Why some of the outbid notifications are not sent

When you place a bid, you enter the maximum amount (Proxy Bid) you are willing to pay for the item. If another bidder has a higher maximum, you will be outbid automatically. Outbid notifications are not sent when this automatic outbid happens.

Let us walk through a scenario to see how this happens:

Seller1 - lists an item with starting price of $1
Buyer1 - places a maximum bid of $5. Although the max. bid is $5, the actual bid at that time is $1.
Buyer2 - places tries to place a bid of $2.
At this point, since Buyer1 has a max. bid of $5, his bid is set to $2.25 (bid of buyer 2 + the minimum increment required) and Buyer2 is outbid automatically.