sniping for the seller vs. sniping for the buyer

Ernie writes, "The way I see it, sniping reduces final value for the seller because it eliminates bidding wars."

That might be accurate if everyone bidding in an auction was a sniper. On the other hand, if that were the case there'd still be a bidding war, only it'd be compressed into the last few seconds of the auction. Look at it this way: a sniper succeeds because his bid is higher than anyone else's and often it's placed after everyone else is all done bidding. So the purpose of the sniper's bid is to top the previous high bidder's *max* bid, which may not have happened otherwise. Even if the snipe is unsuccessful because it is too low, it drives up the final price. Put that way, a sniper definitely benefits a seller.

OK, Steve... I see your point. My question now is: is it a good idea to recommend AuctionSniper to all of my regular customers who frequently win my auctions? Would I make more money if my regular customers placed automatic snipes?

Ernie

Steve: You seem to be saying that we pay AS a fee so that the closing price is higher than it would be without sniping. I use AS to avoid bidding wars, which "typically" means a lower closing price, which means, "not as good for seller". Maybe I'm the only one on AS that isn't altruistic, or maybe I'm reading too much into your last comment.

Ernie: Any snipe, manual or through software, can have the effect of benefiting the seller. I really can't think of any circumstance under which it can work to the seller's detriment, since a snipe by definition occurs in the last few seconds of the auction when there wouldn't be time for many more bids anyway. Any bids coming in after the sniper's bid would either drive the price to the sniper up or overcome his max, either of which would act to the seller's benefit. Either way, they *would* be taken into consideration by eBay so long as they registered before the auction ended. So I can't see how any seller can say that a sniper cuts off the bidding.

Rick: No, I didn't mean what you read my comment to say. All I said was that in order to win, a sniper has to top the previous high bidder's maximum bid, much of which is usually concealed as a proxy reserve. (AS has nothing to do with that; it's the sniper's judgement and experience which tells him how much is probably needed to succeed.) The snipe therefore drives the final item price up whether or not the proxy bid is overcome, that is, whether or not the sniper wins the bidding.

I am an ebay powerseller & actually welcome snipes 100% It brings excitement on big ticket items & drives up prices on my lower priced items.

OK, so far I agree with everything that Rick, Steve, and RickDogg have said. Their argument is that adding a sniper to an auction only drives the price up. Yes. I agree, it does.

What I am talking about, instead, is the idea of converting regular non-sniping bidders into Automatic Snipers. Let's say there are two bidders, Peter and Paul. They frequently bid on my auctions and get into a bidding war. They drive the price up on my auction during the last 48 hours. Either Peter or Paul (or both) may attempt a manual snipe near the end, but regardless, the price is already high. Peter and Paul have had a chance to outbid each other and reconsider their maximums.

If I recommend to Peter and Paul to become automatic snipers, now they're going to put in maximums which may be on the low side. If either Peter or Paul put in a high maximum, the final price winds up at the lower maximum plus the bid increment. If both maximums are low, that would be slightly worse.

So it's great when a new, late bidder comes along to snipe an auction. I welcome that. But should I really consider recommending my existing regulars to start automatic sniping? I guess what I'm really asking is: do automatic snipers tend to have lower maximums than bidders in a war?

Ernie

Ernie writes, "I guess what I'm really asking is: do automatic snipers tend to have lower maximums than bidders in a war?"

Snipers tend to be very thorough students of their opposition, studying bidding habits, amounts, timing, item preferences, and the like. As informed bidders, then, they tend to formuate their maximum bids in accordance with what they expect others to bid. These bids are neither "lower" nor "higher" but are instead in an amount which the sniper calculates will carry the day. Remember, a sniper only gets one, or perhaps two shots at winning an auction. He or she is not going to bother doing a lot of "homework" trying to calculate the *least* a bid should be. The object is to calculate a bid that is *sufficient*.

There can be little doubt that bidding wars are beneficial to sellers. They are quite distasteful to snipers because the "wars" have to be taken into consideration in calculating the amount of a snipe bid. But the bottom line is that sometimes a bidding war will take the bid amount higher than a sniper wants to pay. Fine. The sniper will wait for the next item of that type to be offered on eBay. If the bidding has not gone beyond the realm of possibility in terms of sniping, then the sniper's bid will tend to be on the "high" end because the bidding war has been taken into consideration. Naturally it's not going to be lower than the visible high bid.

I'm not going to be drawn into saying whether you should or should not recommend AS or some other snipeware to some or all of your customers.
That's for you to decide.

I guess from all this discussion I have come to the following conclusion. I would recommend AS to a regular buyer of mine if he is the type who waits until the last five minutes to place a bid. In a sense, he is already a sniper and it would benefit us both for him to use AS. This is especially true if he cannot get to a computer during the closing minutes of an auction. (One such buyer of mine will not place a bid at all, unless he is at a computer to snipe at auction close.)

On the other hand, if my regular buyer is of the type who likes to engage in a bidding war, for him I would need to keep silent about AS, as I need bidders like him to jack up the price.

It's difficult to see the results first hand when the above-mentioned buyer of mine has not bothered to try AS, since I first recommended it to him a few weeks ago.

Ernie

Ernie, it seems to me that you've arrived at a sensible conclusion; in fact, it's the one I hoped you would draw. My question to you as a seller is, now that you know -- or at least I hope you know -- that snipers are not a harmful presence in an auction, are you going to defend our practice in the chat rooms where snipers are so regularly vilified?

Well, of course, I would gladly defend snipers. After all, I am one myself. It's just that, on one level there seems to be a bit of a double standard: sniping is good for the buyer, but maybe not as good for the seller. In most cases, it appears the sniper IS good for the seller.

Actually, I'm thinking more along the lines of whether or not AS is a good idea. The way I see it now: It's a great idea for buyers who have been manually sniping until now (for both buyer and seller alike).

As for buyers who don't as a rule snipe, AS probably wouldn't interest them anyway. Let them continue their wonderful bidding wars while us snipers come in for the final kill.

Ernie

Unless eBay changes directions drastically, sniping only improves things for me. If the sniping bidder didn't bid (and win) then I'd get less. A/S is great because it lets people queue up bids that they might normally have NOT placed at all.

Sometimes, the buyers are like me. I won't wait around and do bid wars. If I buy it, it's either "buy it now", or I snipe it. Period. I decide how much I will pay for it beforehand, and snipe it. Always have, always will. Before I discovered AS, I sat there counting, with my mouse poised over the button. I'm not the only one.

My bid still has to be the max for me to win, but having me in one of your auctions will under no conditions cause you to lose potential revenue. I let the inexperienced or less frugal bidders bid each other out, and I close in for the kill. If it goes over my snipe price, oh well. I wouldn't have paid any more anyway.

I'm quite happy if my buyers use a sniping system. In fact, if they don't, I let them know with a nice referral link, and a "suggestion" to try sniping some of my other similar items

I guess the sellers who complain about snipers either haven't thought things through, since anybody including a nickel-dime incremental bidder can put in a bid right up until the auction closes. Would I be correct, however, in thinking that there are some sellers who are greedy and want the sniper to put his bid out there earlier to be nickel-and-dimed like everyone else, to the ultimate benefit of nobody except the seller?

I have yet to be confronted by the latter kind of seller, threatening to "report me to eBay" and telling me my snipe was "illegal." Just lucky, I guess.

"illegal"?

One, the only contract you have regarding your use of the site is with eBay, so it does not concern the seller at all. They, in fact, have a contract with _YOU_ to deliver said item at said price.

2) eBay clearly doesn't have a problem with sniping and automated bidding systems, since they are expressly allowed, and it would be trivial to stop them. Heck, they even have their own API!

I know that, Carlos. But wait'll one of these hotshot sellers uses this Forum to blast snipers, as happens from time to time. You can tell him, but I doubt very much that he'll listen, even though it's he who will get in trouble if he doesn't honor the winning bid (a snipe) like he says he refuses to do. You can search around in the Forum archives and find such diatribes if you want to.

Here ya go, Carlos. Check this out:

http://www.geocities.com/footballboyisme2/link.html

Unbelievable.

You should hear some of the flack I get for being a shareware author where "the only difference between the paid and regular version is a number and a couple of features". I'm already a shareware author, being a "scum-sucking, bottom-dweller sniper" is a big step up.

The funny thing is, I don't actually write the shareware. I'm just the webmaster

Let's say that you're a seller that uses a tool to help place your auctions, or even a seller that pays someone else a commission to place the auctions for you. Does the seller mark up the price to cover the costs? Isn't that bad for the buyer?

What's the difference in using a tool on the other side of the auction? If a sniper places a snipe for the maximun they are willing to pay, the maximum is the maximum regardless of how the bid is placed. But it does take the emotion out of the bidding, which as I've said before is where the seller does take advantage of the seller. But then again I've heard of people placing multiple snipes on a single item (don't know if they really do this - seems counter productive to me). If they do that, then they can still particpate in the bidding war, like Steve said - just in the last few moments of the auction.

Well, the only argument I could possibly see that was founded in any sort of factual basis whatsoever is the argument:

"I participate in eBay for the fun, and the experience of bidding head-to-head with other users, then getting the item instead of them. I like bidding it back and forth in increments. By bidding your absolute maximum at the last second, you take the emotion and fun out of it for me, when I don't get the item."

My response would be "For me, I use eBay to get an item. I'm willing to pay more. While you may find fun in fighting it out with other people, that is not what ebay is about. It's about the person willing to pay the most getting an item. You want the item, you have to be willing to pay more for it. If you don't _tell_ eBay you are willing to pay more than me, how can eBay tell? The fact remains that eBay is ran by cold, emotionless, non-psyhic machines."

Yes, I have a cynical outlook on life. I also cheat on video games.

To understand the effect of sniping on all the parties to Ebay auctions, let's perform a "thought experiment" in which we compare two auction scenarios involving the same auction. This experiment will show that sniping favors the buyers at the expense of the sellers even in cases where there is no "bidding war" (auctions in which current bidders bid again at higher prices in order to prevail in the auction). As this result is known both to economists who have characterized various types of auctions as well as Ebay management, Ebay's official "suggestion" to buyers that proxy bidding is best will be seen as both deceptive and self-serving.

THOUGHT EXPERIMENT

In scenario "P", all the bidders use proxy bidding (as Ebay recommends)in a no reserve, $10.00 price Beanie Baby auction. The bid increment is $0.50, and the market price (based on Ebay comparables) is $15.00.

All three bidders use the same strategy. The first to bid will bid the "market price" minus 1 bid increment, or $14.50. The Ebay current price will now show $10.00. The second bidder will bid market price, $15.00 because he sees the first bid and assumes that it will be market minus the bid increment. The current price now shows $15.00. The third bidder, seeing two prior bids and current price of $15.00 bids market plus increment, or $15.50. The current Ebay price now is $15.50. Note that this is the LOWEST possible price that the seller will get when all bidders bid by proxy here; quite likely, one or more bidders will have time and the inclination to raise their original bids taking account of the higher and higher current bid price (bidding war). It should also be noted that the price is very secure because none of the bidders will be able to withdraw under current Ebay rules.

In the second scenario, "S", one of the bidders snipes his bid. This means that the other two bidders will be unable to take the sniped bid into account in their own bidding before the close of the auction. All other conditions in this scenario are identical with scenario "P".

If the sniper is either the "first" or "second" bidder (that is, he could have entered the first or second bid in the auction as a proxy bid, but instead entered his bid into a sniping program), the current Ebay price showing will be $0.50 LOWER than under scenario "P". The proxy bidders will assume, incorrectly, that they are bidders 1 and 2 because they cannot see the sniper's bid, and will each bid $0.50 less because of that. Unless there is a bidding war, the sniper will lose the auction, and the selling price under scenario S will be $0.50 less than the price under scenario P. It will be seen that the sniping here benefitted ANOTHER buyer, not the sniper. Still, the benefit accrues to the buyers, not the sellers.

If the sniper decides to take the two previous bids into account and raise his original bid, he "becomes" the third bidder and accordingly will bid $15.50 (we assume that the bidding strategy is the same in both scenarios). In this special case bidding war, the sniper (who is actually the first or second bidder), is the only one to raise his bid, and nobody else has time to raise afterward.

In the more general bidding war situation, the selling price will be reduced by $0.50 FOR EACH round of a bidding war in which both non-sniper bidders raise their bids, because the sniper's initial bid and raises cannot be taken into account by the other bidders.

CONCLUSIONS

The upshot of this analysis is that if one of the three bidders is a sniper, the beanie baby will sell FOR AT LEAST $0.50 less than if all bidders entered proxy bids. Without going into details here, it can be shown that if 2 of the three bidders were snipers, the discount will be at least $1.00, and if all three were snipers, the discount would be at least $1.50.

Keep in mind, though, that the bidding strategy of raising the previous bid by the bid increment would be foolish in an auction in which all the bidders were snipers (this would actually be a "blind auction"). It is, however, safe to say that in mixed sniper-proxy auctions, the more snipers, but bigger the price discount.

Sniping favors buyers by limiting the ability of buyers to compete with each other's bids. Interestingly, sniping is a benefit, on average, to ALL the bidders in an auction, not just the sniper. If the sniper uses the same bid price strategy as he would use as a proxy bidder, then his sniping will not increase his ability to win auctions; it will just mean that he will get lower average prices while winning about the same number of auctions.

If sniping is to the buyer's advantage in auctions that mix snipers and proxy bidders, why does Ebay recommend proxy bidding? It is because Ebay's revenues are derived from percentage commissions on selling prices, and sniping reduces those selling prices, on average. Of course, Ebay knows that in the worst case auctions, wherein all bidders are snipers, the auction degenerates to a blind auction. The bidders in such auctions will tend to submit bids averaging to the market price, in which case, Ebay is in a revenue-neutral position. I believe that this is why Ebay has not implemented anti-sniping tactics (such as extending the auction close a minimum of 1 minute "overtime" after the last bid was received) in the auction processing.

There are a couple of inadmissable suppositions here: (1) that the proxy bidders will bid only in terms of one bid increment; (2) that the sniper will do likewise. In actuality, proxy bidders are likely to throw caution to the wind in a "bidding war," and snipers -- if they want to win the item -- must set a maximum bid which they think will be sufficient to overcome the highest proxy bid (not necessarily the high bid amount shown by eBay).

It's true that bidding wars benefit both sellers and eBay. But that is not affected by the sniper, who comes in with a bid (if the bidding war hasn't moved the item price to ridiculous levels) in the final seconds of the auction when the warring proxy bidders are usually finished bidding. Even if the snipe is insufficient it has the effect of moving the end price upwards, which benefits eBay and the seller. And, since all bids which are submitted and registered in time by eBay count, sniping does not discourage or cut off proxy bidding. In other words, snipers raise final prices in all cases. EBay is well aware of this and wisely does not discourage or ban sniping.

"Sniping Benefits Buyers and AS; Works Against Sellers and Ebay"

I agree. The best proof of this is that we all PAY for this sniping service. We're willing to pay a fee to get the item at a lower price. Surely, no one will argue that we pay AS because we think we'll pay more for the item? We're betting that we'll save more than the 1% fee by placing a snipe instead of a proxy. The expected saving is most likely much higher; probably around 10% to 20%.

Some will say they do it to avoid a bidding war. I do it because I had too many bid retractions from stalkers and shills. But, either to prevent bidding wars or retractions, both mean the same thing: Getting the item for less.

Also, the price that "I'm will to pay" can be very fluid. If after determining what "I'm willing to pay", should I see someone place a proxy bid that I know bids high amounts, I'll usually increase the amount "I'm willing to pay".

"Even if the snipe is insufficient it has the effect of moving the end price upwards, which benefits eBay and the seller." - I also agree with that. But the fact that the proxy bidders have not had the opportunity to evaluate and respond to bids from snipers, would tend to lower the final price.

Bidding wars cause a slow erosion of sound reasoning. We see the item is worth more to others, therefore it's worth more to us. We set our initial bid. Someone outbids us. Before it was worth $100; now it's worth $110. We've only increased it by 10% over our "last" bid. We can continue to do this in 10% increments because we are like the frog that slowly boils to death (the slow turning up the heat on the frog example may only be a urban legend). We can easily get up to $200, because we don't consider that we've increased the initial value of the item by 100%. We consider that we've only increased it by 10% over out last bid.

I think the issue is, if sniping were banned, wouldn't the closing price for most auctions be higher?

The reason sniping is possible on eBay is the fixed end time. All eBay would have to do to really eliminate sniping is change to a last bid plus so many minutes format.

I guess the software could be changed to handle a moving end time, but it would allow people that wanted to continue the bidding war to do so.

So if ebay really didn't want sniping, all they would have to do is change the format of the auction. That would be a fairly simple change on thier side, and many other online auctions are set up that way.

So IMHO, eBay must at some level condone sniping.

For "the other Steve": eBay does indeed condone sniping, and the use of snipe software, in writing. It's somewhere in their policy statements.

Rick writes, "I think the issue is, if sniping were banned, wouldn't the closing price for most auctions be higher?"

Not necessarily, IMO. Snipers often encounter a proxy bid with the end result that the final price is much higher than it might have been had the snipe not been placed. It is a fallacy to think that the high bid shown is the total bid made.

"The best proof of this is that we all PAY for this sniping service. We're willing to pay a fee to get the item at a lower price. Surely, no one will argue that we pay AS because we think we'll pay more for the item? We're betting that we'll save more than the 1% fee by placing a snipe instead of a proxy." - This isn't the first time I've argued this, but everyone avoids responding to it..

"Snipers often encounter a proxy bid with the end result that the final price is much higher than it might have been had the snipe not been placed." - We agree, but you make it almost sound like we are paying AS 1% so that the item will sell for more. We are paying AS 1% because we think we will get the item at a lower price than if we placed a proxy bid. You're a very gracious and generous contributor to this forum, but I don't think your altruism extends to the seller, ebay, and AS in the form of higher closing prices and fees. The issue, as I see it, is: In most cases, if EVERYONE placed a proxy bid, wouldn't the closing price USUALLY be higher than an auction that is sniped? I said USUALLY. I'm not suggesting absolutes.

"It is a fallacy to think that the high bid shown is the total bid made." - Again, we agree. "But the fact that the proxy bidders have not had the opportunity to evaluate and respond to bids from snipers, would tend to lower the final price." I'm not saying that snipers don't tend to increase the closing price, but I AM saying that the closing price would most likely be higher if everyone placed proxy bids.

Of course, ebay condones sniping, or they would stop it. ebay's revenue comes from the closing price AND volume. ebay would rather sell 4 of the same item at $50 then 1 item at $100. ebay and the individual seller do not have identical priorities. The individual seller doesn't want competitive sellers, but ebay does.

Also, ebay depends on a large number of sellers, AND buyers. A venue will bring in more buyers, if the prices are lower. I propose that sniping provides for lowering overall prices, which increases the number of buyers. This also, in the long run, helps out all buyers. But again, on a specific auction, the seller would probably like to have a bidding war. If everyone sniped, the bidding wars would end (they'd be sniping wars - which could be interesting). Don't forget, you've admitted that you've increased your snipes based on your competitors' proxy bids. Wouldn't it be fair to say your competitors might, or would probably, increase THEIR proxy bids if you placed a proxy bid?

I still come back to my original premise: Why do we pay AS a 1% fee to place snipes for us? I know it's easier than placing a manual snipe, but then, why do we snipe? We do it because it's in our best interest to do it. It's in our best interest because we have a good (not absolute) chance of getting the item at a lower price than if we placed a proxy bid.

If we felt that placing proxy bids would provide the merchandise at a lower price, then we would place proxy bid.

If sniping doesn't tend to lower the selling price, then why do it?

Another thing we can agree on: to disagree!

I'm tired of these hypothetical examples. Let's do a really simple real-world example. I don't want to deal with auctions. I want to get in and get out. Before AS, I only went for auctions ending real soon. I always, 100% of the time either snipe (by hand back then) or Buy It Now. Because I will never _ever_ proxy bid (I don't have a hole in my head), I am still helping to increase the final closing price. With sniping: I still win. Without sniping: I don't bid at all.

Which is better for the seller.

And if you insist on hypothetical unsubstantiated examples, consider this. Suppose the price IS less due to sniping instead of proxy bidding. What about the INCREASED number of sales, and increased numbers of items that are won? By sniping, buyers have their money tied up for less time, quite possibly resulting in an overall INCREASE in the number of bids. Furthermore, the quick turnaround means they know if they lose faster, resulting in quicker rebidding and perhaps more items getting bids, resulting in an INCREASE in the number of sales. Furthermore, because it's easier and takes less effort when you snipe, it may lead to an INCREASE in the average numbers of items bid on, won, and even fought over (albeit in the last few seconds) overall, resulting in more fees for ebay. And while we are at it, what about the fact that snipers usually know beforehand how much they are going to pay if they win (no heat of the moment), leading to a DECREASE in non-paying bidders and retracted bids?

How getting some real data, instead of just "what if's?". Ebay has access to a large amount of pertainent data, and their goal is to make money. They have decided that sniping is in THEIR best interest. Since they are paid a comission, it's not too much of a stretch to assume that what's good for them is good for the seller.

quote:

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If sniping doesn't tend to lower the selling price, then why do it?

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Because I'm lazy, because I don't feel like getting into bidding wars (not the price so much as I don't want to have to sit on ebay.com all day), because I hate to wait, because there isn't always an auction I want to win over in 3 minutes, and because I like just getting an email saying yes or no, instead of a "you've been outbid, go back now and up your bid or you don't stand a chance" email.

I don't think Rick and I disagree at all; we're just looking at the same thing from different angles. Yes, of course we increase the end price of something when we snipe. Proxy bidders do the same thing, but they don't snipe, they get into bidding wars. And yes, of course we get items for a lower price...because we use max bids in sniping and anything less is indubitably lower, and because we aren't engaging in bidding wars.

I'm with Carlos, too. I'm lazy. I want to enjoy my retirement, not sit on eBay.com 16 hours per day sweating out bids. And when I do put in a bid that's not a snipe, and somebody comes along and tops it, I don't really want to see some hortative (another 50-cent word) message from eBay saying, in effect, "Now get back in there and BID AGAIN!" Excuse me, eBay, but your greed is showing!

>>If sniping doesn't tend to lower the selling price, then why do it?<<

Like Carlos, I simply see eBay as a way to obtain the item. I do not get off on the chess game strategies or the bidding competition; in fact, I care very little about what other bidders do. I am not quite as "get it now" as he is; I will gladly place an item on my watch list for a week, and set the snipe several days before. But want it I do and I see AS as the best tool to help my obtain it, generally at a better price, but always freeing me to go about my business.

I have very much enjoyed reading the replies to my first post here, in which I argued that "Sniping Benefits Buyers and AS; Works Against Sellers and Ebay".

In general, I've learned alot from your replies, some of which explored sniping from angles that had not occurred to me before. I'd like to continue on some of those explorations a little bit in future posts.

Some other replies reminded me that no matter how careful I was in presenting my point of view, I won't convince everybody I'd like to the first time around. Those who still need some convincing that sniping on average exerts a downward pressure on selling price will find the following at least thought provoking.

In my previous post I described a "thought experiment" (or hypothetical) that showed that when a bidder chooses to snipe rather than post a proxy bid well in advance of the auction close, he denies other bidders the knowledge of his bid and the opportunity to raise on that bid at the same time. This observation (among others I will discuss presently) led me to conclude that SNIPING CAN ONLY REDUCE typical selling prices in Ebay auctions.

In any event, Steve (the SuperSniper forum participant -- I know there's more than one Steve here) did not agree with my approach or with my conclusions. (I will discuss other member's replies in future posts, I'm just starting with Steve's in this one). Steve said that I had made some "inadmissable suppositions", then went on to argue that bidding wars are "not affected" by sniping. That conclusion is of course the direct opposite of my own: that the principal effect of sniping is to limit bidding wars by removing the snipers and their bids from the firefights.

Steve's ultimate thesis really struck me and got me to reread his entire post from the beginning:

"...snipers raise final prices in all cases..."

How did Steve and I come up with totally opposite conclusions about the effects of sniping? In part, it's because we make different assumptions about what motivates bidders in Ebay auctions, and in part, it is due to a fact that Steve overlooked, which I'll describe presently (not to be picky or argumentative -- it's just important to all of us why it is we are sniping!

In any event, how bidders think and behave and interact with each other and the Ebay bidding process is what determines the selling prices in Ebay auctions, so the assumptions that Steve and I made about these things are very important.

Steve believes that there are two types of Ebay bidders -- Snipers and Proxy Bidders -- and that these differ fundamentally in their economic behavior. Steve suggested that Proxy Bidders are "likely to throw caution to the wind in...bidding war[s]", whereas Snipers may well bid prices so high that they will "overcome the highest proxy bid" if they want to win.

Now, if Snipers "raise final prices in all cases" (relative to proxy bidders) as Steve concludes, they must indeed place higher bids than they would have if they had been proxy bidders. In other words, Snipers would have to "bid to win, price be damned". To an economist, Steve's sniper is an irrational bidder. And, if you haven't guessed by now, I put alot of stock in economic theory...

Not surprisingly, Steve considers my "suppositions" about bidder behavior to be "inadmissible". My thought experiment assumed that all bidders, whether sniper or proxy, will bid the same prices when given the same information about market price and competing bids. Their bids will differ because Snipers have more information about the other bids than proxy bidders do because they kept their intentions secret, while retaining the ability to observe the competition. This is the basis for my conclusion that snipers tend to reduce typical selling prices on Ebay...at least until everybody is sniping, in which case, the auctions will become "blind".

Before I close this very long post, I promised to clarify what I think was a factual/analytical oversight in Steve's post, which contributed to an erroneous conclusion. Steve said that sniping "does NOT discourage or cut off proxy bidding". To the contrary, by definition, sniping discourages competitive bidding. That's why we're all here! A snipe is a bid delayed such that competitors have no time to submit raises. A snipe further discourages competition by witholding information about the bid until after the competitors can take action on the information. It should be noted that ALL bidding on Ebay is "proxy bidding" in the sense that Ebay defines that term. From Ebay's point of view, a snipe cannot be distinguished from a non-snipe bid, except in the crucial matter of TIMING.

I hope the foregoing will help focus future discussion and speculation about sniping and why we do it -- as well as its impacts upon price.

For now, ask yourself: Do you snipe in order to win an auction even if it means paying more? Or do you do it to get a better price than otherwise, knowing that by bidding early as a proxy bidder, your exposed bid can only be raised by others? Speaking for myself, I want a better deal and am happy to let others "win" the bad deals.

Happy Sniping...and thanks to Steve and others for their thought provoking replies.

azureson,

Not to step on Steve's toes, nor impose on his response, should he decide to respond, but it doesn't appear that you and Steve have that much disagreement.

He says, "And yes, of course we get items for a lower price...because we use max bids in sniping and anything less is indubitably lower, and because we aren't engaging in bidding wars." It's the "of course we get items for a lower price".

Chatter says, "But want it I do and I see AS as the best tool to help my obtain it, generally at a better price ...". It's the "better price."

Both seem to be agreeing that if everyone left a proxy bid, the closing price would tend to be higher than an auction that is sniped.

Carlos says, "Suppose the price IS less due to sniping instead of proxy bidding." That's not really agreeing, but it doesn't sound like he disagrees. It's a little hard to warm up to Carlos' argument about sniping helps cash flow. I think a 1 or 2 hour proxy bid would accomplish the same thing. Perhaps he deals in a volume where even and hour delay will impact his capital. But, his other agreements must work for him.

I just wanted to respond to one thing azureson said about snipers who bid extremely high so that they can win at any cost. Most snipers I know aren't like that at all. Since snipers usually get just one chance to bid before the auction closes, it's a given that experienced snipers will make their maximum bid at that time. This is not the same as saying that they'll bid ridiculous amounts...that would truly be irrational. No, if the snipe amount isn't sufficient the sniper will simply regroup and wait for the next such item to come up on eBay, which WILL happen, sooner or later. "Win this one at any cost" isn't a phrase in the experienced sniper's vocabulary.

The terms "higher" and "lower" as applied to final bid amounts are subjective. Higher or lower than what? Who owns the crystal ball that would reveal what the final bid would have been with, or without, sniping? My guess -- and Sherlock Holmes once said that guessing is 'a shocking habit, destructive of the logical faculty' -- is that the outcome of any given auction may be higher or lower because of the bidding techniques employed in that auction.

I strongly suspect I get a better price then if I did a non-sniping proxy bid, I just try not to draw absolute conclusions without the data to support it.

Also, I only spend 15 minutes on ebay at a time, usually about 30 a day. I can easily blow through 4-5 auctions in this time doing buy it now, or quick ending auctions, but that tends to get me a higher price. Hence, I snipe.

As for my suppositions about increasing cash flow, they were just suppositions. When evaluating hypothetical situations with insufficent data, one should at least have the decency to attempt to evaluate as many potential outcomes as possible.

Carlos writes, "When evaluating hypothetical situations with insufficent data, one should at least have the decency to attempt to evaluate as many potential outcomes as possible."

And you did a fine job, too. Thanks for fueling the discussion with so many alternatives. A fascinating exchange, and one I suspect is not finished yet.

" ... and one I suspect is not finished yet."

I hope you're right. I'm looking forward to azureson's next response.

Azureson says:

Now, if Snipers "raise final prices in all cases" (relative to proxy bidders) as Steve concludes, they must indeed place higher bids than they would have if they had been proxy bidders. In other words, Snipers would have to "bid to win, price be damned". To an economist, Steve's sniper is an irrational bidder.

Do not all auction winners (i.e., highest bidders) by definition, "raise final prices"? Any winning bid, whether it is three seconds, hours or days before the end, raises the final price by making the bid higher than the previous bidder, if any. But I think that he mischaracterizes Steve's remarks here. Steve, as he has already pointed out, does mot necessarily believe that the sniper thinks "Let the price be damned." He contends that the sniper evaluates the item and decides (logically or otherwise) what the item is worth to him, and plans his snipe accordingly.

He plans a snipe which, by definition, means he will raise the final price, just as any proxy bid would. Whether or not that snipe, had it been a proxy bid, would be answered by a higher counter bid, varies greatly with the auction and the behaviors of the bidders, another point Steve made. Sometimes my winning snipe is only or two increments above the next-highest bid. In most of these auctions, I feel that there is a good chance other bidders might have counter bid my bid, had they the chance. Whether or not they would have been successful depends on how high the full amount of my snipe was. In some auctions, it was not much higher, whereas in others, it was. If I decide an item has sentimental value to me, I may bid "above market price," but even in those situations, I have decided upon an amount and almost never have changed the amount of my snipes, no matter what bids may come in.

Right now, as I write this, there is an auction ending on a magazine. There were no bids all week and then yesterday someone bid $5. My snipe was for $11.09. Ten minutes ago, with the auction in its final hour, I received an outbid alert from AS, which said the bid ws now $12.79. I did nothing, since the magazine was already out of my previously-decided upon range. I did NOT raise the snipe. Had I wanted the magazine that badly, then I would have bid higher.

As for Rick's remarks, he quoted me mentioning that I hoped AS would help me get a better price. Everyone, including myself, desires a lower price. However, I will say that I see AS more as a tool to help me acquire the item than as a bargaining aide.

Some bidders are bargain hunters, first and foremost, and others want the item, no matter what One could say, as Steve basically did, that there is a continuum of bidders, ranging from the bargain hunter to the acquistioner. Most of us fall somewhere in between, and how we bid in a given auction depends on where in the continuum we fall. In some auctions I am like Carlos, looking for Buy It Now or auctions soon to close, whereas in others I do not mind waiting days on end. Some items I am willing to Buy It Now or even snipe because I think that the $1.99 BIN is a great price for that item, one that I probably would not have otherwise purchased. Other times I think, "There is NO WAY I will spend $50 on that; I will wait for anothe time!" Yet other times I place a snipe for $46.77 because I want that $5 item enough for sentimental reasons.
Does this place me somewhere between Steve and Carlos in the continuum?

In any event, the bidders in each auction probably reflect a similar continuum, but only a small number of them are snipers