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Hack 25 Take Advantage of Bid Increments

A slight adjustment to your bidding strategy
will help you save money and win more auctions.

Every
auction has a
minimum bid, a dollar amount shown just
above the Place Bid button on the auction page, as shown in Figure 3-4. If the auction hasn't
received any bids, the minimum bid is the same as the starting bid.
Otherwise, the minimum bid is equal to the current price plus a bid
increment.

Figure 3-4. The Bidding Section shows the current bid increment and minimum bid

Bid increments, at least in theory, prevent bidders from outbidding
one another by a single cent, and are calculated as follows:

For example, an auction currently at $68.45 will have a minimum bid
of $69.45 ($1.00 more), so you wouldn't be able to
bid $69.00 even though it's higher than the current
price.

Bid increments also come into play when calculating the current
price. If there's more than one bidder, the current
price is equal to the second-highest bidder's bid
plus the bid increment. So if someone bids $114 and someone else bids
$157, the current price will be $116.50 ($114 + $2.50), and the
minimum bid for future bidders will be $119 ($116.50 + $2.50).

As more bids are placed, the current price continues to rise, always
equal to the second-highest bid plus the bid increment. But it gets
more interesting when someone places a bid very close to the high
bidder's maximum bid. The bid increment rule is
compromised by another rule: eBay will never raise the current price
above the highest bidder's maximum bid.
Here's how this works:

If someone bids $156.80 on this auction, it will raise the current
bid to $157, even though it's only 20 cents above
the second-highest bidder's maximum.

If a subsequent bidder enters a bid of $157, the current price will
be exactly $157. The original bidder will still be the high bidder,
because earlier bids take precedence over later bids of the same
amount.

If the later bidder bids $157.01, the current price will be raised to
$157.01 (one cent above the previous high bid), and the newcomer will
become the high bidder.

This loophole effectively allows you to outbid another bidder by as
little as a single cent. But why is this important, and how is this
useful?

3.7.1 Outbidding the High Bidder

Bid amounts are always kept
hidden until an auction closes. As described above, however, you can
easily determine the second-highest bidder's maximum
bid by subtracting the bid increment from the current price. Only the
high bidder's maximum remains elusive.

Most bidders type whole, round numbers when bidding, primarily out of
habit and sometimes out of laziness. You can take advantage of this
by guessing a high bidder's maximum and adding a
penny.

For example, if an auction with a starting bid of $7.99 has only one
bidder, the current price is $7.99. If that bidder is relatively new
to eBay (having a feedback rating of, say, less than 30), that bidder
most likely typed either $8 or $10 as a maximum bid. Although you
couldn't bid $8.01, as the minimum bid would be
$8.49, you could bid $10.01 and have a pretty good chance of
outbidding the other bidder by a single cent. Contrast this to a bid
of $15.00, which would result in a final price of $10.50 ($10 plus
the 50-cent increment). You've just saved 49 cents.

More experienced bidders won't type whole numbers, but they will likely be just as predictable. If you want to outbid someone by a single cent, try searching for past auctions they've bid on (see Chapter 2); look at the bidding history of closed auctions they didn't win, and you'll see their exact bids. Look at two or three old auctions, and you'll likely find a pattern.

Understanding bid increments is also extremely useful if you bid and
don't end up as the high bidder. If, after you bid,
the current price ends up lower than your bid
plus the bid increment (you bid $40 and the price rises to $40.17),
then the high bidder's maximum bid is equal to the
current price (in this case, $40.17). This means that all you need to
do is place one more bid of at least $41.17 to put yourself in the
lead. Combine this with sniping [Hack #22], and you've won
the auction!

3.7.2 Take It One Step Further

You can take steps to prevent other bidders from outbidding you by
one cent (and they will) while allowing you to more readily outbid
others. Instead of bidding whole, round numbers, make a habit of
bidding odd numbers, such as $10.07 or $11.39. That way, if someone
bids $10.01 or $11.01, respectively, you'll still be
the high bidder. Likewise, you'll also be more
likely to outbid others who type bid amounts like $10.01.