Proxy bidding is a method of bidding in which a bidder sets a maximum amount they are willing to pay upfront, and the auction owner automatically increases their bid in pre-set increments until the maximum amount is reached. This allows bidders to bid on multiple items at once without continuously monitoring the auction. Proxy bidding is used in second-price auctions, and it is important to research the item’s market value and set a true maximum bid. Fishing at the maximum bid and sniping the bid are also strategies used in online auctions.
Proxy bidding, sometimes called automatic or no bidding, is a method of bidding in an in-person or online auction. The way it works is that the person who wants to bid on an item decides a maximum amount that he is willing to pay upfront and communicates that amount to the auction owner. When more bids are made, the auction owner automatically increases the person’s bid in pre-set increments until the maximum amount is reached. If the bidder is monitoring the auction, they may opt out or choose to raise their bid at this point. The reason people do this is that they don’t have to continuously monitor an auction to win an item and therefore can more easily bid on multiple items at the same time.
How proxy bidding works
Although many people only associate proxy bidding with online auction sites, this also happens in physical auctions. In a physical auction, the bidder who wants to bid by proxy usually calls or emails his maximum bid to the house before the auction begins; in an online auction, you provide this information to the auction site at any time after the auction has opened. In both cases, the bidding process is automatic and the successful bidder does not need to do anything else unless the maximum amount is reached. In this case, the auction owner calls or emails the proxy bidder, who can decide whether he wishes to continue bidding beyond the initially identified maximum price. If the maximum amount is not reached but the other bidders withdraw, the delegate only pays the amount of the last bid, not the maximum price.
Proxy bidding is used in second-price auctions, which are those in which the winning bid is a higher bid increment than the second-place bidder. This means that the highest bid, which is the highest bid placed by any standing bidder, is sealed, but the second highest is always public because the current highest bid is one increment higher.
For example, two people are bidding on an item. Bidder A sets a maximum proxy bid of $100 US Dollars (USD). If bids increase in units of $10 USD and A is the only bidder, he will have the highest bid with $10 USD. If bidder B joins the auction and sets a maximum proxy bid of $150 USD, the highest bid is now $110 USD, the second highest bid’s maximum ($100 USD) plus raise per unit ($10 USD). The actual maximum B is willing to pay – $150 USD – is not known unless someone else bids more and becomes the second-highest bid.
pros and cons
This strategy can be very convenient, as it allows people to bid on multiple auctions at once without having to follow them, but people can get mixed results. People bidding on multiple items at once can choose lower highs in case they win several auctions so they don’t suddenly end up with a huge bill. However, having a lower high makes the bids less competitive, so it’s not always the best strategy. On the other hand, people bidding by proxy don’t have to constantly watch the auction to outbid other bidders. Proxy bidding can also help make it less tempting to get carried away with the offer, as the bidder sets a predetermined limit.
Tips for best results
Auctioneers say the way to get the best results with proxy bidding is to first research the item for bidding to assess its market value. Next, the proxy bidder would have to set the maximum amount at a price that is really the most she would pay for the item, then leave the auction alone. Placing an artificially low maximum and then planning to raise it later is generally ill-advised as someone bidding by proxy may not have time to raise his bid before the auction is over. It’s also important to remember that some auctions have minimum bids and commissions, so bidders looking to bid by proxy should take this into account when deciding on their true maximum bid.
Fishing at the maximum bid and sniping the bid
In online auctions, proxy bidding opens the bidding process to drawing the maximum bid. This is when a bidder raises his bid by small amounts until it is the highest bid to find out what the higher maximum is. In this way, the “fisherman” can find out how much people are willing to pay and, in some cases, artificially increase the offer.
To combat this, some people use bid sniping for online auctions. This is when bids are only made at the end of the auction rather than being placed in advance. By setting bids to only be placed when the auction time limit is about to expire, it lets the sniper know what the second-highest maximum bid is, and doesn’t give other bidders a chance to “draw” to see how much the sniper is willing to pay. Some people object to bid sniping because other proxy bidders, who set their maximums earlier in the auction, usually don’t have time to raise their bids if the sniper’s maximum is higher. If an early proxy bidder has set his maximum bid to be higher than the sniper, however, he will still win the auction.
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