Let's set the scene. I tried to buy a fluffy toy on eBay and I was leading the auction until the very last minute when some dastardly sniper outbid me. I never had a chance to respond. And now they're sleeping soundly with my toy whilst I cry myself to sleep nursing my burnt fingers.
It's a touching tale, although completely fictional, and one that suggests sniping is a winning strategy. The logic for sniping is presented more formally below:
If you are bidding on an eBay item and:
- You know the value of the current highest bid at all times
- You have a window of time open only to you and no other bidders to place a bid at the end of the auction
- You are willing to pay more than the current highest bid during this window of time
Who could argue with that? This logic seems watertight. And it is.
But one of these steps does not apply to eBay bidding. Of course the window of time open only to you is not real: anyone can place bids right up to the end. It is simply a hypothetical construct to mark you out as a sniper. It is approximately correct because you are dedicated (or have electronic help) while your opponents are sluggishly getting on with their lives instead of focussing on the auction.
But I digress, because it is line 1 that is the real problem.
The "current highest bid" shown on an eBay item is not really the highest bid. It is the second highest bid, or the starting price if this is higher. There are some small complications (see below) but this captures the main features.
Example: If you have bid £5 on a newly-listed item with a starting price of £2 then you will be the highest bidder. If the auction were to end now you would win and pay £2 for the item. If I come along and bid £3 then you will still be the highest bidder but the price you pay will rise to £3 (you "own" the £3 bid because you bid before me). If I bid £10 then I would be the highest bidder but I would only pay £5.10 were the auction to end immediately. In all the above cases only the current highest bidder knows the bid that they have placed. Everyone else must make do with the second best.
The natural extension to this is that it doesn't matter when I bid because I will only win the auction if I bid more than you. But unfortunately I don't know what this amount is. The only way I can find out is to outbid you and become the highest bidder, which is not consistent with a sniping strategy. In other words: sniping doesn't win auctions.
The argument I've constructed above has flaws. It is similar to a straw man in the sense that I have presented my own version of the sniper's logic and then knocked it down. But I think it does cast doubt on the prevailing wisdom.
So it would be easy to say that sniping is worthless. But there is a more subtle argument in favour of it. Sniping is very similar in nature to bluffing in poker, although in some ways also its opposite.
By bidding on an item you are indicating that you feel it has some value, which is a powerful statement in a market where all you get is a small picture and a biased description. This signal may alter other bidders' perception of the value of the item, making them more inclined to bid and therefore drive up the price. By sniping you deprive others of this information, hopefully saving you some money.
Logically this makes it best to snipe on items with no bids since you are trying to discourage other bidders from taking part. It feels wrong to call it sniping when you aren't sniping anyone, which is why I don't think this is what snipers are trying to do.
This logic is the reason why when I bid on eBay I follow the following process:
- Pick the item I want
- Estimate its value to me
- Bid this amount
- Walk away and wait for the email