The lot comes up for sale and the auctioneer crys out for bids and when no more bids are made, the lot is hammered down as sold, following the traditional song, "going once, going twice, the lot is sold to".

Any one interested in buying the lot can bid early in the process and may eventually drop out if the price rises above their interest level. A person can jump into the fray late in the bidding as well. When no one is willing to pay more than the current high bidder, the auction reaches a close.

eBay auctions are not this style. eBay auctions do not continue until one bidder reaches a point where no other bidder will pay more. eBay could easily change their system do this, but they don't.

eBay auctions end at a particular time and the high bidder at that moment is the winner, even if there are bidders in the audience who would bid higher. This rule puts eBay auctions into a different category than the type auctions mentioned above.

There is more than one style of auction.

Let's call the style auction described above an open auction. This style auction stirs up the emotions of the auction crowd. Competition is open and bidders face their competitors. Events from early in an auction affect events later in an auction.

But just because there is open competition does not mean that the prices realized are fair market value. Another group or another day could produce completely different prices realized. There is no invisible hand of the market place that makes an open auction best at setting a fair price. Some old hand bidders avoid open auctions where there are many rookies, with their dollops of emotions tossed into the fray, because prices realized get too high, and in fact are "not fair", as in repeatable.

Also consider an auction where many in the crowd are close friends who might not want to overbid a friend chasing an item. The prices realized in that situation would be lower than expected.

For selling into a crowd of close friends, another auction style, a reverse auction, is a better style for reaching a fair (read higher, and perhaps repeatable) price.

In a reverse auction, the auctioneer proposes a very high price for the lot and crys out for a bid. He lowers the asking bid price slowly until a bid is taken. The first bidder willing to pay the asking bid price wins the lot. This prevents the dynamics of friends in the crowd staying quiet to avoid competing with each other. There is less knowledge of someone's interest until they bid and win the lot.

In another style auction, bidders place their bid amounts into sealed envelopes and deliver them to the auctioneer by a certain date and time. At the publicized date and time, all submitted bids are opened and a winning bid is selected from among those submitted by the deadline. This is a sealed bid auction.

This is how some development projects are priced, where the project is awarded to the low bidder. Sale of some property is done is this way, awarding the item to the highest bidder. For instance, rights to broadcast frequencies, and allocations of crude oil.

A sealed bid auction is best for business deals that are defined as fair because emotions do not play a part of establishing the fair market price. This makes sealed bid auctions very civilized and polite.

An eBay auction ends at a particular date and time and the high bidder at that exact moment is the winning bidder. Having a specific end time of the auction clearly puts this into the sealed bid style auction. But eBay adds a twist to the classic sealed bid auction. The twist is that a sealed bid is made public if made before the deadline.
 

One thing that can happen is that tire kickers and bottom feeders are tossed out of the mix. Potential bidders who would not make the cut are priced out of play. This lowers the work of opening final bids because a threshold is established, and only those who would bid more can participate.

But what about the effect on players who can participate, and who value and want the item.

One effect is the bigger fool effect. A bidder who has set a bid price in mind will adjust their bid upward in light of seeing a smaller fool offer more.

"If that guy is willing to pay that much, then I'd pay more."

Another effect is the mistaken judgement effect. A bidder who has set a bid price in mind will re-think their bid after seeing another bidder offer more.

"Maybe I was wrong in my estimate. That guy offered that much, before the end of auction, so it must be worth more."

The final effect is the close-call effect. A bidder who has set a bid price in mind will re-think their bid after seeing another bidder offer slightly more, not wanting to lose by a small amount.

"I would pay a little more than that guy's bid. No reason to lose this over a few bucks. I'll try just a little higher."

eBay's rule to let early sealed bids be public allows emotions to be part of the bidding process. The emotions of an open bidding auction are mixed in with the rules of a sealed bid auction. It is this mix which confuses and distresses many people who first experience sniping.

This is a short term win for the seller. If the price realized is out of whack with other lots of the same item, then most likely the buyer will find out and get pissed. This could lead to non-payment, or simply losing the buyer as a future customer. Sniping generates a fair final bid and this is a long term win, even for the seller.

Some buyers enjoy the fame of being high bidder throughout an auction, and will bid often to keep on top.

However, a serious buyer wanting an item and wanting to pay a fair price for it, would rather that the bids remain sealed until the end. This is the conservative businessman model of having stable prices, reflecting understood conventions, with confidence that fair prices are understood by those in the know and should not be influenced by rookies and passers-by.

In practice, on eBay the only way to make your bid stay sealed and unknown until the end, is to wait until the end to bid. This practice has been given the name snipe, as in

"I sniped that puppy and won it for half of what it's worth",

"I sniped that lot and no one else had put in a bid for what it was worth so I got it at a bargain."

This negative judgement against last minute bidders is normally done by newbies to eBay, perhaps journalists on a happy assignment to bid on something on eBay and report about it, who are rudely woke up by serious players trying to get what they want at a fair price. Most reporting about the end-of-auction bid explains it as some sort of mean spirited cheater doing the nasty. When in reality, it is just hard working folks trying to get what they want at a fair price that is not inflated by dilettantes.

The other people who are put out by losing to a last minute bidders are the sharp shooters who think they have a bargain in hand, having only bid a fraction of the worth of a lot but still holding high bid. When their almost-theft is denied them by someone doing a last minute fair market bid that tops them, they get angry and call the last minute bidder a jerk and worse. Any of you eBay readers ever get email from a second bidder telling you that? I have, and that is why my eBay aboutMe page starts out with an introduction that I'm just a civilized last minute bidder, not a criminal, in case someone had that thought.

It is clear that last moment bidding is the best strategy for eBay shopping. It provides the best chance to get an item for a fair price, and helps prevent an item from selling for more than it's worth. Even if the sniper is not the winning bidder, the winning bidder is not pushed into an emotional bidding war ending up with paying too much.

In order to have a concrete example, let's use this scenario:
Joe sees a nice copy of his favorite book with opening bid of $9.99 and he sets $25 as his price point. Mary also sees it and sets her price point at $17.50.

Consider the case where all interested bidders do a sealed bid that stays unknown. Or in the eBay world, wait until the last 10 seconds to bid. Each bidder is putting in their fair bid of what they would pay for the item, without passion or emotion. It's just an economic decision. The high bidder wins, and no one has grounds for anger toward any other bidder. It's just business.

In our example, this means the two bidders submit their bids as proxy bids to eBay 10 seconds before the auction end time. The winning bid would be Joe at $18.50, one bid increment above Mary's $17.50.

Now consider the case where a Joe and Mary don't bid at the end of an auction but instead bid early. Let's say Joe submits a proxy bid of $25 on the first day the item is listed. What are the possible outcomes?

We can imagine the simple view that all other bidders submit a fair bid without regard to the current bid amount and that proxy bidding processing occurs and the high bidder wins. This is possible, but let's stay real about how bidders are affected by seeing an early bid amount.

Let's say Mary submits her bid of $17.50 and sees that Joe is still high bidder at $18.50. She may think about it and decide that she'd pay a little more after all, and submits another bid of $20. Again Joe is high bidder at $21. If this is the end of bidding, then Joe will be the winner with a price of $21. This is more than he would have paid had he waited til the last moment to bid. This is a very common pattern is eBay auctions. The second bidder runs up the bid, pushing the winning bidder's early high bid higher and higher toward the proxy amount.

What this shows is that if a buyer waits until the last moment to bid, they will always pay the lowest winning price possible. If they bid early and win anyway, it is very likely they will pay a higher price than if they waited until the end to bid.

In some areas, bidders are recognized and used by other bidders as "pointers". The bidders who are hard working scouts, bidding early on every cool item, are tracked by other shoppers who use eBay's search tools to find items bid on by these scouts. It is an easy way to discover the "good" items that are out there. If you are a scout doing this early bidding, you should stop now. You should not show the world all the good stuff you find by bidding early. Instead, you should wait until the final seconds and bid then. This will increase your chances of winning the good item you worked hard to find.

There are still some good reasons to bid early. First, by establishing your interest, you may warn off other bidders, perhaps your friends, that you want the item. This aspect is the key dynamics of all public auctions where friendships exist. And friendships exist in the eBay world. Even though it is a huge market in general, every specific section is aimed at a small group who get to know each other, or at least recognize each other as regulars. Sellers probably hate to see friendships stop competition on their lots, but this is just the other side of passionate obsessive competition among non-friends. Both cases come with public auctions.

Because of the buy-it-now options and the number of negotiated sales before an auction ends, it is sometimes good to bid a low amount early to put some inertia into the process of closing an auction early.

Another good reason to bid early is that if the alternative is not at all. If you are not going to be around at the end-time of an auction, then you must bid early in order to have any chance of winning, although you may not get the lowest price for the lot, you at least have a chance to win the lot. But this reason is no longer a good one. There are too many tools around now to automate last-moment bidding.
 

The same feature of entering last minute bids is also available as a desktop application.

Not only do these services allow you to have a life outside of eBay, but they also allow you to take back your bid much easier than on eBay. When you use these tools, the bid you request is not actually done until the end-time of the lot. You can register an intent to bid days before the auction ends, and then cancel your intent before the auction lot actually ends. This is a convenient way to shop eBay, using the service as a wish-list shopping cart, with the ability to remove the item before final checkout.

Desktop versions require that your machine be on and connected to the net at the time of the auction. Most will autodial if not connected. I have some desktop tools but never get around to using them before discovering the convenience of net based services.

I've been using AuctionSniper, a net based sniping service, and have found it very convenient to use. I just paste the auction number into a dialog box along with my intended bid amount, and submit. The same page also shows all lots currently registered for last minute bids. AuctionSniper is at http://wwww.auctionsniper.com.

One distinguishing feature that AuctionSniper has that other net based tools do not is that it works in the Mature Audience area of eBay.

One difference between desktop based tools and web based tools is that you must give your eBay id and eBay password to a stranger when using the web based tool. I've never had any problem with this while using AuctionSniper.

If you appreciate my analysis and explanation of sniping and you want to try out a net based sniping tool, thank me by signing up at AuctionSniper using the button below. You can sign up for a few free snipes to see how it works. I think you'll be hooked on it after trying it out.

Remember this page and pass it on to your friends when they see you enjoying your life again, without a need to be at a terminal when an item on eBay is ending.