Thursday, April 29, 2010

How to bid for things on eBay: be a True Max sniper

I've tried half-heartedly to buy a few things on eBay in the past, but
always ending up not winning the auction. Thanks to a webpage I ran
across by Tyler Jones, I now understand what the right strategy is, and
have since bought several things very much to my satisfaction. It's here:

The important thing to understand is eBay is not a going-going-gone
auction like on TV. It uses a *proxy bidding* system, which is like
sending an agent to a tv-style auction to bid for you. You tell the
agent how high you're prepared to go, and he keeps raising the bid by
the *minimum* possible amount to get in the lead (beating all the other
agents' maximum bids), $1 at a time, stopping when he's either won or
hit your maximum.

What's great about this is that you don't have to actually *do* anything
during the auction: you put in your bid and it either gets it for you
for the best possible price, or passes if the auction goes too high. But
you have to make sure to bet what Tyler Jones calles your True Max - and
what my book about negotation calls your Best Alternative to Negotiated
Agreement. This would be a good spot to read my entry on negotiation if
you haven't:

But in a nutshell it's about figuring out how high the price would have
to be before you walk away from the deal. And there's always an
alternative: the internet makes it easy to look for other places to
purchase an item, so if there's another website you trust that carries
it your bid definitely shouldn't be any higher than that (taking into
account shipping). Think Craigslist, Facebook, Kijiji, Amazon, etc. And
make sure to look at the other eBay listings for the same type of item.
Also, there might be a substitute solution you'd be willing to settle
for if the price got too high. Or you might just be able to do without
it, for a while or forever. Think all that through, read the item
description very carefully (does it have all the accessories? What kind
of condition is it in?), and figure out an exact dollar amount beyond
which it's not worth it. That is your True Max. (Tyler Jones provides an
interesting exercise to help you figure out your True Max as well if
none of those other things apply). Of course you hope that you will get
a better price - and if you win you usually will - but at least you will
never go over your budget.

So all you have to do then is as soon as you've decided to go for the
item, type in your True Max and click to enter it as your bid. Then walk
away and wait for the results of the auction. (NEVER bid on more than
one of the thing you want at a time, unless you're willing to buy both.
Only go after your second choice listing once you've lost the first one)
You don't even have to log on, except once you've won to arrange
payment. In theory this is the optimal strategy, called Proxy bidding,
and it works well.

However Tyler Jones recommends a different strategy if you have the
time, which is sniping. Sniping is waiting until the last possible
minute to put in your bid, still your True Max. If you understand eBay's
system you can see why this is not unfair: if someone else has a bid
registered that's higher than yours, they'll still win. It sometimes
helps because not everyone is following the optimal strategy, and so you
can beat them with sniping. Jones names two bad strategies, low balling
and nibbling, that involve not bidding your True Max, but the price you
*hope* to get. The distinction is that nibblers continuously raise their
bid, when they see that they're not in the lead anymore, just enough to
get back on top. This makes no sense, unless you are using the auction
process to figure out how much you really want to pay for something,
which is a very bad idea (well documented psychological phenomena
strongly bias your judgment). By bidding at the last minute, you beat
them, and also help to protect yourself against dishonest practices like
friends of the seller conspiring to run up the price.

How I've done it so far is to put something on my watchlist when I want
it, rather than make a bid, and make a note in my calendar about the
closing date of the auction. eBay sends you reminder emails for watched
items when the auction is about to end, so you could probably rely on
that too. 5 minutes before the end I sign in, watch the timer on the
eBay listing page count down, read the listing again *carefully*, and
then enter and confirm my bid in the last 30 seconds. (Any less than
that is probably cutting it too close, since there might be unexpected
complications like having to type in your name and password again).
Sniping is fun! You seem to have a good chance of winning, and also some
idea of what you're getting it for (though the bid might jump more than
$1, to $1 more than whatever the next highest bid is)

There's a few more things to think about, in terms of paying and what to
do if there's a problem, but that's how to bid. A few more tips I've
discovered in my short time on the site:
- The Watch button is really useful both when you're trying to decide
whether to buy something, or when you want to compare a bunch of
listings of the same type of thing.
- If you have no idea how much an item is typically worth, a good way to
research it is to look at the closed auctions on eBay for similar items.
How to do that, and a lot of other important information, is in the eBay
education center, which you should definitely read through (it's not long)
- I've developed a few ideas about what is a trustworthy seller besides
the percentage positive feedback: that they have a large number of
sales, that they have a kind of professional graphic on their listing
page, that it's a photo of the actual item you'll be getting and not a
stock photo of that model, and that it seems they specifically wrote
text for that item and didn't just copy and paste it.
- I bought something from a really sketchy looking listing: bad grammar,
short on specifics, and the seller had few transactions and a website
that was some kind of very dubious real estate consulting business. I
thought there was a fair chance I'd get ripped off. But I factored that
risk into my True Max, and bid 25% less than I would have for a more
solid seller. It came, and worked, despite some cosmetic damage that
wasn't visible in the photo, so I consider it a good deal.
- Make sure to sort lists of items by Price + Shipping, not just price,
because shipping fees can vary wildly, especially to Canada.
- It might make sense to bid non-round numbers: if you bid $61 (or just
add a few cents) then you'll win over someone who's betting $60. If
there's a tie the earlier bidder wins, so this is relevant to sniping.
- Listings come and go fast. It's a good idea to search over a period of
at least a couple of weeks, being prepared to possibly miss out on some
good deals in the process of learning what kinds of prices come through.

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