Please explain the purpose of "sniping" (ebay)

Factual Questions
161

This is one of the most frustrating threads I’ve taken part in!

I realise this is a long thread with long posts, but for those joining us, here’s my main point:

Even rational bidders can get sniped.

Consider, I enter an auction, and have the following prices in mind:

A lower bound, L, under which I would definitely buy the item without hesitation.
An upper bound, U, after which I would definitely refuse to buy / walk away.
L is not adjacent to U; they’re actually separated by, say, 20%.
An average price, A, which will usually be between my L and U.

The problem with bidding U is that you are bidding what you consider to be over the odds. As a regular strategy, it could be very costly. Most people would prefer to just be sniped now and then.
And the problem with bidding below U is that you are vulnerable to sniping.

162

You’re confusing “rational” with “winning”.

This is hilarious. I joked upthread that it is sacrilege to complain about eBay, and apparently, it is.
KB, I’m not talking about smiting eBay, or trying to pass a Bill forcing them to change their rules. I’m saying that some of the mechanism of the auctions is flawed. I’m allowed to say that.

Yeah, this is the kind of thing I mean by inspecting the market. Your post is reinforcing what I was saying.

Some people see price as something that I can set independent of the market. That I can just decide how much a widget means to me, and a value will appear in my mind. Anyone who’s recently bought something with no idea of the market rate knows that this is untrue.

I need a widget. In some nebulous way, I know how useful a widget is to me, but in an important sense there needs to be feedback between me and the market before I know what that is.
Why? Well let’s say I find that the price of widgets is higher than I’m comfortable paying. So I explore alternatives to buying a widget. If these alternatives don’t pan out, then my subjective value of a widget goes up. Now the price I’m willing to pay may be higher.

The simple point being that contrary to popular opinion, people do not generally price an item by some kind of internal calculation of worth to them. They look at the market and decide if the market value is an acceptable price for them. It’s not the same thing.

163

But still, what you say requires people to have some sort of benchmark in mind against which they can assess the externally “market value” in order to decide whether the market value is an “acceptable” price to them.

If I want to buy a widget, and I have no idea what widgets cost, I will do some sort of market survey - e.g. by looking at completed auction - to see what’s the going rate for widgets. I might find out that widgets of the make and quality I’m looking for tend to sell for about $1000. Now am I going to say, “Well then, this means I have to bid $1000, or slightly more than that?”. Nope. I will first think for myself whether I really want to spend $1000 to get a widget. This is exactly what you referred to when you said that people decide if the market value is an acceptable price to them. I might say: “It would be nice to have a widget, but I’m not going to blow a grand on it.” This means that $1000 was not an acceptable price to me. But the acceptability threshold is a subjective valuation; it’s not imposed on me by an external market.

You’re right when you say that I can’t set a price independently of the market (at least if I’m not a monopolist) - if I set my subjective valuation of a widget below $1000, then I will simply not get one. But my subjective valuation of widgets is not the same thing as the market price, and people can (and do) set subjective valuations for items before they buy.

164

This is not rational.

If you are standing in a store, and the product has a price label on it that is slightly below U, do you buy it or not? Let’s say it’s an antique store, there’s only one item for sale, and the seller is known for a “no haggling” policy. When you walk out of the store, is that thing going with you? There is no “I’d consider it” or “I’ll think about it”, you’re walking out of the store at some point, and the item is either with you, or it’s still on the shelf.

If you are buying it, then it’s rational to buy it at the same price from eBay, so you should bid U. There is no “problem” with bidding U, it is not “too costly” or any such thing. U is a fair price, it’s a price you’re willing to pay for the item, so you should be willing to bid it. It’s irrational to be unwilling to bid a price for an item when you would be willing to pay that amount directly to a retailer for an identical item.

If you don’t buy it at the store, then U is not the upper limit on what you’re willing to pay, it’s something less than U, restate U until you’re actually willing to buy the item at that price.

165

That is self-evident. There is always the possibility that another bidder values a given item more than I do. However, this is not an issue of sniping, it is an issue of the other bidder placing a higher offer than mine, regardless of when in the life-cycle of the listing the offer is placed.

If I want something i place a bid for my maximum acceptable price late in the auction. If no one else values it as much as I did, I get the item for whatever the next person offered plus one increment.

What someone else is willing to pay at this time is not a factor in how much I am willing to pay. Why do you let others define your maximum valuation of an item?

166

My personal impression is (and I hope none of the snipers here takes this personally) that sniping is popular because it makes people feel smarter. People love the feeling of being smarter than others and looking down on others as suckers. That’s the kind of sensation elaborate bidding strategies create, but what they overlook is the simple fact that there is nothing particularly important about “winning” an auction. Buying an object at a price that exceeds your subjective valuation of it is a bad deal, no matter which bidding strategy you used, whereas conversely, buying an object at a price below your subjective valuation is a good deal, no matter which bidding strategy you used. And since the bidding strategy you use doesn’t have an impact on your subjective valuation of the object, I still fail to see the rationale behind sniping.

167

Schnitte:

Sniping gets an offer in as late in teh game as possible. That way, emotional bidders like Mijin do not have the chance to react and enter a higher offer. This means that the final cost to me is only what the second-highest bidder entered plus one increment.

If a emotional bidder has a chance to react, they will drive up my final cost by picking away until my max is reached or their “really, truely highest price” is reached.

I prefer to pay as little as possible, and bidding late helps keep the nibblers from pushing up the final price.

168

The point is that the bidding strategy can affect the maximum bids of the other (non sniping) bidders it has nothing to do with my subjective valuation.

Bid early, and you encourage non-snipers to re-bid, which can cause your purchase price to increase, if their max bids are lower than yours, or can lose you the auction entirely, if their max bid is higher than yours. Bid late, they do not have a chance to re-bid, and your bid is compared directly against their original bid, which is possibly much lower than a re-bid that they would make.

169

Of course, that’s what I’m saying.

What I’m saying is that I have a need for a widget. It may be obvious to me that that need is less than my need for a car, say.
However, to actually quantify that need, I interact with the market.
There’s no definite value in my mind.

Again, anyone who’s recently shopped for something with no idea of market value will be familiar with this. A price that seemed exorbitant at the start of the day you could be crawling over broken glass to get by the end of the day.
And along the way, you discover that you needed the item more than you thought…

Of course there is an “I’ll think about it”! You can stand there and think about it as long as you like, and you can go to other stores and get an idea of what a good price is.
If you don’t do this it’s probably because you already know what a fair price is from past experience.

Indeed this is one of the key differences with an auction, as you must make a quick decision and often auction items are rare or unique.

It’s hilarious the market model that some seem to have in mind here – that with no idea of the going rate I would conjure a price in my mind, then the first store I see if their price is less than “conjured”, I’d buy. It’s just not that simple.

170

If you have no idea of the fair market rate of an item you really have no business bidding on it. I’ve seen bid wars between emotional buyers drive up the price of their particular auction item well past what it available for on the same site.

Of course, if you don’t want to risking “losing” an eBay auction, then use the “nuclear option” in your bidding strategy. Set your final bid price so high nobody in their right mind would pay that much for your item of interest. Just pray some other irrational doesn’t use the same strategy at the same time.

171

No there isn’t. “I’ll think about it” means “No Sale”.

To expand on my analogy, this thing is not going to be on sale forever, the store is closing for good. You either go home with the thing, or you don’t. It’s something you are interested in buying, and is selling for less than U. If you don’t go home with it TODAY, you’re not getting it at all. What do you do?

Maybe U changes from day to day, that’s OK, there’s no rule that says U must be constant. However, if the price is less than U, and U is the true upper limit to what you’re willing to pay for the item, then you buy it, or bid it.

Look, I have a preferred brand of tea, it usually sells for $3.99 a box. I’m willing to pay that. It’s also sometimes on sale for $2.99 a box. If I notice it’s on sale, I buy a box. If it’s not on sale, I don’t buy any, unless I’m running out. If I’m running out of tea U is $3.99, if I’m not running out of tea, U is $2.99, if I have 5 boxes in my pantry, U is $1.99. The point is, U is defined by when I buy and when I don’t.

I’m on eBay bidding on tea, what’s my max bid? It depends on the day, I’ll set my max bid based on what U is for the day the auction closes. I bid $3.99 if I’m out of tea, $2.99 if I have one spare box, and $1.99 if I have a bunch already.

If you don’t have any idea what you should be paying for something, maybe you shouldn’t be thinking about buying one until you’ve done some research. The worst possible way to buy it is to go into an auction and bid based on what other people are bidding, making up your maximum price on the fly.

172

Well, said Cheesesteak.
And yet, there will still be people who insist that they want to buy something, but don’t know how much it’s worth to them. It must be a right-brain vs. left-brain thing.

173

OK, I can see the point about sniping as a tool to avoid nibblers driving up the prices. In that sense, sniping can be rational. But it’s only rational because of other people’s irrationality, which makes them adjust their valuation on the basis of other people’s valuation. Which doesn’t mean there’s no point in sniping, I admit - if a strategy gives you an advantage over irrational people, then it’s rational to use it. But if we purely look at the comparison between sniping vs the “bid your subjective valuation manually” strategy, then sniping doesn’t win in that comparison.

174

You may do this, but that’s not the end of the story, it’s just a temporary suspension of your decision-making process. At the end of the day, there will be a point when you have to make up your mind and either buy the object or not. Tertium non datur. If you agree to pay the price, then you get the object, if not (either because you’re still undecided, or because you make a conscious decision of not buying the thing), then not. Ultimately, your “I’ll think about it!” comes down to a plain “no deal”, and the only alternative to that is buying the object. There is no middle ground between these two options.

175

I cannot undestand this concept of making a price determination based on how other people value the item, not how you value the item. That is the behavior that is called “irrational” elsewhere in this thread.

People make decisions about what an item’s value is to them, and that (along with the same decision by sellers) is what determines market value. Not the other way around.

176

Explain how extending the auction helps if you don’t even know the sniper(s) max proxy bid?

I’m guessing you’ll reflexively say, “The extra time gives me a chance to place another higher bid.”
You really need to think that through.
How is your new “fuzzy max” bid in extended overtime different from letting a proxy bid that increments on your behalf? When you submit a bid of “U”, you’re not going to necessarily pay “U”. With the proxy system, you’ll likely pay “A” . If by some chance someone else joins the bidding, you said you’d like to keep manually upping A to A+1, A+2, etc until the pain point of “U” is reached. Well, that’s what the proxy system does! Why are you reinventing a bid escalation algorithm by hand that ebay’s proxy system already takes care of?

This is reasonable to not have a firm price without market research BUT in the limited context of an auction you are participating in, the statement makes no sense. How does one “look at the market” if the competing bidders’ max proxy bids are not revealed to you? If you’re the loser of the auction (2nd highest bidder), it was your bid amount that determined the final value and not the snipers’ max bids. If you’re the winner, the loser below you determined your final value. In both cases, the boundaries of your bid amount is the same knowledge you had when you started. No new “market value information” has been revealed in that one auction you participated in.

You can “look at the market” via the history of completed auctions and/or check prevailing prices at non-ebay sources like Craigslist or For-Sale forums. The rub is that you’re not actively participating in those transactions because by definition, they’re history.

How do you gain “new market information” in the active auction you’re participating in? The L and U boundaries haven’t changed right?

I noticed that a gap in logic running through all your posts is the concept of the max proxy bid. Maybe this is the key to the disconnect. I guess you’re trying to overlay some aspect of the outcry auction with ebay’s system. Well, if it makes you feel better, think of the max proxy bid as a silent outcry auction that bounces back and forth between competing bidders at nanosecond speed.

177

The analogy with shopping was intended to show how people determine a fair price.

Rather than disputing the point, Cheesesteak and Schnitte seem to be massaging the analogy to make it more like an auction. It isn’t.

It’s laughable to imply that there is a time restriction; I can take as long as I like (within reason), and the deal takes place when I decide. And when that deal takes place, for $15 say, the cashier will not say “Aw, shoot, it was $15.02. Sorry”.

I can only direct you re-read the post you’re responding to, where I fully acknowledge that people have an internal sense of value. I’m saying that part of quantifying that is interacting with the market.
Consider the situation of buying something where you have no idea of the market value: are you honestly saying that before you leave the house you think “$14.49 is what that part means to me” and potentially do a deal in the first shop because they offer it for $13.99?

Or if we want to take it to the extreme, imagine I leave my house and find that star trek style replicators are now available, and retail for just $80. How much is a widget worth to me now? Probably nothing.

I won’t explain that, since I’ve said a couple of times now that I’m not interested in a discussion on alternative auction formats.

Well, it’s pretty clear to me that I’m not going to make any progress within this thread. There are just too many people that want to stop by and say “You bid the most you’re willing to pay! It’s that simple LOL!1!1!!” without attempting to follow what I’m saying.

Nevertheless, I think I’m on to something here. I’m gonna do some research on what has been written in game theory under how a rational auction participant determines their maximum price in (say) proxy auctions.

178

Do you mean the post where you said:

Further,

It depends on whether I would be happy to meet my need for my perceived value, or if I have the time and energy to try to get the lowest possible price. But I’ll tell you with absolute certainty that if the first shop offered it for $20.00 I would not buy it. I could read market research, talk to friends, shop at 50 different sources, and if they all said that $20 is the going rate, I would say fine, but I ain’t buying until it comes down to $14.49.

179

Nobody ever said anything to that effect. Obviously it’s better for the purchaser to pay, say, $10 than $13.99 for an object, all else equal. Having a subjective valuation of an object in mind doesn’t mean this is precisely the price at which you’re going to buy the item. It means that this is the maximum price you’re willing to pay. You’re happy to get a bargain, and obviously you’ll be happy to pay less, but you’re not willing to pay more. This is precisely what the “bid your subjective value” people have been arguing all throughout, since this strategy doesn’t mean that this is the price you’re going to pay for the item. Rather, the strategy means that either someone else bids more than you, in which case you won’t get the item but that’s fine for your because you wouldn’t be willing to pay that much; or, you get the item for a price that’s below your maximum. Your point about people looking to get the item for as low a price as possible is perfectly valid, but it doesn’t support your position.

180

Well, yes. That is what we are saying.

If it is worth $14.49 to us, we place our bid at $14.49. That way, if no one thinks it is worth that much, we can buy it for the amount the next lower person bid plus one bid increment. So if one other person felt it was worth $13.99, we get it for $14.49, being fifty cents more than that other person was willing to spend and still saving fifty cents off the amoutn we were willing to spend.

We are not understanding why the amount *you *are willing to spend changes upward just because someone else is willing to spend more.