This is something that has always puzzled me about human behavior on online auction platforms. I am talking about a specific platform where you can sell almost any item you want with a starting bid and a fixed time until the auction ends. People then can place a bid at any time, thus increasing the current price. The current price is always last bid + 0.5 currency. When the auction ends the highest bidder gets the item for the current price, with a percentage going to the platform. E.g. if the starting bid is 1 currency and someone bids 50 currency, the price is at 1.5 currency, until someone else places another bid, e.g. 20 currency, which would push the price to 20.50 currency, with the first bidder still being in the lead.

And that's exactly the crux. No one except the highest bidder knows what the highest bid is. People tend to place a bid, see it's not high enough and then increase their own bid in small currency steps, often going beyond what they originally were willing to pay. Also anyone who bids early risks that someone else tries to bid more than them, while when they bid late that chance is reduced, especially because there isn't any time for anyone to bid again.

For the platform this is good. For sellers this is good. For buyers, not so much. It's super irrational. They just drive the price up by bidding.

If buyers would just wait till a few seconds before the auction ends, and then place exactly the highest amount they are willing to pay, the item would sell for less, and they wouldn't be drawn into a bidding war that escalates the amount they are willing to pay. Even if it slightly decreases their chance of getting the item, unless it's a super rare thing there are so many items from different sellers, it would still be rational to behave this way until they succeed on one of the items. If unsuccessful too often, they could then conciously decide to increase the amount they are willing to pay - to adjust to the market price, not escalate in a bidding war.

Of course the platform wouldn't profit as much then, but I doubt buyers behave this way out of charity for them. So the question is: Why are people behaving this way? Are they really not aware of this? Do they not care? Is bidding to them just fun? Is this in some way related to gambling?

(I have asked this same question a few years ago on a Q&A in my native language, and the unanimous answer was: "Bidding is how that platform works, you obviously don't understand it," which leads me to believe that the answer is people really are not aware, but I don't get why not.)

I have been selling items on a particular platform for over a decade and absolutely profited from this irrational behavior, but at the same time I am so confused by my fellow humans.

closed as off-topic by Bryan Krause, Chris Rogers, Arnon Weinberg, AliceD Oct 17 at 8:38

This question appears to be off-topic. The users who voted to close gave this specific reason:

If this question can be reworded to fit the rules in the help center, please edit the question.

  • Three things that might be missing here: 1) Do you know for a fact that people that bid earlier pay more? Bidding early could discourage competitors from participating in the process. 2) Auctions usually extend when bids are placed near the end of the window. There is no way to "snipe" at the last second, just the action of bidding delays the close. 3) Bidding the highest amount you are willing to pay is one of the worst strategies; it guarantees that if you win you pay the most you were willing to pay. – Bryan Krause Oct 9 at 15:54
  • 2
    @BryanKrause You are referring to regular auctions. The question is about the system eBay uses to conduct auctions, which is somewhat different. In this system, there is a hard cutoff time, and the winner pays the next lower bid (the stated minimum if there is no other bidder) plus some small amount of money. – David Thornley Oct 9 at 18:38
  • 1
    @DavidThornley Maybe things have changed then...I don't remember that being the case when I last participated on eBay. Or I could be mistaken as well. – Bryan Krause Oct 9 at 19:09
  • 1
    This question is offtopic in my opinion, as it seems to be more of a financial question than a scientific one. It's consumer behavior yes, but I find it poorly framed in Psychology. – AliceD Oct 10 at 8:27

One advantage of auctions, to the seller, is that buyers can get caught up in bidding wars and spend more than they intended to. Any auction platform that gets paid by what the auction takes in is going to want or hope for that.

I assume you're referring to eBay-style auctions. eBay encourages bidding frenzies. If you bid on an item and are outbid, they will notify you and encourage you to bid more. As the auction draws to a close, they will notify bidders who aren't currently in the lead. They're hoping at least some bidders will think bidding is fun, and will think of winning the auction as succeeding. The thrill may be that of gambling or similar.

I don't see any advantage in waiting for the last few seconds. I decide how much I'm willing to pay for something, and enter that amount whenever. The only way someone will find out how much I bid is to outbid me, and then I don't want to win the auction. Trying to time my bid for the end of the auction would sometimes be very inconvenient. If there's going to be a bidding frenzy at the end, the price will either go over mine or not, and I think it very unlikely that when I bid makes much difference in that. It should be clear that I don't think bidding by itself is fun, and that I don't want to win the auction by paying more for an item than I value it, which as you've seen isn't the universal approach.

  • 1
    This is probably useful to the OP, but it doesn't really fit within the Psych & Neuro framework of this stack - there's no research here (besides perhaps yourself as a case study), no references, etc. – Bryan Krause Oct 9 at 19:33
  • 1
    The question is pob and hence the answers drawn are borderline as well. Imo the Q should be put on hold therefore. – AliceD Oct 10 at 8:28

Not the answer you're looking for? Browse other questions tagged or ask your own question.