This is what I think:

1. Don bids $15.56, bid will show as $3.99
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ok
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2. Don's confederate bids $15.06 and does not bid again. Bid will show Don as high bidder at $15.56, right?
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Right
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3. Don then increases his bid to $20.00. You say the high bid showing will increase to $16.00? I'm not so sure, that would mean Don's bid is increased for a reason other then being "bumped" by another bidder. Let's try it and see.
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No, the bid would stay at $15.56 because his bid is already on full increment (50 cent) higher than the next highest bidder.
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Continuing;

4. Don's confederate now bids $20.00, which ties him with Don, with Don showing as the high bidder because he placed his $20.00 bid first.
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Right
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5. Don now bids $25.00. You say the high bid showing will increase to $20.50? I don't think so, because that means that Don's bid is increased for a reason other than as a response to a competing bid. He's in 1st place, the price does not need to go up to keep him in first place.
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In this case the bid would not increase. Don's bid would only go up if he became the high bidder by less than one full increment (in this case 50 cent) over the next highest bidder. Then if he bid over his own high bid, the bid would go up one full increment over the amount of the next highest bidder. OK, I just lost myself there.
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