http://www.usatoday.com/tech/science/columnist/2006-06-25-physics-of-ebay_x.htm

http://www.newscientist.com/article.ns?id=dn9398

In class, we discussed how auctions on eBay are essentially second price sealed bid auctions. We also noted that in these types of auctions, bidding one’s true value is a dominant strategy. But some of the unique properties of eBay auctions - their fixed time limit and the fact that people can bid as many times as they like - open up new dimensions of bidding strategy. For example, many bidders employ the tactic of sniping: placing a bid very close to the end of the auction so that no one has a chance to outbid you.

Recently, researchers created a mathematical model that analyzed a large number of eBay auctions. They determined that the strategy that gives the highest probability of winning is to place a single bid near the end of the auction, rather than placing incremental bids throughout its duration. One of the reasons that this works is because it causes early bidders to believe that there is a lack of competition. Thus, they may feel that it is unnecessary to bid their true value. In this sense, the research reinforces the notion that bidding your true value, especially if you are a casual eBay-er who does not have the time or resources to snipe, is a dominant strategy, just as in a typical second price sealed bid auction.  In fact, this is the strategy that eBay recommends, because they will submit proxy bids for you until your maximum is reached.  Essentially, if you assume that people will try to snipe at the end of the auction, then bidding your true value increases your chances of receiving a non-zero payoff.