Why do people bid on eBay auctions before the last 5 minutes? Don't they realize that being the top bidder at any point except when the auction closes is meaningless, right? It only serves to drive the price up. Grrr.
We've talked (argued?) about this before. I think it is an interesting question (in game-theory?). I think the problem is that the theory eBay works under is flawed in the same way that the capitalist free-market theory is flawed: they both assume informed and rational participants.
Now, a lot of normal users of eBay find the last-minute sniping annoying and rude. And I am not convinced that early bidding drives-up the price much except for the expected affect that the more active serious bidders, the higher the final price. The proxy bidding allows people to bid who may not have an opportunity to do so at the last minute. If people bid the true maximum they are willing to spend and everyone does that honestly, the proxy bidding system should work--sniping or not.
But the bidders are not rational and informed. The bidding process is mostly emotional rather than logical. It is emotionally harder to bid $100 maximum a day in advance, even if that is ultimately what you would be willing to pay, when the current winning bid is $50. And emotionally one is always willing to spend the incremental +$10 (or whatever the increment is) beyond one's "maximum" price to beat-out someone else.
I think the eBay bidding system would be fairer to the average bidder if there was a limit to how soon one could put in a new bid. So, a bidder would have to wait 5 minutes or an hour to increment the maximum bid. This would reduce the "sniping" affect and encourage honest bidding. I'm still not sure what the impact on the final prices would be. One would guess it would lower the final price (which is why eBay doesn't do it, they are paid by commission and really are working for the sellers). However, the flip side is that it would force people to put in their honest maximum bid.
To really make it interesting, make the time-out semi-random and/or dependent on variables such as the number of active bidders, time left and number of bids placed so far by that bidder. The time-out could also be dependent on someone else making a new bid first. All these schemes could be manipulated by someone with multiple accounts, of course. Another option is to make the actual end-time of the auction slightly random. In other words, toward the end, no-one would know if it is 10 minutes or 10 seconds left to bid.
Seems that someone would have worked-out a better scheme for this kind of thing. But game theory seems to be rarely applied to real life.
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Now, a lot of normal users of eBay find the last-minute sniping annoying and rude. And I am not convinced that early bidding drives-up the price much except for the expected affect that the more active serious bidders, the higher the final price. The proxy bidding allows people to bid who may not have an opportunity to do so at the last minute. If people bid the true maximum they are willing to spend and everyone does that honestly, the proxy bidding system should work--sniping or not.
But the bidders are not rational and informed. The bidding process is mostly emotional rather than logical. It is emotionally harder to bid $100 maximum a day in advance, even if that is ultimately what you would be willing to pay, when the current winning bid is $50. And emotionally one is always willing to spend the incremental +$10 (or whatever the increment is) beyond one's "maximum" price to beat-out someone else.
I think the eBay bidding system would be fairer to the average bidder if there was a limit to how soon one could put in a new bid. So, a bidder would have to wait 5 minutes or an hour to increment the maximum bid. This would reduce the "sniping" affect and encourage honest bidding. I'm still not sure what the impact on the final prices would be. One would guess it would lower the final price (which is why eBay doesn't do it, they are paid by commission and really are working for the sellers). However, the flip side is that it would force people to put in their honest maximum bid.
To really make it interesting, make the time-out semi-random and/or dependent on variables such as the number of active bidders, time left and number of bids placed so far by that bidder. The time-out could also be dependent on someone else making a new bid first. All these schemes could be manipulated by someone with multiple accounts, of course. Another option is to make the actual end-time of the auction slightly random. In other words, toward the end, no-one would know if it is 10 minutes or 10 seconds left to bid.
Seems that someone would have worked-out a better scheme for this kind of thing. But game theory seems to be rarely applied to real life.
So, what were you trying to get?