If they keep inching up on you, they're looking for the amount you bid and bid $1 over. But if they do that, anyone bidding anything more at all will win. Instead, they could bid $50 (for example) over and still get to purchase the product at $1 over what you bid. Unless someone else bids more and they'll have to pay more.

So they're interested in beating you, but not interested in paying any more than what it would take to beat you, including whatever it would take to beat the next high bidder.

Of course, there's also the notion that they're just idiots who don't understand how the proxy bidding works, which I didn't consider.