Because eBay is an online auction system whose listings are open for bids for days at a time, the bidding process on eBay is significantly different from the one with which many real-world auctiongoers are familiar.
In a real-world auction, the bidding starts, bidders frantically place bids back and forth to the cadence of a singing auctioneer, and once bids slow, the gavel falls—the auction is won. Because the Internet is often less-than-reliable, and because eBay auctions are open for so long (days at a time, in fact), it's unrealistic to expect bidders to be present and watching an item all the time, from beginning until close.
Instead, the eBay uses an alternate system called proxy bidding that is always the subject of much confusion for new eBay bidders. Here's how proxy bidding works:
- Bidders are encouraged to bid the maximum that they are eventually willing to pay for an item from the start. Don't worry—this rarely means you'll pay that much for the item if you win it, because of what follows.
- The current bid amount shown on an auction listing is the lowest amount necessary for the high bidder to have outbid the next highest bidder's maximum by one bid increment, regardless of the high bidder's actual bid.
- When a new bidder bids on an auction, one of two things can happen:
- If the new bidder's maximum bid is higher than the old winning bidder's maximum bid, the previous winning bidder is outbid and the current bid amount is set by eBay to the previous winning bidder's maximum bid plus one bid increment.
- If the new bidder's maximum bid is lower than the currently winning bidder's maximum bid, the currently winning bidder remains the high bidder, and the current bid amount is set by eBay to the new bidder's maximum bid plus one bid increment.
- If the new bidder's maximum bid is higher than the old winning bidder's maximum bid, the previous winning bidder is outbid and the current bid amount is set by eBay to the previous winning bidder's maximum bid plus one bid increment.
- When the auction closes (i.e. when time runs out), the winning bidder wins the auction at whatever the current bid amount is.
- In order to place a new bid, a bidder must bid at least the current bid amount plus the bid increment. This is the minimum bid amount shown at the bottom of the auction listing.
These rules sound a little bit convoluted, and they lead to the most common source of confusion amongst new eBay members: some attempt to bid on an item by outbidding the current bid amount by a few dollars at most—only to find that the current high bidder has "immediately" outbid them. Then, they bid again and again, a few dollars more each time, and are outbid immediately again and again.
In such cases, the high bidder is not cheating (even though his or her bids are occurring almost instantly), nor is he or she sitting on the other end in front of his or her computer madly bidding against the newcomer. Instead, eBay is bidding on their behalf, by proxy, up to and including their maximum bid. It is only by bidding an amount higher than the current high bidder's maximum bid that a new bidder can take their place in the winning position.
