Not sure I agree with you guys about actions. First of all, it really takes at least two people (not one) with an inflated value of the price to really drive it up -- otherwise, everyone else drops out and the one person who is willing to pay more buys it at (or slightly above) normal market value. Secondly, inflated price would only happen for something that is relatively rare. If multiple copies are showing up on Ebay, one crazy person will not affect the price much. Finally, I would argue that Ebay has brought DOWN the price on most things. In the old days you'd have, say, a comic book dealer who'd set a price on a back issue. Take it or leave it. Now, if you shop on Ebay, the price starts low and goes up the value that two buys agree upon.

Jeff - You have some good points. Check out these links for more:

http://en.wikipedia.org/wiki/Auction_theory

and most importantly:

http://en.wikipedia.org/wiki/Winner's_curse

The "winner's curse", that is, the winner of an auction being the one who is most wrong about the value of a product, only occurs in common value auctions with incomplete information. What you're describing in your comic book shop example was even more incomplete information than a bidder on eBay has. At the very least the bidder on eBay can look at other auctions and see what they can expect the item to go for. So it's no surprise that the comic-book-shop situation is "even worse" than the eBay situation, in fact, that's the whole point of the curse!

There's a cool java applet here that can demonstrate this for you in a game-type of way:

http://www.gametheory.net/Mike/applets/WinnerCurse/