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How eBay Online Auctions Work

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In this lesson, you learn how eBay auctions work and how much they cost.

Understanding Online Auctions

About half of all eBay transactions are in the online auction format. (eBay used to be 100% auctions, but in recent years it has migrated to more fixed-price transactions.) If you want to buy and sell on eBay, you need to understand how online auctions work.

Let's start with the basics. An eBay online auction is an Internet-based version of a traditional live auction—the type where a fast-talking auctioneer stands in the front of the room, trying to coax potential buyers into bidding just a little bit more for the piece of merchandise up for auction. The big difference is that there's no fast-talking auctioneer online; instead, the bidding process is executed by special auction software on the eBay site. In addition, your fellow bidders aren't in the same room with you; they might be located anywhere in the world. Anyone anywhere can be a bidder, as long as they have Internet access.

The key to winning an online auction is to have the highest bid; it's as simple as that. When the auction is over—most auctions last seven days—the bidder with the highest bid wins the item. It doesn't matter when the bid was placed; the highest bid always wins—even if it's just a penny more than the next highest bid.

It's important to remember that throughout this entire process, eBay is just the "middleman." eBay isn't the actual seller of goods; it only facilitates the transaction—just like a traditional auctioneer does. Therefore, eBay can't be held responsible for anything that goes wrong with any particular auction or sale. When you buy an item, you buy it from the individual who put it up for sale—you don't pay anything to eBay.

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