23 Oct 2003 Bram   » (Master)

Gaming Ebay

Ebay's system of minimum bid increments can be gamed slightly. Let us say that I'm selling an item which is currently at $7000, at which point the minimum bid increment is $100. I could now have a shill bid $7100 and have full confidence that this would definitely make the price go up, since if the highest bidder bid less than that the price would have been at their highest bid.

Shill bidding is against ebay's rules, and there is active policing to stop it. However, detecting gaming of this sort done on a small scale is very difficult. In fact, I might not even have known about it - maybe a friend of mine just bid the $7100 to help me make some more money. A technical solution would be much better than a policing solution.

As it turns out, there is a simple technical solution. In the (rare) case where the highest bid is less than a minimum bid increment greater than the second highest bid, the current winning price should be listed as the second bid plus the minimum bid increment, even though if the current high bidder wins they'll get it for their high bid. If someone else bids higher the winning amount should change to what was previously the second-highest bid plus two times the minimum bid increment. Then shills couldn't outbid without running the risk of getting the winning bid and blowing the sale.

Surprisingly, this system doesn't result in the winning amount being dependant on the order in which bids are placed. The winning price is the greater of the second highest bid plus the minimum bid increment or the third highest bid plus two times the minimum bid increment. Or the maximum the winner bid, if it's less than that value.

So this rule causes some extra complexity in calculation of the winning bid, but not very much. It also adds some potential confusion to the interface, but that can be minimized by making the high bidder see their real winning value while showing the fake (and only slightly different) one for everyone else. Whether these problems offset the benefits of stopping such a simple and likely widespread form of shilling is ebay's decision, but I hope they at least read this and consider it seriously.

There are of course much simpler (and potentially lucrative) forms of shilling. For example, one can have a shill bid which is quite high, then later send mail to the real highest bidder claiming that the high bid was a no-show and offering to sell it for their maximum bid. If you get mail like this, don't immediately assume that it's a cheating seller, since bidders are occasionally no-shows. Instead, you should respond by offering to sell it for what the price would have been if the high bid had never happened. I'm about to do that right now.

I have to say I'm impressed with how much improvement ebay has made over the years. I was going to post about some much more serious errors in their bidding system, but it turns out those have been fixed since the last time I studied it.

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