Have you ever wondered “What is a proxy bid”? The term proxy bidding may be unfamiliar to you if you haven’t participated in a lot of online auctions. Proxy bidding is quite simple but can have a huge impact on an online auction for both the bidder and the owner of the lot.
Proxy bidding occurs when bidders have the option to set a maximum price that they would be willing to pay for an item and then allow the computer system to bid for them by the bid increment until someone places a higher bid than their maximum.
The bid increment is pre-set by the auction and is the amount that a proxy bid must increase by. The computer will place a new bid following the bid increment every time someone else places a higher bid than you and will continue to do that until the auction is over and you win, or the price goes over your set maximum. Bidders are typically notified if their maximum has been outbid and have the option to set a new maximum to continue participating in the auction.
For example, say you want to buy a table but you are only willing to spend $75 on it. You would enter $75 as your maximum. If the bid increment for the auction is $5 then the computer will increase your bid by $5 every time someone bids higher than you. So, say someone bids $30, the computer would automatically put in a bid for you at $35. If the auction comes to a close and you are the highest bidder with $55 you have successfully used proxy bidding! You would have been willing to pay $75 but you got the table for less than that!
Proxy bidding allows bidders to win an auction at the lowest price possible. It also maximizes the benefit for the winning bidder because they would have been willing to pay more for the item but they didn’t have to!
