In order to reduce the need for complexity in the interface, this would functionally use the same bid option we have now, the implementation would simply change. Instead of inputting a bid, you would input a max bid. The game would check your bid against the existing max bid and produce the resultant bid of (lower max bid + bid increment). In the event that the max bid cannot beat the new bid, the one who placed the max bid would get his money back. The value deposited into the auction house initially would be the full max bid, and the difference between max bid and actual bid would be refunded if you win.

examples:
The item in this case will be referred to as "item". The auction house ties two variables to "item", actual bid and max bid (I will use ab and mb). The auction house has a formula which determines increment, or inc. (I don't actually know what increments are at the moment and I don't care to look it up right now) And keeps an empty variable for new bids (nb).

EDIT: Turns out this forum doesn't like the brackets that are used in coding. I defaulted to just using indentation.
EDITx2: It doesn't like indentation either. I think it might just hate the words "else if"
EDITx3: Pretend that the "else" has another "if" and a logic statement for the sake of clean code.
EDITx4: Half my post just disappeared. Man I am bored today. Aha! the Greater than and Less than symbols are messing it up. That makes sense actually.

//bid is placed and item.nb has been assigned the value of the new bid. The new bid is a legal bid, it is no smaller than item.ab+inc
if((item.nb+inc)Less Than or equal to item.mb){
item.ab = (item.nb+inc);
calls refund function to give money back to new bidder
}
else if ((item.nb+inc)Greater than item.mb){
item.ab = (item.nb);
item.mb = item.nb;
calls refund function to give money back to old bidder
}

//bid has ended
calls function to award item to winning bidder
calls refund function to give winning bidder (item.mb-item.ab)

demonstration
item.ab = 1000
item.mb = 2000
player supplies new bid of 1500
item.nb = 1500
if/else finds that item.nb+inc < item.mb
the new bid is 1500+inc
auction ends
winner is given item and (500-inc)cr

I apologize if my coding is a significant underestimation of the complexity involved in the current auction house implementation, my only experience is with Java and some C in a non-gaming environment. I'm really just bored and a fan of object orientation. My explanation does point out to the common man that the "max bid" concept involves fewer actual variable computations than one might expect, and ultimately could involve fewer processes. I expect fewer refund mails would be sent as bids would be settled with less back-and-forth.