4 ms·

Is Sniping a Problem for Online Auction Markets? [pdf]

9 points by nkurz 11y ago

t0mbstone 11y ago
The bidding system on online auction sites like ebay has always been a joke. If an auction ends at a precise date and time, then the only thing bidding early accomplishes is driving up the price. If someone wants to get the item for cheap, they should NEVER bid until the last second. The whole concept is flawed compared to auctions in real life, which start with a bid price, and then drive up the price with additional bids. The auctioneer simply ends the auction when people stop bidding. The only way to fix the sniping problem is to fix this fundamental issue with online auctions. They need to make it so that auctions can dynamically end at any point in time (for example, if the item hasn't been bid on for a set time window, or if the seller is simply tired of waiting). Imagine if you wanted to sell an iPhone or something with this type of auction model. People would place bids up front, and they would have a fast-paced bidding war (driving up the price), followed by a slower bidding war, as they started to reach the limits of what they were willing to pay. If nobody topped the current bid during the following 24 hours, the auction automatically ends, and the highest bidder wins it. Placing a bid automatically resets the 24 hour delay (or maybe it resets it to an exponentially smaller time window to keep people from postposing an auction indefinitely). I'm imagining a scenario where the person who creates the auction can set the auction automatic no-bid termination time window, and they could also set a true deadline (which perhaps only they would be privy to) when the auction would automatically end. That is the only way bidding makes sense to me on online auctions. With the current system that ebay uses, sniping is the only type of auction bidding that makes sense.
- RachelF 11y ago
  Adding a minute or two of uncertainty to the end of the auction would solve the sniping problem. A few tens of milliseconds of jitter in stock market processing would also limit some of the problems that high frequency trading causes.
- lotyrin 11y ago
  The online auction with hard bid window is perfectly fine. Rationally, everyone bids their reserve price immediately at any time during the window. The current winning bid (just above the second bidder) is displayed so you can avoid the effort of bidding if your reserve is too low to matter. I don't really understand the concept of "driving the price up" in online auctions. It only seems to represent a flawed understanding of cause and effect (the current price causes the future price) which only makes sense irrationally with effects such as anchoring or post-hoc rationalization of purchases. The price is whatever someone is willing to pay for it, if you lose a purchase by setting your reserve on the auction system to less than your true reserve - what you were willing to potentially pay or conversely, if you have won an auction for more than you would have liked - you have failed to act in your own best interest, there is not a middle ground between the two.
  - Yxven 11y ago
    This argument assumes we can trust the auctioneer to only increase our bids fairly instead of gaming the system to maximize their profit (or at least short term profit). I don't think we live in a world where that's a reasonable assumption.
    - lotyrin 11y ago
      It doesn't matter. If you set your reserve to what you're willing to pay, you cannot spend more than you are willing to pay. Then any sellers that shill bid above that level risk buying their own auctions and paying the auction house commission, can never gain more money than your reserve -- should have simply set their reserve to whatever the minimum they'll accept for the auction.
  - SixSigma 11y ago
    While I agree in principle - I now just bid what I think and forget about it - if I bid $1.00 and you bid $1.02 you will win but really I was prepared to bid $1.04, so I have to overbid to avoid this margin. And then I'm at the next price break.
    - 11y ago
mattdw 11y ago
New Zealand's TradeMe auction site just automatically delays the expiry by 2 minutes every time there's a bid within the last 2 minutes of the auction. The auction is not over until 2 minutes has passed with no further bids.
matt_morgan 11y ago
Their answer, by the way, is that 4-18% of people are less likely to return to the platform as a result of irritation over sniping. eBay's mechanism for automatically increasing your bid to your reserve as necessary should alleviate this. For me, it does ... I put in my max bid and just let it go (years ago, I sniped manually, when I had ntp and a fast connection and not everybody else did; that was good). But I find that for people bidding on my auctions, some don't understand the max bid idea (so are very good sniping targets) and others appear to understand it but still think they're going to get sniped anyway. I don't know how this could be but I've had a couple confusing conversations over it with people who offer me lots of money to end auctions early (and who don't otherwise seem like scammers). So even though eBay has a way to beat this, regular people don't find it usable enough, basically. The TradeMe mechanism another commenter mentioned sounds smart.
nkurz 11y ago
I didn't see it mentioned in the paper, but one of the main advantages for using a "sniping" service is that you can participate in multiple auctions at the same time. Assume there are similar 5 items that would meet your need, but you only want 1 of them. If you "bid and forget", you might end up committing to purchase 0 to 5 of the items. But if you create a "bid group" to place last minute bids, as long as the endings of the auctions are spaced in time by more than the "lead time", you only have an active bid on one item at a time, and thus will finish with either 0 or 1 items, a much better outcome. The "bid and forget" alternative is to only bid on one item at a time, and then as soon as you lose an auction, you bid on one more. But this requires that you keep track of when the auction end, remember what the next item is, and submit the next bid before that next auction ends, which is hardly bid and forget. ps. No affiliation, but I've used http://auctionsniper.com http://auctionsniper.com for some number of years and would recommend them.

9 points by nkurz 11y ago

The bidding system on online auction sites like ebay has always been a joke. If an auction ends at a precise date and time, then the only thing bidding early accomplishes is driving up the price. If someone wants to get the item for cheap, they should NEVER bid until the last second. The whole concept is flawed compared to auctions in real life, which start with a bid price, and then drive up the price with additional bids. The auctioneer simply ends the auction when people stop bidding. The only way to fix the sniping problem is to fix this fundamental issue with online auctions. They need to make it so that auctions can dynamically end at any point in time (for example, if the item hasn't been bid on for a set time window, or if the seller is simply tired of waiting). Imagine if you wanted to sell an iPhone or something with this type of auction model. People would place bids up front, and they would have a fast-paced bidding war (driving up the price), followed by a slower bidding war, as they started to reach the limits of what they were willing to pay. If nobody topped the current bid during the following 24 hours, the auction automatically ends, and the highest bidder wins it. Placing a bid automatically resets the 24 hour delay (or maybe it resets it to an exponentially smaller time window to keep people from postposing an auction indefinitely). I'm imagining a scenario where the person who creates the auction can set the auction automatic no-bid termination time window, and they could also set a true deadline (which perhaps only they would be privy to) when the auction would automatically end. That is the only way bidding makes sense to me on online auctions. With the current system that ebay uses, sniping is the only type of auction bidding that makes sense.

RachelF 11y ago
Adding a minute or two of uncertainty to the end of the auction would solve the sniping problem. A few tens of milliseconds of jitter in stock market processing would also limit some of the problems that high frequency trading causes.
lotyrin 11y ago
The online auction with hard bid window is perfectly fine. Rationally, everyone bids their reserve price immediately at any time during the window. The current winning bid (just above the second bidder) is displayed so you can avoid the effort of bidding if your reserve is too low to matter. I don't really understand the concept of "driving the price up" in online auctions. It only seems to represent a flawed understanding of cause and effect (the current price causes the future price) which only makes sense irrationally with effects such as anchoring or post-hoc rationalization of purchases. The price is whatever someone is willing to pay for it, if you lose a purchase by setting your reserve on the auction system to less than your true reserve - what you were willing to potentially pay or conversely, if you have won an auction for more than you would have liked - you have failed to act in your own best interest, there is not a middle ground between the two.
- Yxven 11y ago
  This argument assumes we can trust the auctioneer to only increase our bids fairly instead of gaming the system to maximize their profit (or at least short term profit). I don't think we live in a world where that's a reasonable assumption.
  - lotyrin 11y ago
    It doesn't matter. If you set your reserve to what you're willing to pay, you cannot spend more than you are willing to pay. Then any sellers that shill bid above that level risk buying their own auctions and paying the auction house commission, can never gain more money than your reserve -- should have simply set their reserve to whatever the minimum they'll accept for the auction.
- SixSigma 11y ago
  While I agree in principle - I now just bid what I think and forget about it - if I bid $1.00 and you bid $1.02 you will win but really I was prepared to bid $1.04, so I have to overbid to avoid this margin. And then I'm at the next price break.
  - 11y ago

mattdw 11y ago

New Zealand's TradeMe auction site just automatically delays the expiry by 2 minutes every time there's a bid within the last 2 minutes of the auction. The auction is not over until 2 minutes has passed with no further bids.

matt_morgan 11y ago

Their answer, by the way, is that 4-18% of people are less likely to return to the platform as a result of irritation over sniping. eBay's mechanism for automatically increasing your bid to your reserve as necessary should alleviate this. For me, it does ... I put in my max bid and just let it go (years ago, I sniped manually, when I had ntp and a fast connection and not everybody else did; that was good). But I find that for people bidding on my auctions, some don't understand the max bid idea (so are very good sniping targets) and others appear to understand it but still think they're going to get sniped anyway. I don't know how this could be but I've had a couple confusing conversations over it with people who offer me lots of money to end auctions early (and who don't otherwise seem like scammers). So even though eBay has a way to beat this, regular people don't find it usable enough, basically. The TradeMe mechanism another commenter mentioned sounds smart.

nkurz 11y ago

I didn't see it mentioned in the paper, but one of the main advantages for using a "sniping" service is that you can participate in multiple auctions at the same time. Assume there are similar 5 items that would meet your need, but you only want 1 of them. If you "bid and forget", you might end up committing to purchase 0 to 5 of the items. But if you create a "bid group" to place last minute bids, as long as the endings of the auctions are spaced in time by more than the "lead time", you only have an active bid on one item at a time, and thus will finish with either 0 or 1 items, a much better outcome. The "bid and forget" alternative is to only bid on one item at a time, and then as soon as you lose an auction, you bid on one more. But this requires that you keep track of when the auction end, remember what the next item is, and submit the next bid before that next auction ends, which is hardly bid and forget. ps. No affiliation, but I've used http://auctionsniper.com http://auctionsniper.com for some number of years and would recommend them.