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Bidding 101: A Tutorial for Beginning Bidders

This chapter is from the book

In this chapter

  • Understanding the Bidding Process

  • How to Read an Item Listing

  • Before You Bid

  • Just Do It—Placing a Bid

  • Bidding in Other Types of Auctions

  • What to Do After You’ve Bid

  • Five Common Bidding Mistakes

  • You Won! Now What?

After you’ve browsed through or searched the item listings and actually found something you’re interested in, it’s time to pony up and make a bid.

How does bidding work? In a nutshell, it’s as simple as telling eBay how much you’d be willing to pay for an item—and then finding out whether anyone else is willing to pay more than you. If you’ve made the highest bid, you win the auction—and you have to buy the item.

It’s important to remember that it doesn’t cost you anything to bid. You only have to pay if you win—and even then, you don’t have to pay any fees to eBay. (All eBay fees are charged to the seller.) You’ll have to pay the seller the amount of your winning bid, plus any necessary shipping and handling costs to get the item to you.

Sounds easy enough, doesn’t it?

Understanding the Bidding Process

It’s important that you know all about the item you want to buy before you place your bid. It’s also important that you know how eBay’s bidding process works—or you could end up paying too much, or (even worse) not enough to win the auction!

Deciding How Much to Bid

Determining how much to bid on an item on eBay is no more complex than determining how much you’d pay for an item at a flea market or garage sale. You should bid an amount no higher and no lower than what the item is worth for you—and what you can afford. It doesn’t matter what the current bid level is; you should make your bid in the amount of what you’re willing to pay.

That doesn’t mean you’ll actually have to pay that amount, of course. Thanks to eBay’s automated bidding software (discussed in the next section, "Understanding Proxy Bidding"), registered bids will only be as high as necessary to beat out the next-highest bidder. If you bid $40 but the next highest bidder bid only $20, you’ll win the auction with a $20.50 bid.

And you should make that $40 bid even if, at the time, the current bid is only $1. Now, you might think that if the bidding is at the $1 level, you should bid no more than $2 or so. This isn’t the case, again thanks to eBay’s automated bidding software. If the item is worth $40 to you, bid the $40—and let eBay’s proxy software handle the mechanics of the bidding process.

How, then, do you determine that an item is worth $40—or $4 or $400? The key thing is to never bid blind; always make sure you know the true value of an item before you offer a bid.

This means that you need to do a little research before you make a bid. If you’re bidding on a piece of new merchandise, check the price in a catalog, at your local retailer, or with an online retailer.

Understanding Proxy Bidding

The automated bidding software used by eBay is called proxy (or "robot") software. If you’re a bidder, eBay’s proxy software can save you time and help ensure that you get the items you want. (If you’re a seller, it doesn’t really matter, because all you’re interested in is the highest price at the end of the auction—no matter how it got there!)

On eBay, proxy software operates automatically as an agent that is authorized to act in your place—but with some predefined bidding parameters. You define the maximum amount you are willing to bid, and then the proxy software takes over and does your bidding for you.

The proxy software bids as little as possible to outbid new competition, up to the maximum bid you specified. If it needs to up your bid $1, it does. If it needs to up your bid $5, it does—until it hits your bid ceiling, when it stops and bows out of the bidding.

The proxy software bids in the official bid increments used by eBay. If the next bid is $0.50 higher than the current bid, the software ups your bid $0.50. In no instance does the software place a bid over the next bid increment. (It’s pretty smart software!)

Of course, because all bidders are using eBay’s proxy software, what happens when you have two users bidding against each other? Simple—you get a proxy bidding war! In this instance, each proxy automatically ups its bid in response to the last bid by the other proxy, which rapidly (seemingly instantaneously) increases the bid price until one of the proxies reaches its maximum bid level.

Let’s say one proxy has been programmed with a maximum bid of $25, and another with a maximum bid of $26. Even though the initial bid might be $10, the bids rapidly increase from $10 to $11 to $12 and on to $26, at which point the first proxy drops out and the second proxy holds the high bid.

Bid Increments

To better understand proxy bidding, it helps to know eBay’s bid increments. The bid increment is automatically calculated by eBay based on the current price of the item—the higher the price, the higher the bid increment, as shown in Table 3.1.

Table 3.1  eBay Bid Increments

Current Price Bid Increment



















$5,000.00 and up


Proxy Bidding, by Example

Let’s walk through a detailed example of proxy bidding. The process is totally automated, and goes something like this:

  1. You see an item that has a current bid of $100, and you tell eBay that you’re willing to pay $115 for it. The $115 becomes your maximum bid.

  2. The bid increment on this item is $2.50, so eBay’s bidding software—your proxy—bids $102.50 in your name. This becomes the current high bid.

  3. Another bidder sees this item, and bids the next bid increment (as specified on the item listing page), $105.

  4. Your proxy sees the new bid, and ups its bid automatically to $107.50.

  5. A third bidder sees the item, and enters a maximum bid of $150. In accordance with the current bid increment, his proxy enters a bid of 110.

  6. Your proxy responds with a bid of $112.50.

  7. The third bidder’s proxy responds with a bid of $115.

  8. Since the next bid increment would be $117.50—which is over your maximum bid amount—your proxy drops out of the bidding, and eBay notifies you (by email) that your bid has been surpassed. (If the auction were to end right then, the third bidder would win the auction with a bid of $115. Even though he specified a $150 maximum bid, the bidding never got that high.)

  9. At this point, you can place a new maximum bid for the item, or you can throw in the towel and let the new bidder have the item.

Proxy Bidding Advice

The nice thing about proxy bidding is that you can engage in a fierce bidding war—and never get your hands dirty! The proxy software does all the dirty work for you, and just notifies you of the results.

When you’re placing your bid, realize that just because you set a maximum bid price doesn’t mean you’ll have to actually pay that price. The proxy software works in your favor to keep your final price as low as possible; don’t assume that just because you specified a price, the bidding will always rise to that level.

Also feel comfortable that the proxy software will never exceed your maximum bid price. It just won’t happen; the software is smart enough to know your limits. And by bidding your maximum right away, you guarantee that you won’t get carried away and pay too much at the end of a heated competition. Remember, if you lose an auction because the bidding goes higher than your maximum, you didn’t want to pay that much for the merchandise anyway. Get comfortable with that—and be glad the proxy software helped you stay within your limits.

Of course, some bidders don’t like proxy bidding. It is true that if two or more people are bidding for the same item, the bids can automatically (and quickly) rocket up until they max out. For this reason, some bidders prefer to bid the bare minimum on every single one of their bids—effectively defeating the purpose of the proxy software. Of course, if you choose to operate this way, you have to be a lot more hands-on with your bidding, essentially checking back on all your bids as frequently as necessary to ensure that you always end up on top.

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