A proxy bid is a maximum-bid strategy: the bidder sets the highest amount they’re willing to pay, and the auction system automatically bids on their behalf, raising one increment at a time only as needed to maintain the lead, up to the maximum.
Proxy bidding is the standard mechanism on online timed auctions and a digital implementation of the traditional absentee bid. Its benefits: bidders don’t need to camp on a screen waiting to react to competitors, and bids are placed efficiently rather than impulsively. Its drawback: sniping — bids placed in the last seconds — can beat proxy bids if the auction lacks soft-close protection.
Game-theory analysis shows that proxy bidding incentivizes bidders to enter their true maximum willingness-to-pay — the same equilibrium that the Vickrey auction targets. In practice, bidders often hedge by entering proxies below their true max and then placing additional bids if they’re outbid. This behavior reflects distrust in the proxy system and a desire to retain control. Platforms that combine proxy bidding with soft close (auto-extending the close time when late bids arrive) get the best of both worlds: efficient absentee bidding plus protection against last-second sniping.