I don’t like shill bidding because I think it does concrete harm to (1) the knowledgeable, rational bidder, (2) the uneducated, sentimental, emotional bidder, and (3) the popularity and success of auctions in general.

First, let me state these facts/assumptions:

(1) bidders will frequent auctions, generally, only if there is a decent chance of getting a bargain. They don’t object to paying “fair market price” upon occasion, but they like to know they have a chance of getting a bargain.

(2) “fair market price’ is a price determined by many transactions, or similar transactions, of an item between willing buyers and sellers who are under no compulsion to buy or sell.

(3) Bidders are not created equal. Some are smarter, more educated and more in control of themselves. But as a practical matter even those ideal bidders will loosen up in certain circumstances -- for example low-priced auctions, particular sentimental pieces, against certain competition, etc.

Next, let me give this personal tidbit. As a teenager I greatly appreciated a library book on poker written by George S. Coffin in about 1950. When I saw it at auction about six years ago, I mailed in an extremely high bid. Fortunately it was an honest auction, and I won it for 10% above the second highest bid. If it were a dishonest auction or one with shill bidding (to me, the same thing), I would have “won” it at an exorbitant amount, an amount way above “fair market price.” (Incidentally, if the auction had an opening bid as high as the maximum of my proxy bid, I think I would have been disgusted at such an unreasonable amount and shunned the auction.)

Here are the concrete, real harms and costs to real people brought on by shill bidding:

(1) the knowledgeable, steady, rational bidder is deprived of ever getting a bargain and ends up wasting his time. He may have hoped that occasionally high-bidding competitors would overlook the lot or already had the item, leaving the field to him. But no, the shill bids it up close to our bidder’s maximum, or over the maximum. If the shill bidder/seller had been honest and announced either a reserve or high-opening-bid auction, the bidder might have decided not to participate in the auction and save his time. SO THIS FOOLERY AND DISHONESTY OF SHILL BIDDING DID HAVE A COST -- A WASTE OF TIME AND UNNECESSARY ANXIETY!

(2) shill bidding is particularly harmful to those who placed a large maximum proxy bid in error (say out of ignorance of the field; typing a wrong amount; not noticing an important point in the description like damage to the item; etc.) or out of sentiment and could have been rescued in an honest auction by the proxy system which would place his final bid just a little over the second highest (and hopefully reasonable) bid, but instead is shill bid up to near his maximum amount;

(3) shill bidding is costly to the impressionable, who misinterprets shill bidding as a true market-driven stampede to a good deal, and then increases his bid to keep up with the shill bidding;

(4) once widespread shill bidding is recognized, disgusted bidders will leave the auction scene, harming all of us who benefit from auctions -- less bidders causing less business and less dealers;

(5) shill bidding costs eBay revenue (lower opening bids (thus lower listing fees) with shill bidding), which might lead to a general increase in auction fees.

Robert