It's not supposed to be some red line absolute max price, but rather "how much is this item worth to you?" You set that as your max bid price. If you get it at auction for less than that, you got a good deal, but if you buy it for more, you got a bad deal. If someone outbids you, then maybe it was worth it to them, but you (supposedly) would not have wanted to buy the item for that much, and would rather use your money for something else.

For tricky-to-price items like unique art pieces, the idea that you can pin this down might be a fantasy, but for commodity items it's pretty reasonable. If you can buy the same thing at costco dot com for $500, then it's probably not worth more than $500 to you, and if at auction you get outbid and it sells for $500.01 then you'll shrug and go order the same thing for a cent less, having wasted only a few minutes of your time. If the item you're bidding on is discontinued (e.g. it's last year's model) but you can buy a slightly better one for $550, and you can spare that extra $50, then again you won't be too sad about getting outbid. Online auctions are more popular for used items, but again in that case you usually still have an idea of what a used item is worth to you.

The logic of "you shouldn't ever need to snipe, just bid your max price" only works if we assume that the max price is a red line though. If I "value something" at $5000 (as in I want to buy it at $5000), and I bid $5000, and someone bids $5000.01, I would probably be happy if I sniped them and got the item for $5000.02.

I'm not defending "you shouldn't ever need to snipe, just bid your max price" as a hard principle, just trying to explain where the idea comes from. Sniping can be strategic for lots of reasons: you don't have to commit to a bid until the last second (in case you find a similar item for cheaper elsewhere), you deny other people information, you might avoid anxiety from wondering whether your bid will win, etc.

That said, the max price is supposed to be a price where you are not especially happy to get the item at that price, but not really sad either, a price where you would say "well, I hoped for better but I guess that's a fair deal". That's not realistically pinned down to the cent. But if you set a max price at $5000 and would be happy to get the item at $5000.02 (for some reason other than satisfaction from sniping), then you set your max price wrong, or at least differently from how economists expect you to set it.

> But if you set a max price at $5000 and would be happy to get the item at $5000.02 (for some reason other than satisfaction from sniping), then you set your max price wrong, or at least differently from how economists expect you to set it.

I think this is the problem. When most sciences observe reality diverge from the model, they see that as a flaw in the model. When economists (at least you HN "economists") observe reality diverge from the model, they seem to see that as a flaw in reality.

The model is wrong.

According to you, a bidder should always be willing to extend the bid to infinity since each increment is only one cent more.

No, I am willing to pay $0.01 more but not infinity more, there's a difference

"I made my max bid $500.00, but I'd have paid $500.01!"

"I made my max bid $500.01, but I'd have paid $500.02!"

"I made my max bid $500.02, but I'd have paid $500.03!"

…where does this process end?

The way you've put it, always exactly 1¢ above your max bid.

I can't give you a precise number, but it's somewhere above $0 and below $∞

This thread is pretty weird.

My phrase "how economists expect you to set it" is probably wrong here, since I'm not an economist, I've just read the most basic theory about how to use this tool, and also used it myself (on eBay, you know, years ago when the site was mostly auctions). So I don't really know what "economists expect", but rather the basic guidelines for using this tool. You got me there.

> I think this is the problem. When most sciences observe reality diverge from the model, they see that as a flaw in the model. When economists (at least you HN "economists") observe reality diverge from the model, they seem to see that as a flaw in reality.

But like, to double-check here: "reality" means your imagined use of a tool that you do not in fact use, right? Like you say you "don't do auctions" and I'm trying to explain what that option is for, and you're countering that the basic "how to use this tool" explanation is a wrong model of reality?

By your logic, there is no such thing as a limit or maximum bid. It's like you don't understand the concept of a maximum.

If you're always willing to add one more cent then that wasn't your maximum.

Your max price should be the price such that you're indifferent between buying the item at that price and not buying it at all.

At a shop, usually you're paying less than the maximum you'd be willing to pay, because the shop's prices are fixed and it would be a big coincidence if the price they set happened to match your max price exactly.[1] So even if we model you as homo economicus, it's normal that you're almost always fine with paying $X + $0.01.

In the case where $X really is your max price (i.e. it's right at your threshold of indifference), the idea of rejecting $X + $0.01 seems less silly. You were already very close to deciding $X was too much, so you're probably feeling ambivalent about making the purchase, and the trivial nudge of an extra cent being added to the price might as well be what pushes you over the edge.

[1] There are exceptions, e.g. when you have a negligible preference between brands A and B, so you're defaulting to brand A because the prices are exactly the same, but you would buy B if it were marginally cheaper. But that doesn't affect the main point here.

I don't see why I would buy something if I'm indifferent to whether I buy the thing.

So it should be the highest price such that you're not indifferent, you marginally prefer to buy it. The point is that you're right at the threshold where it's just barely worth it to you.

The gap between total indifference and wanting something bad enough to bid on it is always going to be more than $.01.

I reckon that's empirically false. Shops set prices like $499.99 for a reason.

(And it has to be theoretically false, otherwise $X is equivalent to $X + $0.01 for all X, and so if you'd buy something at 1c you'd buy it for the contents of your bank account.)

If you still dispute this, you need to try to explain how a larger price difference can affect your decision. If you'd happily place a $1 bid, and you'd definitely not place a $100 bid, and a 1c difference could never deter you from placing a bid, then... well, how is that possible?

Regarding the last part: it's simple, $1.01 is less than $100

This process doesn't work endlessly. You can't just add $.01 a billion times and I'd still pay it. But it works once or twice.

Shops set prices like $499.99 due to funny psychological effects: $499.99 is still a price "in the 400s" while $500 is "in the 500s". Nobody sits down and thinks logically about it and concludes that no, the $.01 difference between $499.99 and $500.00 crosses the line. But people see $499.99 and the brain initially goes "oh, it's only 400-something".

Are you:

- agreeing there must be some threshold such that if the price is $X then you will buy(/bid on) the item, but if the price is $X + $0.01 then you won't;

- but maintaining that in a case where you have already decided to buy/bid and the price then rises by $0.01, you will always go ahead and pay the extra cent (provided this hasn't already happened a bunch of times)?

If so, then I don't see the original problem. Do your best to estimate X (or, more specifically, the value of X you actually endorse as your 'true' valuation), and put that in as your maximum bid. If you get the item at $X you'll be marginally pleased; if you get it for less then you'll be more pleased; and if you miss out on it then you shouldn't mind, as you knew it was only going to be just barely worth it at $X.

If you're actually disagreeing with the first point, then you still need to explain how that can make sense. It's coherent to say that in practice, after making the decision to buy at a given price, you would always accept a 1c price rise but at some point between the first 1c rise and the billionth you'd tell the guy to piss off. But that's not the same as saying the actual value of the item, separate from the emotions involved in the purchase process, is somehow indeterminate. If it's not worth it at $1, and it's worth it at $100, but 1c can never take it from "worth it" to "not worth it", then ?

> are you

> - agreeing there must be some threshold such that if the price is $X then you will buy(/bid on) the item, but if the price is $X + $0.01 then you won't;

No, I'm not. If I will buy an item for price $X, I will buy the item for the price $X + $.01. The decision to purchase something is more complex and cannot be encapsulated as one single dollar value.

I think something your model fails to account for is: there is friction associated with a purchase. I will not necessarily go through the process of buying something whose "value" is $0.1 even if its price is $0.09, because there is friction to making a purchase which that $0.01 profit doesn't cover.

As an example: I recently played a Pokemon ROM hack where there was an NPC selling a nugget for 4999. You can sell the nugget for 5000. That's 1 coin profit; objectively a good trade, right? But going through the process of purchasing something isn't free. So in spite of what your economic models may suggest, I did not stop everything I was doing and spend the rest of the game buying nuggets for 4999 and selling them for 5000, because that would've been boring and my time has value.

If I've already gone through a lot of the process to decide to buy something at a certain price (which includes doing research to find out that the thing suits my needs, researching how the market looks for that category of thing, then bringing the item to the cashier or engaging in the eBay auction or contacting a seller), then I've already spent some not-insignificant amount of resources on the purchasing process. A $0.01 price increase will never be enough to stop me from completing that purchase, because $0.01 is not worth going through the whole process again.

If I'm already at the point where I want to bid on an item at $X, then I have spent more than $0.01 in effort researching things to bid on, so I would also bid $X + $0.01.

> If I've already gone through a lot of the process to decide to buy something at a certain price [...] then I've already spent some not-insignificant amount of resources on the purchasing process.

Yes, that's part of what I was trying to account for with my second bullet point. But before you've made that initial decision, there must be some price that would cause you to make it a 'yes' and some marginally higher price that would cause you to make it a 'no'.

This value obviously won't be totally constant across time -- it will vary with your mental state. But at any given time (and for any given roll of the mental dice, if we're assuming there's some true indeterminism here), it must exist. So when we're translating from "what's the maximum I would pay" to "what should I bid", we can imagine that we're in our most rational and clear-thinking frame of mind, aren't seized by any strange impulses, and so on.

The time and effort of researching a different item also has a value that could be pinned down in a similar way. So it doesn't fundamentally change the arguments here; if product A would be worth $X in a vacuum, but you'd happily pay $Y to avoid going through the research process again, then you should bid $X+Y.

Before I have made that initial decision, and before I have invested resources into evaluating what I think the value of a product is, I do not have a price in mind. Deciding on a price I think is fair for a product takes effort. The more accurately I want to determine it, the more effort it is.

Could there exist some hypothetical subjective value? I mean maybe. But not one that I have knowledge of, so it's not something that can even hypothetically affect my behavior. The only time at which I could possibly be aware of my own subjective value judgement of a product necessarily has to be after I have invested time to evaluate it.

So what is the problem? You've done the research, and your best estimate for the value is $X. And if you had to put a dollar value on avoiding doing the research again, it would be $Y. You put in a maximum bid of $X+Y, walk away from the auction, and come back to see that you won at a lower price (great!), won at your max price (fine), or lost (also fine; $X+Y was right at the threshold of what you considered worth paying, even accounting for the extra research you'll now have to do. Maybe if you look at the final price and see that you lost by 1c, you'll feel annoyed... but if that's anything more than an irrational emotional response, then why didn't you bid 1c more in the first place? You were free to enter any number you wanted, and you knew in advance that this might happen. If it is just an irrational emotional response, you can avoid that next time by not looking at the final price unless you win.)

Neither $X nor $Y are going to be hard dollar values. If I semi-arbitrarily pick some $X and some $Y, put in $X+$Y as my max bid, and lost the item due to $0.01, I would be annoyed not due to some irrationality but because $X and $Y were never cent-accurate in the first place.

They'll never be cent-accurate, but if you've done a decent job then they should be in your zone of rough indifference. Then you can simply avoid that annoyance by not looking at the final price, safe in the knowledge that at worst you may have missed out on a marginally worthwhile purchase by marginally underestimating its value. If that's not the case, you didn't bid enough in the first place.

(But also, how is the annoyance not irrational? Your estimates weren't cent-accurate, but they were just as likely to be slightly too high as slightly too low. And you haven't learned anything new about the true values -- unless you take your emotional reaction to be new evidence. For your emotional reaction to be new evidence, it has to be somewhat unpredictable, otherwise you could have fully factored it in in advance. But you seem to be saying that you're predictably going to be annoyed by a 1c loss.)

Adding a single grain of sand to a small pile of sand never turns it into a big pile of sand, yet big piles of sand exist... well, how is that possible? https://en.wikipedia.org/wiki/Sorites_paradox

Yes of course I know the Sorites paradox (and I can give my take on it if you are interested), but what point are you making in the context of this discussion?

it's because this argument of "what is $0.01 more?" can be extended forever, implying you are willing to pay an infinite amount of money for anything. since we know this is silly, we try to understand what our "real" maximum is. this is difficult to do for exactly the reasons you mention in your comment! surely $0.01 is negligible! there is a tension here.

and so, absolute max price is not a fantasy - the world would be absurd if it were - but instead its a real and difficult to construct value

It can be extended forever in theory, and sure, that is an interesting philosophical discussion, but it isn't in practice. We're discussing sniping. That means you make the choice once: do I send in a last-second bid that's $.01 more than my "max price", or do I not?

You're just trolling at this point.

Imagine someone wanting to pay $3.50 on an auction and them rounding up to $4 to account for cent sniping. You're saying they should bid $4.01, but the bid is already including half a hundred one cent increments beyond the price to avoid cent sniping.

You're saying it's only one cent out of 50 cents. Then you're saying it's only one cent out of 51 cents so you should keep bidding more.

The infinite budget of one cent increments that you're dreaming of is actually finite and probably easier to quantify than the absolute price itself, so you're taking a problem where the hard part has been solved and are now obsessed with the easy part that almost nobody bothers paying attention to.

Edit:

Maybe the context isn't obvious but eBay has an automated bidding system with coarse grained increments for automatic bidding like 25 cents. This means there is a finite number of increments that can be meaningfully cent sniped before getting into the next coarse grain increment. You can't actually win an auction by placing a one cent higher bid at the last minute in an unfair way. Sniping on eBay isn't about winning the item, it's about doing a sealed bid auction where others can't see your price to nibble it up since the automated bidding systems performs a snipe for you at the last nanosecond if you entered a higher bid. There is no meaningful situation where a cent or two is standing between you and the item.

If your time has no value for you, sure, keep glued to your machine sending countless counterbids $0.01 higher than the latest bid.

The field of Economics