How Online Auctions Work
Online auctions are similar to real-life auctions, except that in the online version everything is done through the web. Instead of traveling to a gallery or showroom, for example, potential bidders browse web pages to see pictures, descriptions and suggested prices for the items being auctioned.
Most online auctions use a method called “proxy bidding,” which works almost as if the auction tool were your trusted representative at a live auction. A participant in an online auction enters the maximum amount he is willing to pay for a particular item directly into the auction website. The system bids for him, increasing the current price by small increments as much as necessary to win the item, up to the participant’s maximum amount.
If no one else beats that high bid, the first bidder wins—potentially paying much less than his maximum. If someone else enters a higher maximum bid, however, the system will email the first bidder to let him know he has been outbid, and to allow him to up his maximum bid, if desired.