use chickens, right? Yes. Is that fair? According to this claim, no. Should we force everyone else to change the way they bid so that I, who let my pet chicken do my bidding, will have no disadvantage? According to this claim, we should. If you pick a strategy that puts you at a disadvantage, don't blame anyone but yourself for it, fair or not.

On this topic, eBay member mttlg writes:

Does having a strategy give me an advantage over incompetent bidders on eBay? Yes. Does having an engineering degree give me an advantage over a mentally handicapped high school dropout in the job market? Of course. In both cases, I earned the advantage by adapting to the system involved and doing what I could to make the system work for me. Is it fair? That's a difficult question to answer. Is it fair that I was born into a good family, raised by intelligent and supportive parents, and given the opportunity to receive a good education while millions of children starve in this world? Fair or not, you can't fault a person for making the most of themselves and their opportunities in a way that did not intentionally cause harm to others. This is why sniping isn't wrong - snipers play by the same rules as everyone else, rules that give everyone equal opportunity to place bids until the clearly defined end of auction.

A cynical response is to say that the person making the "It isn't fair" claim would only think it's fair if he got the last bid, instead of the sniper.