Ebayers are familiar with what is called bid “sniping.” That’s placing your one, real bid, just a few seconds before auction close. People sometimes do it manually, more often they use auto-bidding software which performs the function. If you know your true max value, it makes sense.
However, it generates a lot of controversy and anger. This is for two reasons. First, there are many people on eBay who like to play the auction as a game over time, bidding, being out bid and rebidding. They either don’t want to enter a true-max bid, or can’t figure out what that value really is. They are often outbid by a sniper, and feel very frustrated, because given the time they feel they would have bid higher and taken the auction.
This feeling is vastly strengthened by the way eBay treats bids. The actual buyer pays not the price they entered, but the price entered by the 2nd place bidder, plus an increment. This makes the 2nd place buyer think she lost the auction by just the increment, but in fact that’s rarely likely to be true. But it still generates great frustration.
The only important question about bid sniping is, does it benefit the buyers who use it? If it lets them take an auction at a lower price, because a non-sniper doesn’t get in the high bid they were actually willing to make, then indeed it benefits the buyer, and makes the seller (and interestingly, eBay, slightly less.)
There are many ways to write the rules of an auction. They all tend to benefit either the buyer or the seller by some factor. A few have benefits for both, and a few benefit only the auction house. Most are a mix. In most auction houses, like eBay, the auction house takes a cut of the sale, and so anything that makes sellers get higher prices makes more money on such auctions for the auction house.
However, it is a mistake to assume an auction house would want to always benefit the seller (and their fees.) To be popular, an auction house must attract both buyers and sellers. An auction house without happy buyers is no good to sellers, or likewise. The goal is to find the right balance.
This gets a bit complex because eBay has attained a bit of a monopoly. This gives them some slack, in that even if they do certain things wrong, they will still attract the most buyers and sellers. It would take a lot (such as a possible entry by Google) to break the eBay monopoly on general online auctions in the USA. Thus many eBay features remain that are not optimized as they would be in a competitive market.
Sniping is interesting because while it generally provides a small benefit to buyers who use it, it is also seen as a detriment by the buyers who, for whatever reasons, are not willing or able to do it. Over time, this would drive such buyers to be less fond of eBay, though at present there are no viable options. I would venture that in auctions with many bidders, there is almost always sniping.
Live auctions often use the “going, going, gone” method. This largely favours sellers, as they are sure they get a bid from the bidder truly willing to go higest. Every other bidder consciously decides they will not. Sometimes, bidders trying to make a “preemptive” bid will go higher than they need to. In addition, to avoid wasting time, increments can be higher. This again makes more for sellers. It has some value to buyers — a buyer knows if they are truly willing to go to the mat for an item, they will get the item. At the same time they still have a sanity check. On eBay you can be sure to get an item by bidding an immense ammount, but if two people do this the result is not desired by anybody but the seller. GGG auctions can sometimes trigger emotional and irrational bidding, especially on rare items. GGG auctions, because they don’t end at a predictable time, offer other complications, in particular for those trying to bid to get one from a group of similar items. To wit:
Sniping software also offers a feature eBay does not provide directly, the ability to bid on multiple auctions of identical items, and thus cancel all future bids the moment one of the items is won. This is a useful means for those interested in getting the best price, and makes for a more efficient market. eBay could offer this by changing their system. They would have to provide a UI to set up such bids (something they are not yet so good at) and effectively place your max bid on each successive item the moment it fails to take the prior item. This would look just like sniping if the auctions were spaced minutes apart, just like late bidding if they are further apart.
Sniping software acts more like the sealed bid auction, where each buyer prepares their sealed bid with a true price, with the variation that they pay the 2nd highest bid plus the increment, rather than their actual top bid. This actually seems like a good system unless you can’t figure out your true price in advance.
Sellers psychologically like to see high bidding early, if they are watching. And to see lots of bidders. They might not like this.