When you make a maximum bid on the eBay bidding form, you actually make several small bids — again and again — until the bidding reaches where you told it to stop.

For example, if the current bid is up to \$19.99 and you put in a maximum of \$45.02, your bid automatically increases incrementally so that you're ahead of the competition — at least until someone else's maximum bid exceeds yours. Basically, you bid by proxy, which means that your bid rises incrementally in response to other bidders' bids.

No one else knows for sure whether you're bidding by proxy, and no one knows your maximum bid. And the best part is that you can be out having a life of your own while the proxy bid happens automatically. Buyers and sellers have no control over the increments (appropriately called bid increments) that eBay sets.

The bid increment is the amount of money by which a bid is raised, and eBay's system can work in mysterious ways.

The current maximum bid can jump up a nickel or a quarter or even a Washington, but there is a method to the madness, even though you may not think so. eBay uses a bid-increment formula that uses the current high bid to determine how much to increase the bid increment. As you can see, the higher you bid, the larger the proxy (automatic) bidding amounts become.

Here are a pair of examples:

• A 5-quart bottle of body lotion has a current high bid of \$14.95. The bid increment is \$0.50 — meaning that if you bid by proxy, your proxy will bid \$15.45.

• A 5-ounce can of top-notch caviar has a high bid of \$200. The bid increment is \$2.50. If you choose to bid by proxy, your proxy will bid \$202.50.

eBay's Proxy Bid Increments
\$0.01–\$0.99 \$0.05
\$1.00–\$4.99 \$0.25
\$5.00–\$24.99 \$0.50
\$25.00–\$99.99 \$1.00
\$100.00–\$249.99 \$2.50
\$250.00–\$499.99 \$5.00
\$500.00–\$999.99 \$10.00
\$1000.00–\$2499.99 \$25.00
\$2500.00–\$4999.99 \$50.00
\$5000.00 and up \$100.00

The following table shows you what kind of magic happens when you put the proxy system and a bid-increment formula together in the same cyber-room.

Proxy Bidding and Bid Increments
Current Bid Bid Increment Minimum Bid eBay Auctioneer Bidders
\$2.50 \$0.25 \$2.75 "Do I hear \$2.75?" Joe Bidder tells his proxy that his maximum bid is \$8.00. He's the current high bidder at \$2.75.
\$2.75 \$0.25 \$3.00 "Do I hear \$3?" You tell your proxy your maximum bid is \$25.00 and take a nice, relaxing bath while your proxy calls out your \$3.00 bid, making you the current high bidder.
\$3.00 \$0.25 \$3.25 "I hear \$3.00 from proxy. Do I proxy hear \$3.25?" Joe Bidder's proxy bids \$3.25, and while Joe Bidder is out walking his dog, he becomes the high bidder.

A heated bidding war ensues between Joe Bidder's proxy and your proxy while the two of you go on with your lives. The bid increment inches from \$0.25 to \$0.50 as the current high bid increases.

 \$7.50 \$0.50 \$8.00 "Do I hear \$8.00?" Joe Bidder's proxy calls out \$8.00, his final offer. \$8.00 \$0.50 \$8.50 "The bid is at \$8.00. Do I hear \$8.50?" Your proxy calls out \$8.50 on your behalf, and having outbid your opponent, you win the auction.