Thursday, August 26, 2010

Killing the eBay sniper

When it comes to online auction, a sniper is a bidder who makes his bid at the last second with the intention to outbid the current highest bidder without giving him a chance to bid again. Here is an example of a sniper in action. Notice that the sniper (r***a), contrary to the name sniper may imply, is not actually very discreet. He started showing interest about an hour before the auction ends, but could not become the highest bidder until the last second.

We can see that f***f, the person who got outbid by the sniper, only bid once. He's a traditional eBay bidder who takes advantage of the so-called proxy bidding. Proxy bidding lets the winning bidder pay the amount bid by the second highest bidder plus a small increment, the least amount the winner bidder would have to bid in order to outbid the second person. While proxy bidding saves f***f tons of trouble, when he got sniped by r***a in the last second, he didn't have a chance to decide whether he wants to bid higher. Although one could argue that if f***f really wanted to pay more, he should have raised the first bid. However, a person also makes a bid to gauge interest level from fellow bidders. A sniper, by virtue of his operation, conceals his interest until the last second to keep the interest artificially low.

There is one thing eBay can do to discourage sniping: every time when a bid is made, whether it outbids the current highest bidder or not, the auction end time is extended by an hour. The sniper r***a in this case would have extended the end time by 20 hours. Another orthogonal policy adjustment is to limit the number of bids each bidder can make to a low number, say 5. This encourages more bidders to take advantage of proxy bidding, as well as limit the amount of time a bidder can extend the auction end time by bidding.

eBay, I hope you're listening.
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