Auction sniping

Auction sniping is the practice, in a timed online auction, of placing a bid likely to exceed the current highest bid (which may be hidden) as late as possible—usually seconds before the end of the auction—giving other bidders no time to outbid the sniper. This can be done manually, by software on the bidder's computer, or by an online sniping service. Use of an online service is said to decrease the failure rate of the snipe, because the website has more reliable servers and a faster Internet connection with a less variable delay in sending data (jitter), allowing the bid to be placed closer to the deadline, even arriving within the last second.

A bid sniper (often, merely called a sniper) is a person, or software agent, that performs auction sniping.

Experienced bidders on online auctions with fixed ending-times often prefer entering bids late in the auction to avoid bidding wars (multiple rounds of bidders each increasing their maximum bid to temporarily regain "current highest bid" status) or bid chasing (where the presence of an existing bid encourages others to bid on the same item).

One economic analysis of sniping suggests that sniping is a rational gain-maximizing (in other words, price-minimizing) strategy for bidders in auctions that fulfill two criteria:

For example, a novice antiques buyer may prefer to bid in auctions which already have bids placed by more experienced antiques buyers, on the grounds that the items which the experienced buyers are interested in are more likely to be valuable. In this case, more-informed buyers may delay bidding until the last minutes of the auction to avoid creating competition for their bids, leading to a lower winning bid. The highest bid 10 minutes before the end of a contested auction is often not at all representative of the eventual selling price.

An analysis of actual winning bids on eBay suggests that winning bidders are more likely to have placed a single bid late in the auction, rather than to have placed multiple incremental bids as the auction progresses.

Many online auctions use proxy bidding, an iterative sealed bid auction where winners pay a fixed increment over the second highest bid. The auctioneer does not disclose the current maximum bid, but the second highest bid is always public.

In proxy bidding, the wise bidder must know in advance the "true" value of an item as a basis for their secret bidding limit. The fact that the maximum bid is revealed when it is outbid introduces the possibility of maximum bid fishing. Bidders unsure of the value of an item may incrementally increase their bid until they narrowly exceed the previously hidden maximum, thus placing themselves in a winning position without placing a very high bid.

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Wikipedia