In thoery, eBay is a place where shoppers enter their maximum bids for items, and then the system sells them to the highest bidder for the lowest amount necessary to beat all other bidders. In practice, there's more to the game than that.
I haven't done any studies, but I've purchased a few items on eBay, and the flurry of bids that comes in just before an item expires tells me that the story works more like this: an item is listed for a week; during the week, a few people bid on it, and a few more bookmark it; some of the bids that are entered represent the maximum amount the bidder is willing to pay, others the maximum amount they think they're willing to pay, and the rest are less than they're willing to pay; right at the end, a bunch of people come to the page, see the current bid amount, decide that they're willing to pay a little more than that (even though some of them previously thought they weren't), and enter more bids; and as a number of people are trying to decide whether to enter just one more bid, and others are thinking, "oh crap! somebody just outbid me! I need to enter another bid!", the auction ends.
There are a few funny things that I'm pretty sure are going on here:
1) People are losing items that they would have bid more for because they didn't enter the real maximum amount they were willing to pay soon enough. I think this happens because we want to get items for less than the maximum amount we're willing to pay, and for some reason, we think we'll get it for less if we bid less.
2) People end up bidding more at the end than they would have thought they were willing to pay because they think they might just have a chance to get an item for just a little more than it's worth to them, which is close enough to worth it to be treated like it's worth it.
3) Because of #2, the person who gets the item often pays more than they would have it everyone had actually bid exactly the maximum that think the item is worth to them.
I had the psychology right--a few bids came in during the last minute or two--but unfortunately, my timing was off! I had entered my bid in one window (and was on the bid confirmation page), and was watching the clock tick down in another window, pla...4) Because of #3, it's actually wisest to hold off on bidding till the last 30 seconds or however long it takes to enter a bid, and then bid the maximum you're willing to pay, to avoid giving people time to decide to bid more than they're willing to pay.
Well, I've got an auction I'm looking at that ends in 6 minutes 19 seconds. I'd better get ready to enter my bid...
May 31st, 2005 at 4:10 pm
I had the psychology right--a few bids came in during the last minute or two--but unfortunately, my timing was off! I had entered my bid in one window (and was on the bid confirmation page), and was watching the clock tick down in another window, planning to confirm my bid with about five seconds to go, but I goofed! I think I entered it about 1/2 second too late! How embarrasing!
Fortunately, it wasn't that important. Had it been, I'd have entered my bid with about 20 seconds to go. ;-)