The black art of Sniping

Depending on whom you talk to, sniping is either a gift from the Gods or the spawn of the devil. As usual, the truth lies somewhere in between.

What is sniping?
Sniping is simply the art of making a well-timed bid in the dying seconds of a listing that gives other users no chance to respond with a higher bid. This is the reason why items often get bid up dramatically in the last seconds.

As a buyer I love sniping and have used it well. As a seller, I hate it. It is also extremely unfair to those on dial-up connections, since they do not have a fast enough connection speed to keep up with the changes.

Why snipe?
Simply speaking, there is a tendency for buyers to make low bids and then raise them later when they get outbid - rather like a traditional auction. However, eBay's listings are not like traditional auctions. Suppose there is an item that is worth ten dollars and you and I are bidding on it in the traditional fashion.

• You $1
• Me: $2
• You $3
• Me: $4
• You $5
• Me: $6
• You $7
• Me: $8
• You $9
• Me: $10 [BING!!!]

So I end up paying ten dollars. Now here's what the snipe looks like:

• You $1
• Me: [Tick... tick... tick...]
• You: Hmmm... maybe I will get it for a dollar!
• Me: [...tick... tick... tick...]
• You: I'll buy that for a dollar!
• Me: [...tick...] $2 [BING!!!]
• You: Erk! Curse you Wizard Prang!

That's how it works, at least in theory. Sniping is neither good nor evil - it is simply a consequence of eBay's decision to end listings at a specific time. Sniping takes advantage of those who don't know how to bid, and those who have slow Internet connections. Ironically, eBay could put snipers out of business in a heartbeat by the simple expedient of extending auctions after last-minute bids, but for reasons best known only to them, they choose not to.

I recently stumbled across an excellent academic paper in the subject of bidding and sniping, called "The Timing of Bids in Internet Auctions: Market Design, Bidder Behavior, and Artificial Agents" by Axel Ockenfels (University of Magdeburg, Germany) and Alvin E. Roth (Harvard University). It is available in PDF form here .

Defence against the Dark Art

Simple rule for bidders: Put in your maximum bid - the highest amount you are willing to pay - and walk away. The proxy bidding system will bid up to your maximum to fight off other bidders, until someone bids a higher amount than you. You may still lose, but you have the comfort of knowing that the item went for more than you were willing to pay.

Simple rule for sellers: Never list an item for less than you are willing to part with it (unless you are trying to save on the listing fees and are absolutely certain that it will go up). Of course your listing fees will be higher, but you will spare yourself the heartbreak of parting with something valuable for a song…