Proxy Bidding
What is proxy bidding ?
Proxy bidding makes bidding on auctions easier and less time-consuming for buyers once the auction reserve price has been met. When you place a bid, you might get the item for less than your actual bid.
This fancy terms means nothing more than this: it adjusts your bid as needed to ensure that you only pay the minimum you have to in order to win something. (eBay's bidding system is designed to be a proxy-based bidding system.)
How Proxy Bidding Works
Proxy bidding works like this: suppose you bid 100 points on something that currently has only a 10 point bid. It places your bid at 20 points, and you'll be listed as the current high bidder. If others come in and bid higher than 20, it keeps raising your bid at the preset increments and keeps you the highest bidder automatically until someone bids higher than 100 points.
So entering the maximum you want to pay early in an auction when you enter your initial bid ensures that maximum amount is the highest you'll ever pay. If, however, you can win with a lower bid then it makes sure that happens. If someone outbids your maximum, you'll no longer be the high bidder, but it will alert you if this occurs and you'll have the opportunity to raise your maximum bid until the auction ends.
This works both ways. If you place a bid that is higher than the current bid, you might instantly be outbid if the current high bidder had originally placed a bid higher than yours.
If you are the highest bidder when the auction closes, you are the winner. When you win the auction with proxy bidding you pay only the lowest possible winning bid, which may not necessarily be your maximum bid.