The rational bidding strategy on EBay is to always place 1 bid at the maximum price you're willing to pay. The problem is that humans aren't rational. Some people place winning the auction higher on their priority list than bidding within their budget.

There is also an element of uncertainty. Sometimes you are ready to pay more but you are unsure of the value. Others bidding more, may convince you it is ok to bid more.

For example, foreign jewellery on which you are unfamiliar with the hallmarks. You don't mind paying $200 for it if it is silver, but is it ?

Of course, rationally, for the raison you gave, you should not use that, but conversely if you are familiar with a certain type of popular auction you start to see some patterns. An object that breaks it is either a bargain, a fraud or you were simply early.

For example, silver never goes for less than scrap and genuine auction never really shoot way over boot sale value.

Or maybe I rationalised my irrationality :-)

I wish Ebay would extend the auction for ten minutes every time there is a new bid, the current situation isn't good for sellers.

If they do that they should also allow the seller to accept bids and end the auction.

No. Consider many similar items being sold at one time by one seller (common scenario). By bidding what you think "it's worth" up front, you announce to the competing bidders what you are willing to pay. You are much better off waiting until the last minute then bidding slightly higher than the current bid on every item.

You are not really announcing it, due to the second price nature of the eBay "bidding agent", but tough luck when two high price bidders happen to bid on the same copy. With multiple auctions, bidding becomes surprisingly tactical.

It's trivial for them to see that you've auto-bid because of the increment and the speed at which a second bid is placed if they place one higher. So you are kind of announcing it. And on similar items, they can work one up to your limit, determine the limit, then return to best it on all the other items at the last minute.

I gave a scenario where that doesn't work. It's only rational if everyone else does it. If some people won't do it, then by raising the price early you may induce them to bid higher, which is bad for you.

Unless you enjoy misery, trolling, and derive satisfaction from forcing other people to make stupid decisions.

Personally I'm more than happy losing a bid if I make someone else suffer winner's curse just because they are blinded by escalation of commitment and a long list of other biases.

One of my favourite speeches touching on the subject: The Psychology of Human Misjudgement - Charlie Munger Full Speech

bit about auctions is at 59:30 https://youtu.be/pqzcCfUglws?t=59m30s text https://buffettmungerwisdom.files.wordpress.com/2013/01/mung...

It's not bad if they bid higher than you - you being a rational person would know that you'd be unwilling to pay higher than your only placed bid, so you aren't really "losing" anything

It's bad if, if you wouldn't have bid so high, you'd have been able to win at the end with a lower bid than your highest.

Ebay bidding theory is a convoluted mess once you start considering multiple concurrent auctions for similar items that may or may not be perfect substitutes for different bidders.

Even with only two bidders and only one item, the scenario I described can take place, showing that assuming other bidders are rational and well informed about sniping tools is required for the theorem to obtain.

If everyone is rational (ie., won't purposely screw themselves.) and does not change their maximum amount according to what other bidders do, then it kind of doesn't matter in the end.

[1] https://en.wikipedia.org/wiki/Revenue_equivalence