The Web Site of Victor Niederhoffer & Laurel Kenner
Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter; a forum for us to use our meager abilities to make the world of specinvestments a better place.
Write to us at: (address is not clickable)
Original message from Jim Sogi
My son tells me an interesting fact about the Ebay auction rule, but have not verified the info. Lets say a Rembrandt is bidding at $50. A buyer can come and bid $125 but that high bid is not revealed on the site, but that high bidder will get the item at bids above the current bid of $50. So if some one comes in the last moment and bids $60.00, the $75 bidder gets the item at $60. This presumably protects a high bidder from the last minute minimum higher bid, encourages high bids, but allows the seller to receive incrementally higher prices. Interesting micro structure twist on a market exchange.
After losing a few auctions to such a bidder, one might be inclined to incrementally bid with a vengeance.
I have only used eBay a couple of times, and I found this bidding structure very convenient and efficient. I wanted to buy a specific esoteric piece of computer hardware, but did not have the time to sit and manage the process. I picked my maximum bid and entered it, even though it was double the then-shown best bid. Luckily, I won the item a few notches below my top price, and I did not have to sit around watching "yet another" auction market (as I do in my adult job). Given the relatively small dollars involved, tens instead of tens of millions, I didn't worry too much about deeply gaming all this.
Ming Emily Vandenberg
When I first started using eBay I never seemed to win anything. The key to getting a good deal really is that annoying technique of placing a bid at the last moment, because most people don't know about that hidden high bidder rule and if you don't watch the auction until the last minute someone else will place a last-second bid instead of you.
for those that are interested check out: AuctionSniper, a great tool for those ebay auction you feel you simply must win. it ties into ebay's servers and places you bid up to the last second before auction ends. (sorta kinda like the market maker who goes high bid to insure his long position is marked accordingly)....
Speaking as a blue-star (ie, >=50 completed transactions) eBayer (and one who's purchased a car sight-unseen on eBay), I can tell you the problem with this logic: if you bid "infinity" in order to avoid being sniped (outbid at the last second), you run the risk that shill-bidders (ie, friends of the seller) will walk you up the ladder toward your maximum bid, even if no other "real" bidders are active. Sometimes they push too far, "outbidding" you by mistake, and then the seller sends you a "second chance" email (this is eBay-sanctioned) to the effect that hey, the winning bidder was "unable to complete the transaction" but lucky you can pay your maximum if you still wish to
The only way I ever get really good deals is when I throw in a lowball bid, then just forget about the auction and let the devil take the hindmost. Every so often I'm "filled" on one of these (eg, a CD-burner for 99 cents)
I had always thought that the rationale for the "Maximum Amount You Are Willing To Bid" function in eBay was based on second price auction theory - the result of which is supposed to encourage people to place bids up to their true reservation level. Perhaps someone who knows for sure could comment.
(ie current price of a camera is $50, you've looked around and think $100 is a fair price to pay for it - according to the theory your best strategy is to put $100 into the system because you will only pay $100 or less, depending on what the second best price bid by someone else is. If you put anything less, such as $80, you might suffer from regret if you lose, kicking yourself for being too greedy if the camera clears for $90.)
My wife and I also use AuctionSniper to put our bids in at the very last second. Very convenient and handy. They charge from 25 cents up to $10 for the service, depending on the value of the bid (no more than 1% of the bid value).
Like a broker, Auction Sniper also has "one-cancels-another" type of bids, where if you win one bid, it will cancel your open "snipes" on other auctions.
If you guys decide to give Auction Sniper a whirl, send me an email message and I can send you a referral invitation (where I get a few free "snipes" for referrals).
One can also apply a bit of option theory to bidding on eBay. If you make a visible bid on eBay, you have given the rest of the world an option to outbid you. You however may not compensated enough for writing this option -- the benefit you gain from putting out a bid now is that you are first in line up to your maximum bid price, if anyone else bids at the same level. For some people, this benefit is not worth the "cost" of allowing others to outbid you.
like Ming, in the beginning and like most newbies as in all endeavors, end-up being the butt of the Joke! I was in the same boat. A book could be written on how to place items and sell items on eBay, and that's just the beginning of it all. Yet I will suggest this for you newbies. Always place your item you wish to sell on eBay so that it goes off ( auction ends) on either a Tue, Wed, or Thur at 8:30 p.m Pacific time. really so much of this is obvious yet.......................oh and pray the lister doesn't have a gang of esnipers jaking the price-up.
I've written about this in more detail in the past, but the gist is: if you show a bid, you give information, but you get time/price priority. That's the "trade". The next bidder has to pay your max + epsilon in order to surpass you. To my taste, the epsilon (which varies according to a schedule determined by eBay as below) is "too small", ie you aren't paid "enough" for stepping up to the plate. For instance, at automobile-level prices, the epsilon is $100 (ie, to surpass $10,000, you must bid $10,100). But I'm sure eBay has studied this in great detail and has its reasons for the current schedule
As to sniping: I've never gotten a good deal by "winning" a snipe-war
To see more on bidding increments click here.
Current Price Bid Increment $ 0.01 - $ 0.99 $ 0.05 $ 1.00 - $ 4.99 $ 0.25 $ 5.00 - $ 24.99 $ 0.50 $ 25.00 - $ 99.99 $ 1.00 $ 100.00 - $ 249.99 $ 2.50 $ 250.00 - $ 499.99 $ 5.00 $ 500.00 - $ 999.99 $ 10.00 $ 1000.00 - $ 2499.99 $ 25.00 $ 2500.00 - $ 4999.99 $ 50.00 $ 5000.00 and up $ 100.00
Here's an interesting article by Greg Perry on Lew Rockwell talking about the structure of the auction markets on eBay, relations to efficient markets and random walks, and tactics for dealing with the process.
A prior article by the author discusses the disinflationary effect eBay has on the price system generally.
Next week's installment in this series will look at the dark side of eBay.
Steve Wisdom is correct. Buying an EBAY auction with snipe machine is a Nasdaq electronic MOC order, buying the market on close and letting the "computer specialist" fill you. It is akin to playing online poker against a "team" of computer boys and they will smoke you. They have the edge. If I was selling cars on line I would have multiple bidders to snipe the snipers.
Buying on EBAY is buying a Tim Melvin distressed securities purchase. You know what value you have set on the item, you only pay with a limit order. I must stress that if you want the item and there are "6 men watching," yet no one bid the open you must, so the seller can't cancel the auction before the last 12 hours rule.
Which takes me to a little edge I found in selling eBay items. Open the auction with "no reserve" perhaps a high buy it now price, but I don't use the buy it now. I save that for a ping. Then start the open bid price at the lowest you'd sell the item for. When the auction is half way over 3.5 days, on a Sunday night the way I set it, I pull the auction if no one has bid my open price.
That is like a salesman talking away the item for sale. I have found the 2 or 3 really interested buyers will immediately e-mail you "what happened to item #12234, did you sell it?"
Then I engage in an experiment and say no one was willing to pay my lowest sales price, lets say $499 for a used BMX bike part. Two or three people will ask, what will you take? Then I use the old, there are 3 people interested in the bike, and I send all correspondence from them to me included in all e-mails so they know I am not BS-ing them, there are really multiple buyers. That is a good way to sell good items at fair prices to experienced buyers, I find.
Buyers seem to want to wait for the last minute to buy. They also want the best price. Yet they no their faults and do not want to get caught up in an auction fever and over pay. Many use the snipers which don't bid until the last 5 seconds.
Sellers seem to list at low starting prices with a reserve. I see "reserve not met" all the time with 57 bids going off at a seemingly fair price and the item does not sell. I have had people ping me and say "Ill give you $200, please, put a buy it here now for 200 up and Ill take your offer," boom done deal.
I just sold two bmx bikes and a wheel set last night. Yet another bike I have for sale some one minimum bid me right away. I can't cancel the auction; the auction is a go till the end. Either he will get it at my open offer price or he will get sniped and I guess I can get 10-20% more on the item. Which is exactly what I received in my little private e-mail exchange Monday night.
I bought my family "conversion van" off of eBay (site unseen.) It was a special used item that none were available in Florida. It has a special engine. I know the exact auction price he paid for it in Texas. I know the wholesale auction prices in Florida. Every state has different prices for cars, supply/demand. The spread in conversion vans are huge. A Toyota Camry the spreads are very tight. I consider Camry's and Honda Accords to be ridiculously overvalued in used.
The "Kelly blue book" sold at stores is about 1000$ off per 10,000 in Florida, by the way. There are five "basic" prices used cars trade, salvage, rough book, average book, clean book and bank loan, what the bank is willing to loan on the car. Bank loan and clean book are usually close. Never pay more than loan value on a car. Clean book would be an older, yet like new "1996 corvette" with 7,500 miles on it garage kept, perfect car. That is worth $5,000 more than a clean book car. Average book is 12,000 miles per year so 36,000 on a 3 year old car with no damage ever.
You need to subscribe to the auction books which are quite expensive for car dealers. My brother in law runs/ran Toyota Lexus, here, AZ, NC and now he has a company that: "markets used cars for "auto nation" He bar codes, prices and lists cars on local lots, eBay, cars.com and local auctions for all Fla dealers to see at once via a hand scanner and a PC in a van. He drives from lot to lot etc and does their inventory controls and listings.
I sold my motocross motorcycle on EBay delivered "free delivery" for well over what I thought I would. I received 70% of retail on a used dirt bike. That was 20% over plus.
Buying used motocross parts I know the exact "value" of the part, the cost of the parts new to dealer and the msrp. With that I can buy with ease. However, if I was buying an antique lamp, no way would I buy on eBay with out proper arduous research.
EBay listing fees can be steep, but worth it to sell at a global market. I sell motocross parts used to places like UK, AUS, Puerto Rico that have heavy tax on the new, or low supply at ridiculously high prices of I say "free shipping" most eBay sellers are afraid to sell to far away lands or use the EBAY, shipping calculator which is way off price. The USPS is low balling UPS/FEDx right here and is much cheaper on bowes less and 30 linear inches. However they wont ship bigger boxes. I breakage is not an issue like a drill press, send it Greyhound bus shipping service.
Pay pal is a rip off. If I was going to do an eBay business, I would set up a Citibank account to clear CC cards. I could do it for 1% with low volume plus a 20$ a month fee. Pay pal charges 2-3% which is a rip-off. I use pay pal because I am not an EBAY business.
The majority of junk on eBay is garage sale items or "new old stock" I would guess that antiques bought and sold even with the steep pay pal and eBay fees are much cheaper than dealers. However just like buying from dealer you better know what price is fair.
I am not totally against buying with an auction sniper. If you really want/need the item buy it MOC. However a rule of thumb would be to only buy a very unique item that you do not at all mind paying up for. I sniped the Van, bought it 1000 behind clean book which was 4000 under "retail" or a negotiated 2000$ savings. The van turned out to be exactly what I wanted needed and as advertised.
I met the kid that runs his EBAY dealer direct car service in Dallas TX. He sells 2 cars a month and makes a nice living. He sells rare cars. Mostly older low production models like Corvettes. I asked him a few "key questions" and he just smiled and said "you got the gist of what we do" It turned out that the only important thing to him was a positive feedback rating on EBAY. That is akin to the dealer survey you receive when you buy a new car.
I held him hostage for a few weeks after I changed the usual parts, belts, hoses ,tires ,brakes. He paid 50% for the parts if I paid for a labor. Of course I built a race car, so I could do the work myself; it was a good deal for me.
One last note, my buddy here asked me to be involved in selling EBAY for Ultrasol to BMX-ers, MX ers etc to my little niche'. I declined before he could finish his sales pitch to me.
See the problem with EBAY and SOHO is knockoffs. They sell Oakley 110$ sunglasses that are knockoffs at my local gas station for 10 bucks...No dealer reps for me. I tried in the 80's before computers for Oakley and other MX gear as a kid. I guess the joke is the Internet moved the time line from idea to commodity pricing to auction snipes to milliseconds.
Oh man one bad eBay deal. I bought a cheap trumpet for my office to go with the other brass. I wanted a cheapo just to look cool. I wasn't paying attention and paid $25 for the trumpet. However the dude was in India and wanted 80 bucks to ship the item. I told him Hades no. He threatened me 5 times with nasty emails saying he would give me negative feedback. I said I could care a less and would file a complaint with EBAY on his shipping scam if he did. He didn't. LACK