Auction sniping

Less than a minute left. It's up to $41. Laura sat at the table in our apartment, her eyes anxiously fixed on her laptop. $47. She crossed her fingers. A short gasp. Frantic typing. Bated breath. Then, with a smile and happy waving of hands: I won! It bumped to $50, but I won!

Great! That was your maximum bid.

No, I bumped my max to $53 a few minutes earlier—just in case.

Laura won the privilege of buying a pair of used running shoes.

Nearly everyone who has bought stuff off eBay knows the phenomena of last-minute bidding, a.k.a. auction sniping. An auction lasts for a week, and the first 6 days, 23 hours and 58 minutes bring about no activity beyond a few low-ball bids and maybe some questions for the seller. Then, in the two minutes before the auction closes, a swarm of would-be opportunists fish for a winning bid: The price spikes to somewhere around the market price for the item, and someone somewhere is rewarded for being irrational—though not so with my victorious Laura and her running shoes.

I'm not a fan of auction sniping—not on sites like eBay which include a proxy bidding service that automatically bids on your behalf up to a defined maximum amount. Proxy bidding is an efficient way to ensure you pay no more than what you value an item at. Either you're willing to pay up to X for something or you're not. Put in X as your maximum proxy-bid. Why bother with sniping?

But what if you really want to win?

You mean by changing your mind and paying more than X?

Well, yes.

Then change your mind now and proxy-bid more than X.

OK, I'm aware my argument leaks some air. The principal counterclaim of snipers is that their acts of sniping affect the auction by causing other bidders to bid, on average, less than they would otherwise. One idea here is that sniping reduces the chance of competitors falling into a sunk-loss fallacy whereby, upon seeing their maximum bid outbid, they increase their maximum bid to something more than they're otherwise willing to pay for. The dog fights hardest for the bone it has already tasted. I admit this is a concern. One way this problem could be solved is by changing the format to silent bidding: everyone makes a maximum bid and the winning price is the maximum bid. This system has the advantage of forcing people to think about value, not price. But it has the disadvantage of forcing people to think about value, not price.