Monday, February 12, 2007

Why Sniping is Cowardly

In my recent post on the Allspark, I caused some offense at calling snipers cowardly, and was told to “get off of [my] soapbox.” I fully admit that I’m on a soapbox here, and stand by my conviction that sniping is a cowardly practice, and that those who argue for sniping while suggesting that bidders should simply bid their maximum are being disingenuous. Let me explain why I believe that this is so:

Let’s assume an auction with a minimum bid of $5, and posit three bidders:

Bidder #1 – willing to pay $10
Bidder #2 – willing to pay $25
Bidder #3 – willing to pay $50

We’ll also assume that proxy bid amounts are in increments of $1 at all levels, for the sake of simplicity.

Also for the sake of simplicity, we’ll ignore the time limit for now, assuming that the auction closes after all three bidders have had a chance to place their bids. As will later become clear, having a time limit will not affect this argument at all.


Possible outcomes:

If Bidder order is 1, 2, 3
When Bidder #1 bids – amount appears as minimum = $5
When Bidder #2 bids – amount appears as $11, with Bidder #2 winning (just enough to beat Bidder #1, but no further)
When Bidder #3 bids – auction is sold to Bidder #3 at $26 (just enough to beat Bidder #2, but no further)


If Bidder order is 1, 3, 2
When Bidder #1 bids – amount appears as minimum = $5
When Bidder #3 bids – amount appears as $11 with Bidder #3 winning (just enough to beat Bidder #1, but no further)
When Bidder #2 bids – auction is sold to Bidder #3 at $26 (just enough to beat Bidder #2, but no further)


If Bidder order is 2, 1, 3
When Bidder #2 bids – amount appears as minimum = $5
When Bidder #1 bids – amount appears as $11, with Bidder #2 still winning.
When Bidder #3 bids – auction is sold to Bidder #3 at $26


If Bidder order is 2, 3, 1
When Bidder #2 bids – amount appears as minimum = $5
When Bidder #3 bids – amount appears as $26, with Bidder #3 winning.
Bidder #1 does not bother to bid, since the amount already appears higher than the $10 he was willing to pay. Bidder #3 wins the auction at $26.


If Bidder order is 3, 1, 2
When Bidder #3 bids – amount appears as minimum = $5
When Bidder #1 bids – amount appears as $11, with Bidder #3 still winning.
When Bidder #2 bids – auction is sold to Bidder #3 at $26


If Bidder order is 3, 2, 1
When Bidder #3 bids – amount appears as minimum = $5
When Bidder #2 bids – amount appears as $26, with Bidder #3 still winning.
Bidder #1 does not bother to bid, since amount already appears higher than the $10 he was willing to pay. Bidder #3 wins the auction at $26.


In absolutely all cases, the result is the same. Bidder #3, the person willing to pay the most, wins the auction at $26. This is what would happen no matter how many people bid, if all people really did bid their actual maximum, as is suggested by eBay. Furthermore, the result remains the same no matter when the clock runs out, so sniping is meaningless if people actually do bid their actual maximum.

Why have a clock at all? Let assume that there’s a Bidder #4 out there, who might have been willing to bid $100, but didn’t know that the auction existed until a month later. Is it reasonable to make the seller wait until all potential bidders have seen the site? The auction would go on forever! Bidder #4 didn’t know about the auction when it was in progress, so Bidder #4 misses out. All the clock does, in reality, is sets a limit on the auction so that it does actually end. People have a limited time to become aware of the auction’s existence and decide whether or not they wish to bid. This is necessary, at least in part, due to the potentially infinite number of bidders that could come into an auction given an indefinite amount of time. But the argument still holds: the bidder willing to pay the highest price (so long as he/she is aware of the auction while it is in progress) wins and pays the same amount, regardless of how early or late that bid is placed.

But back to the issue of sniping, and the advice that bidders should bid their actual maximum. I actually think that this is good advice. But for whatever reason, people do not bid their actual maximum. My contention is that snipers actually depend on this fact when they snipe, or they would not actually be paying anything less for having sniped than they would if they bid early. This is why I call the practice cowardly.

Snipers know that not everyone bids their actual maximum, and are afraid of someone coming along later who honestly is willing to pay more than they are. This is why I say that snipers who argue that people should just bid the maximum they’re willing to pay are being disingenuous.

But, as I've said before, snipers are here to stay, and until and unless eBay decides to change their system (such as by automatically extending the time for an extra few minutes after the latest bid), simply encouraging bidders to bid the maximum amount they're willing to pay up front is the most anyone can do about the situation.

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