Swoopo.com - what a business model

Martin Shubik invented a famous game-theory exercise, sometimes called “the dollar auction,” where a teacher auctions off a $20 bill to the highest bidder. Bids have to be in round dollar amounts, but the twist is that both the highest and the second-highest bidder have to pay. When uninitiated students start to play this game, someone rushes to bid $3 or $4 dollars for the prospect of winning $20, and then other students respond by bidding up the price.

But then something amazing happens as the auction price starts approaching $20. The remaining bidders realize that they could end up having to pay a lot of money and not win the auction. Imagine that you had bid $19, and another bidder upped the ante by bidding $20. What would you do? Is it better to bid $21 for a $20 prize or to remain silent and pay $19 for nothing?

What starts off as a feel-good exercise to take advantage of a generous professorial offer suddenly becomes a sickening war of attrition, where the last two bidders pay more than what the prize is worth. These games routinely end with the winning bid being 50 percent higher than the value of the prize. Since both the highest and second-highest bidders pay, this means that the professor rakes in about three times the amount being auctioned.

This is an example of what auction theorists call an “all-pay” auction, and it’s a game you want to avoid playing if you possibly can.

But Barry Nalebuff pointed me toward a scary website — called swoopo.com — that seems to be exploiting the low-price allure of all-pay auctions. And it seems to be working.
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no one is posting in this thread because they all went to swoopo for the awesome deals and are now looking for money to finance the $400 they lost trying to win the bidding for a Wii.
 
It seems like the only conceivable way for it to work for a bidder would be to decide what you want and study the final sales pricing trends for that product. When you see one getting close to the maximum, start bidding and don't let up. The downsides of course are the time involved, missing out on deals because you're forced to play it safe, and getting in a bidding war with someone else doing the same thing.

So basically, it would only work in theory.
 
I sat on their home page yesterday and watched a guy bid repeatedly on a Nikon DSLR. He had put around 20 bids into it by the time the price reached $4. $20 invested and the auction was nowhere near complete. It's amazing. "Thank you for allowing me to sit on your website and click a button. Here's $20."
 
Where is the oversight on stuff like this? Imagine if someone affiliated with the site is going around bidding on things. Every time someone clicks to get the high bid back the site makes a load of money.
 
Sarcasmo said:
Where is the oversight on stuff like this? Imagine if someone affiliated with the site is going around bidding on things. Every time someone clicks to get the high bid back the site makes a load of money.
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oh that would be so totally easy. something like this seems like it should be regulated by gambling authorities to ensure fairness.
 
Chris Bauman is the company’s business development manager here in the US, whose job seems now to include educating the public on the company’s auction practices. He argues that our view of online auctions has been shaped by the rise of eBay.

“It’s the biggest problem we have found,” he told Technologizer. “In a real auction, the auctioneer calls out the price, not the bidder automatically bidding the maximum amount he or she wants to pay.”


The timer for auctions works in a similar way. When somebody makes a bid, no matter how close it is to the end of the auction, the time goes up, usually by fifteen seconds. This is similar to giving people a last chance to rebid as is done by auctioneers.

Bauman said that these and other misconceptions about how Swoopo works has led the company to develop a new section of the site which would offer a “beginners auction.” Participants would be able to use this area to learn what is obviously a drastically different online auction format.
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In a real auction, you don't pay for the chance to bid. It's definitely not a gimmicky auction site. It's a gimmicky gambling site. In fact it's so gimmicky it appears to be safe from legal action since they consider it an actual auction site.

Technologizer got in contact with the European Commission, the regulatory body of the EU. The EC then took a closer look at Swoopo apparently, and has gotten back to us saying the site appears to be following all laws.

Even though complains in Europe have already appeared online, the EC itself has as of yet not received any complaints from residents. Moreover, the site appears to be following the rules governing online auctions. Spokesperson Carol Franklin had this to say:

“The Unfair Commercial Practices Directive (2005/29/EC) applies to commercial practices of this kind. Under this Directive, the consumer must receive the material information he needs in order to decide whether to purchase an item or place a bid on an auction site. Complete information about the price and the costs involved must be provided. In the case of auction sites, consumers must therefore be clearly informed whether they will be charged for bids that will not lead to an eventual purchase. Omitting to provide such information would constitute a misleading practice which is banned under the Directive.”
Franklin added that if users did indeed have a problem with Swoopo, they would need to contact their local consumer authority who would then decide if the site is acting against the directive, which is incorporated into local law.
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Sarcasmo said:
Where is the oversight on stuff like this? Imagine if someone affiliated with the site is going around bidding on things. Every time someone clicks to get the high bid back the site makes a load of money.
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They don't even need to, that's the thing. There are so many people watching and bidding, you don't need to drive up the price.

This website is so incredibly brilliant, I'm mad I didn't think of it. Anyone want to work on a clone with me?
 
Fat Burger said:
They don't even need to, that's the thing. There are so many people watching and bidding, you don't need to drive up the price.

This website is so incredibly brilliant, I'm mad I didn't think of it. Anyone want to work on a clone with me?
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yes. where do we start?

edit: fuck. I can't. it's just wrong to take advantage of people.

edit: oh screw it. i'm in.

edit: oh man, I just don't know.
 
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