A proxy bid is a strategic bidding technique used in various types of auctions, particularly online auctions, to help buyers secure an item at their desired price without constantly monitoring the bidding process. Essentially, it's a way for bidders to automate their bids based on their maximum budget.

Here's how it works:

Setting a Maximum Bid: When a bidder decides to place a proxy bid, they determine the highest amount they are willing to pay for an item. This maximum bid remains confidential.

Automated Bidding: The bidding system, usually employed in online auctions, will then automatically place incremental bids on behalf of the bidder, as long as the current bid remains below their maximum bid.

Outbidding Competitors: If someone else places a bid that exceeds the proxy bidder's maximum bid, the system will automatically increase the proxy bid to maintain the highest offer, up to the preset maximum.

Winning the Auction: If the proxy bidder's maximum bid is higher than any competing bids, they win the auction at the current bid amount.

Proxy bidding offers several advantages to buyers. It allows them to participate in auctions without constantly monitoring them, prevents emotional bidding, and ensures they don't exceed their budget. This method promotes fair competition, as the final price is determined by genuine market demand rather than the last-minute manual bidding frenzy.