The background

Proxy bidding: how much should you bid?

What amount should you enter? Perhaps you've decided that you're willing to pay $200.00 for this guitar. Still, you might assume you should enter $130.00, because that's the minimum amount you can bid. (The current high bid of $127.50 plus the bid increment of $2.50 is $130.00). Why pay more than you have to?

That's what you'd do in a conventional open outcry auction, where an auctioneer yells, "$127.50, $127.50, do I hear $130.00?" and people make bids by waving bid cards in the air.

That's not how it works on eBay.

eBay uses a different system called proxy bidding. This means that eBay keeps your bid as low as it can while still allowing you to win the auction.

To understand how this works, imagine that you can't attend an auction in person, so you send a friend—a proxy—to bid for you. You instruct your friend to bid up to $200.00 for this guitar, but no higher.

When the bidding reaches $127.50, your friend bids $130.00: the current high bid plus the bid increment. If someone else bids $132.50, your friend bids $135.00, and so on, until no one else bids and you win the guitar, or someone bids over $200.00 and you lose it.

If you're willing to pay $200.00 for the guitar, that's the maximum bid you should enter on eBay. Throughout the auction, eBay will act as if your friend were there bidding for you. If you win, you will pay no more than the next highest bidder's maximum bid plus the bid increment.