Proxy bidding is an implementation of an English second-price auction used on eBay, in which the winning bidder pays the price of the second-highest bid plus a defined increment.
eBay uses the term proxy bidding to refer to their implementation of an English second-price auction, in which the winning bidder pays the price of the second-highest bid, in addition to a defined increment.
[1] Though similar to a Vickrey auction, the bids are not sealed.
In a standard English auction, the winner pays the amount of their bid—regardless of competitors' bids—and it is therefore desirable to place a bid that exceeds the current highest bid by the smallest possible increment.
eBay's approach, however, reveals the bidder's limit to rival bidders early in the auction, which can sometimes artificially inflate the price of the item higher than its actual intrinsic value, and ultimately encourages the practice of auction sniping.