How can Swoopo, the online auction site, rake in $2,151 selling a laptop for $35.86? Easy: set an opening price of $0.01 (almost free!), then let each new bidder top the last by only a penny, and extend the auction each time someone places a bid in the final seconds. Oh, and collect $0.60 from each player for each bid they place. The winner of the auction might walk away with a good deal, but the losers will have racked up big fees chasing their sunk costs. The house always wins. Writer Mark Gimein calls the site “the evil bastard child of game theory and behavioral economics.” [%comments]
Shopping for Gamblers
TAGS: Behavioral Economics, gambling
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As far as I understand, nothing stops Swoopo for bidding themselves in a “hidden” fashion:
Being the operator of the site, they even can set it up in a way that all the bots only have the option of bidding until the last second or 0.1 second before the end of the auction. Then Swoop themselves can make a shill-bid in the remaining milliseconds if no bid has taken place and the price is below their reserve.
This would prevent any and all losses for them in the rare case that they cannot start a bidding war and rake in 600% profit. Sheer evil genius.
Transplanted Lawyer, great comment. Thanks for sharing.
Probably the product of unemployed evil geniuses from our decimated financial sector. We should expect more such ingenuity in the future.
There’s a watchdog source for these penny auction sites similar to swoopo, yes there are MANY more of them it’s http://www.pennyauctionwatch.com.
In what way is this site “evil”? So long as they don’t bid themselves, everyone knows what they are going in for. If a site sold a laptop for $100,000,000 it would be a rip off but not “evil”, as it is for the individual to choose whether to contract or not?
Peter: They are evil in the same way that state lotteries are evil. They play on the lack of understanding of odds & math by their players. They advertise focusing on the low final sales price, without mentioning the sunk cost, and how much money they actually make.
I think sites like this should be regulated as gambling, with a disclosure requirement.
I’d like to be a fly on the wall if there’s ever a court case over whether or not this is legally a gambling site and should be regulated as such…
I checked Swoopo out some time ago. I think it is owned by Dr. Evil. If you do your math right and stick to your discipline in bidding, you can go OK. I’m also sure that if you do that, you will never actually win the item because some knucklehead will always outbid you and you’re out your bid fees.
Sheer genius–all the fees and conditions are fully disclosed, so it is truly caveat emptor.