Ebay is a contract. There are legal obligations for both the buyer and the seller. The seller, in this case, breached the contract. Not only is it legally wrong for him to do, it is ethically wrong. It's also bad taste.
Ive made pricing mistakes on ebay as well. I met my obligation and took the hit. (and no, they weren't only mistakes of a couple of bucks but a significant amount) I then scanned my remaining items for pricing errors. It was the right thing to do.
At worst, the seller should have first asked the buyer permission to cancel the purchase. If the buyer did not want to then the seller was legally (and ethically) bound to sell the item.
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