I was outbid by $2.50 in the last 5 seconds of an auction on Ebay.?

You didn't get awarded a "second chance" the seller decided to re post instead

Someone could bid $105.50. Then come along with another account or a "partner in crime" and bid $299.50.
Which would run everyone else off. But this behavior could be easily detected and such "crooks" should be banned. So the fix could be, automatic to 2nd place, if the 1st place bid is the minimum bid above 2nd place. Another way would be if the 2nd highest bid is no more than 5% lower than the winning bid. Example: High bid $100 ; the 2nd highest bid would have to be at least $95; High bid $1000; the 2nd highest bid would have to be $950. If any higher then the seller, to protect themselves and other honest bidders, would have no choice but to relist the item. In your instance, the seller should have to give you the chance to buy it for your second highest bid.

It's not automatic so people can't cheat. In theory I could make two accounts and bid with both and then refuse to pay on the account that was the high bid and get it cheaper with the second account.

in your case the winner did not "back out" ; instead he/she was not able to provide the required amount by the time the seller states, which is usually a certain $ amount w/in a certain # of days or hours............you now have the chance to bid again on the item, and if you watch the bidding til the last second, AND you have the automatic bidding process ( or whatever it's called on ebay ) then you have a good chance of being the highest bider

Why am I not then awarded the item?
Because the seller did not do a "second chance".

And unless the buyer specifically said "I can't pay". the seller would not know this since you are not required to immediately pay on eBay Maybe the seller had multiple items.