Sniping 101

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0. Definitions
1. Four Reasons to Snipe
1.1 Auction Detachment
1.2 Avoiding “Stalkers”
1.3 Avoiding “Nibblers”
1.4 Waiting for a Better Item
2. Before you Snipe
2.1 Research the item
2.2 The Psychology of Valuation
2.3 The Winner’s Curse
3. Three Ways to Snipe
3.1 Manual
3.2 Online Service
3.3 Free Desktop Software
4. Three Situations when Sniping will not Work
4.1 A Popular Item
4.2 A Bidding War
4.3 A “Standard Valuation” Item
5. How to Neutralize Snipers as a Seller
5.1 High starting price
5.2 Low starting price

0. Definitions

Sniping: The act of placing a bid on a fixed closing time auction in the last few seconds.
Stalker: A buyer who searches listings so as to bid on those items where there are already other bidders.
Nibbler: A buyer who puts in multiple sequential bids in order to nibble away at the current price, until he/she is the current high bidder.
1. Four Reasons to Snipe

1.1 Auction Detachment

Auctions are emotion-inducing selling venues, where you can bid irrationally in many different ways. You can get attached to an item and pay more than you would have in an outright sale. You can get caught up in a bidding war and make the loss of the item a personal issue. You can buy items and then regret having bought them.
Sniping helps you stay detached from the items you want to get attached to. It promotes self-discipline by making you do your research before you set your price and therefore avoid regrets.
1.2 Avoiding “Stalkers”

Stalkers are attracted to auctions where there is already at least one bid. This is a rational strategy for the uninformed, since it shows that there is someone else out there who is interested in the item. This is particularly true for items whose valuation is subjective, or requires expertise.
By sniping the bidder avoids attracting stalkers, and may get a good value for a neglected item.
1.3 Avoiding “Nibblers”

Even though proxy bidding keeps your bid secret by “bidding” only the minimum required to win the auction (up to your maximum), it will reveal your valuation to the committed nibbler. Once you place a bid, you allow the nibbler to take the advantage of your research and expertise at the cost of one bidding increment.
For example, you know that $20 is a fair price for an item. You bid first, and bid $20. The nibbler, with the help of 10 incremental bids, wins the item for $21. For the price of $1, the nibbler has used your valuation service. Bidding less than $20 does not help, since that may promote a bidding war later on. Bidding more than $20 after getting nibbled also is unhelpful, since your research indicated that $20 was the correct price.
Sniping can help you avoid being nibbled.
1.4 Waiting for a Better Item

In some cases, the grading/condition of an item plays an important part in its valuation. In some of these cases, for example, ancient coins, it may be possible to determine some aspects of the coin’s grade/condition from pictures. For these items, you may bid for the first item that comes by, and then find a better item that may list before the first auction comes to an end. Thus, you are resigned to either stay with the first inferior specimen, or get the superior specimen and hope that either you get outbid on the first one, or incur the transaction costs for disposing of the second one.
By setting up a snipe for the first item you can cancel inferior item snipes if superior items are listed before the snipe occurs.
2. Before you Snipe

2.1 Research the item

The successful sniper must research the item being sold much more than others. Stalkers and nibblers hope that the actions of other bidders will determine how much the item is worth. The battle of two nibblers is a great spectator sport. I recently saw one old Indian silver coin (Sikh fractional rupee) sell for $750, when it should not have crossed $50. There were 4 nibblers who fought it out in two separate major battles.
There is not much to research in order to value a current specification computer system. However, collectibles (art, coins, beanie babies, etc) require a much better understanding of the market and a deeper knowledge of what creates value in that market.
It may be worthwhile to state that the less clear the valuation of an item is, the more important the reputation of the seller also is. If you buy a beanie baby whose value may lie between, say $8 and $10, even if you pay $10 for a $9 item, it is not a disaster. However, if the price of a collective may range from $1,000 to $10,000 based on its condition (as is true for many coins), then there can very well be a dispute after the sale.
2.2 The Psychology of Valuation

How much is an item worth? If we knew the answer to the question (and nobody else did), we could make money by buying under-priced items and waiting for their market price to reflect their intrinsic worth. In the absence of such knowledge, we use other factors.
We can gather experience from the sales of similar items. Unfortunately, for many collectibles, a 30-day history of completed auctions is rarely enough. You need to maintain your own specialized history database.
We also realize that the more people are (credibly) interested, the higher someone will be willing to pay.
Finally, if broader factors in the environment change, then the price can change. If there is a sudden discovery of 1000 pristine examples of a rare beanie baby, then its price will drop over time. If the Vietnamese economy picks up a lot of steam, then authentic antiquities from Vietnam may appreciate in value (but it is difficult to predict when, and by how much).
2.3 The Winner’s Curse

The value of an item may be uncertain due to many factors. One is the risk of transacting from an unknown seller (even one with high feedback). Another is the credibility of the evaluation of the items (even with pictures and reputed third-party authentication). Finally, there is the inherent uncertainty in the value of the item itself. Even without the risk of a new purchase, there is the phenomenon of the winner's curse.
Consider an item which is valued at somewhere between $5 and $10. This means that “out there” there are individuals willing to pay a fixed amount between $5 and $10, some willing to pay more, and some less. Thus, in an auction where all these people bid, the chances are that the one with the highest valuation will win the auction. However, this person will also have the least chance of landing a “good deal”. This is called the winner’s curse.
Be aware of the winner’s curse. If you snipe and win every item you are interested in, you are probably paying much more than they are worth.
3. Three Ways to Snipe

3.1 Manual

You wait at your computer at odd hours of the day, particularly for international auctions, and put in a manual snipe when the auction is ending. The pros include (a) the thrill of the chase, (b) no fees to be paid to the third party snipers, and (c) you just like to do it. The cons include (a) getting caught up and changing your snipe amount as you see the auction go higher, (b) not getting enough sleep.
3.2 Online Service

You sign up with an online service and pay them a fixed fee per snipe (or successful snipe), or a fixed percentage of your winning bid. The pros include (a) reliable service, and (b) auction detachment. The cons include (a) fees, and (b) security concerns with sharing your eBay user name and password.
3.3 Free Desktop Software

You download an open source software, and run it from your desktop. The pros include (a) better security for your password (but beware of many “free” software with adware or worse), (b) your own auction archive, and (c) no fees. The cons include (a) keeping your computer on all the time (no hibernate or sleep settings), (b) depending upon the reliability of your own internet connection (even cable modems have outages).
I use a Java based open source sniping software on my office computer, which stays on all the time in any case. My personal choice is called JBidWatcher. If you use any such program and like it, please consider making a donation to the author. (Note: no conflict of interest here- I do not financially gain from suggesting this.)
4. Three Situations when Sniping will not Work

4.1 A Popular Item

An item which already has 10 bids from 5 separate users will close at its market price. The sniper cannot gain an advantage in this case, even though he/she may win the item.
4.2 A Bidding War

If two buyers engage in a bidding war, then sniping will not succeed in winning the item.
4.3 A “Standard Valuation” Item

If the valuation of an item is standard, e.g. gold bullion, then sniping will not confer any advantage.
5. How to Neutralize Sniping as a Seller

The basis for neutralizing sniping as a seller is to follow all the common advice about being a good eBay seller- increase traffic to your site, describe the item accurately and extensively, provide multiple photographs, and maintain a high feedback rating. However, there is one factor that makes a difference to sniping- it is the starting price (relative to the valuation of the item).
5.1 High starting price

A high starting price will attract bids only from serious buyers. This means that the chances of a sniper are much higher. In many cases, the sniper will be the solitary bidder, since for most of the duration of the auction there will be no stalkers or nibblers. Thus, a high starting price will probably get just that much for the seller, and hence provide a good deal for the buyer. It may be worthwhile listing such items as fixed price auctions for a longer duration, since that increases the chances that the item will be sold.
5.2 Low starting price

A low starting price encourages stalkers and nibblers, once the first bargain hunter bids on the item. Thus the auction energy is high, and with a long enough period, e.g. 7 or 10 days, the item will get enough serious bidders. However, as with all items, serious bidders will discount the item for any risk factors, like inadequate descriptions, unclear photographs, insufficient reputation (in terms of past items sold, current similar items listed, etc).
Thus, the best way to neutralize snipers is to sell similar items and develop a solid reputation, describe the items thoroughly, and list with a low starting price. However, it can be daunting to list an expensive item for $1 the first time.
Kevin Reviewed by Kevin on . Everything about Ebay Sniping 101 http://i.imgur.com/cvQiuBG.png Sniping 101Please provide me feedback on this article, and vote if you like this article. 0. Definitions 1. Four Reasons to Snipe 1.1 Auction Detachment 1.2 Avoiding “Stalkers” 1.3 Avoiding “Nibblers” 1.4 Waiting for a Better Item 2. Before you Snipe Rating: 5