
Penny Auctions: They're Gambling - w1ntermute
http://www.codinghorror.com/blog/archives/001261.html
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ispivey
The really shady thing is how Swoopo shows the same auctions to people bidding
with different currencies. Look at the front pages of these two sites:

<http://www.swoopo.com/> and <http://www.swoopo.co.uk/>

You probably won't see the same items I do, but I'm sure you'll note two
ridiculous (dishonest?) things:

1) You'll see the same item listed for the same number of US Dollars as Pounds
Sterling (e.g. I see an iPhone for $86.50 and £86.50, with the same
"countdown" running). This is not outright deceptive for penny auctions
because, after all, the current "bid" is just a score, not an actual value
that anyone ever pays.

2) You'll see that people in the US and UK are bidding against each other on
the same auction, but people in the US and UK _think they're bidding on
different items_. For example, I see on the US site a Sony VAIO VGN-AW220J/B
18.4-Inch Laptop for $10.27 with 2:45 remaining, and on the UK site a Acer
Aspire 8930G 18.4" Notebook for £10.27 with 2:45 remaining. If you click
through to both auctions, you'll see the same people and bids on both -
they're clearly the same auction. Presumably when someone finally bids, Swoopo
buys whatever item they think they won and ships it to them.

~~~
jraines
I usually like to take the devil's advocate position in this argument, because
I don't think you have to be as smart as HN thinks[1] to understand what
you're getting into when you enter these auctions -- but in this case, yeah
that's freaking evil.

[1] In comment below: " _populace has NO IMMUNITY . . .it will run through
them like swine flu_ ". Come on. Has the populace moved to Nevada and dashed
themselves upon the rocks of Vegas? Are we a nation of lottery addicts and OTB
junkies? I bet if this were about drugs and/or prostitution, few here would be
saying "the populace has NO IMMUNITY to instantly available pleasure and
distraction! It will run through them like swine flu!"

~~~
Retric
I like to gamble and understand that the math is not on your side, but when
you "win" 40+% of the time the mind plays tricks and you can quickly develop a
MMO style addiction. However, with all the negative feedback I can dump 5$ on
180million to 1 odds and still have fun without getting that sort of feedback.

PS: As long as you recognize gamboling is about having a sadistic sort of fun
and spend a tiny % of your income, you can get a lot of entertainment for your
dollar.

------
jellicle
In the past few years, we've seen mortgage-backed securities and financial
derivatives and hedge funds become household words.

Each of these were ways to game the existing regulatory system. Take dollars,
contort them in a way that appears new, and loudly declare you aren't subject
to any existing regulations. The regulators won't catch up for several years,
and by then you've taken whole generations of investors to the cleaners.

Swoopo isn't an auction, it's a raffle. When your school sells 500 $1 raffle
tickets for a $100 prize, the raffle buyers understand that the school is
going to profit $400 and the kids are going to get to go to band camp, and the
government which regulates games of chance has given it a pass (typically,
raffles may have to apply for a permit from a government agency, and only
bonafide religious, charitable, or education groups are allowed to do it
without the heavy regulations applied to casinos and the like).

Swoopo just decided to call themselves a legal auction rather than an illegal
raffle, and they're waiting until the regulators catch up with them. Then
they'll slightly alter how the scam works, loudly declare this new system is
perfectly legal and isn't subject to any existing regulation, and start all
over again.

This type of internet-scamming is going to be increasingly common, and
programmers really need an ethical duty not to participate. It's like a 3-card
monte, or free throw shooting game where the basket is oblong rather than
round, but, hey, over the internet.... call it Carnival Scams 2.0. The
populace has NO IMMUNITY against this sort of thing so it's going to go
through them like swine flu.

~~~
randallsquared
_This type of internet-scamming is going to be increasingly common, and
programmers really need an ethical duty not to participate._

It's not clear to me that it's unethical to build a tool that someone could
use to harm themselves.

Further, you've just described how this will go on anyway ("censorship as
damage" and all that).

------
ispivey
Theoretically, these auctions could (and should) continue indefinitely,
because every time a new bid is placed the remaining auction time is extended.

Because of this indefinite extension, and because the way most people play
this auction game is by spending up to a certain percentage of the value of
the item (<= 100%), it's definitely a gambling game. You're gambling that some
other new bidder will not happen upon the auction before your bidding
allowance runs out. If they do, you're screwed. If they don't, you can win.

That's the most important reason Swoopo funnels as many bidders as possible to
as few auctions as possible - it drags out the auctions, allowing them to
collect as many bids (dollars) as possible for the fewest prizes delivered.

------
sireat
These penny auctions are just a variation of the infamous dollar auction:
<http://en.wikipedia.org/wiki/Dollar_auction>

I do hope that people who get taken realize what a horrible deal it is after
the first try. Sadly most will keep trying again and again.

As a device of gambling/entertainment these "auctions" would be fine if the
returns would be somewhat regulated, that is house take would never be above
200% (even 120% would probably be fine).

------
edmccaffrey
The metrics that he invented to determine if it is a game of chance are
contrived and outright dumb. It's not a game of chance because anyone can win
if they are willing to spend more than the other bidders.

Even though people _can_ try to use bidding strategies, it is not a game of
chance.

Keep this terrible blog far, far away, please.

~~~
jerf
Not so much. I wrote about this in more depth here:
<http://www.jerf.org/iri/post/2888> and I won't entirely repeat myself, except
I would point out that they sometimes run "special" auctions where the
"auction" price is free, and all you pay is the bid price. In that case there
is 0 ability to "win"; it's straight-up gambling.

Even in the case where you are willing to put a lot of money into a "full
price" auction, the ability that someone else has to put one dollar + auction
price in and defeat your 2 * auction price dollars in bidding + auction price
makes it unlikely you will win without "investing" radically more than the
value of the product. (Especially since they are trying to create a bidding
war between 2 or more people each of which are unaware of the "sunk cost
fallacy", or at least not able to act on it.)

I'm not sure what metric you would prefer, but if you feel it's dumb and not
gambling, I would invite you to try it. Me? I'll be over here, not trying it.
I can work the math. But feel free to let us know how it goes.

If you'd like an easier metric, just go to the site and find a currently
active item. Simulate yourself hitting the "bid" button, and keep track of how
often you do it, and whether you win the item. Until you sit there and watch
the counter in real time (as I did on a couple of items), you can't _feel_ how
this site works.

(And since Swoopo may end up here, I'll repeat what I said on my blog: I am
completely uninterested in hearing from you, Swoopo.)

~~~
mcargian
Although it may be evil and expensive, it is absolutely not gambling. The last
person to bid, wins. There is no chance, no draw, no random event. The last
person gets it.

~~~
diego
Except getting the item is not winning. It's only winning if you pay less than
retail price.

~~~
sachinag
No, and this is where most people make the mistake. The winner of _any_
auction is the last and highest bidder. Whether or not it is rational to bid
more than retail is irrelevant to determining the winner of an auction. People
conflate "I would never do that" with "no one would ever do that".

~~~
diego
You didn't understand my point. Winning is not getting the item. I define
winning as paying less than it would cost at Amazon or wherever you would buy
it. If you pay $20 in bids plus $50 for an item that costs $65 at Amazon, you
lost $5 (even if your time is free). Yes, you "won" the auction but the real
winner in economic terms is the house.

[edit: what is the point of participating in an auction for commodity goods
other than to pay less than retail? I assume that people who take part in this
site do it in the hope of coming out ahead, not to win an auction at any cost
even if it means paying more than the item is worth. I don't see how users of
this site can confuse "winning an auction" with winning in economic terms]

~~~
edmccaffrey
"I define winning as"

You don't get to redefine words to support your personal opinion, and still
have a valid argument.

~~~
diego
That definition is the only one that makes sense from an economic standpoint.
If you spent $100 on an item that cost $90 on Amazon, you lost. I don't care
if you won the item. The winner of the auction is not necessarily the winner
in economic terms, and that's all that matters.

[edit: what makes a game of chance is the point that you win or lose _money_ ,
not whether you win or lose the auction. I'm not confused, I'm just not
getting distracted by the semantics of "winning the auction" vs. the real
objective you are after]

~~~
blhack
Do I lose when I get a soda from the soda machine at work instead of
purchasing it in bulk?

Do I lose if I purchase it in bulk from costco instead of pooling the
resources of my friends, starting a company, and buying directly from a
distributor?

Is the soda machine a "game of chance"?

The answer to all of these questions is "no". None of them are games of
chance.

This _would_ be a game of chance if it was "pay $10 and you might win, but we
won't tell you until the end" instead of "pay $10 and if somebody pays $11 we
will tell you so that, if you chose to, you can bay $12. This cycle will
continue until the item reaches a point that nobody is willing to spend more
for the item"

This is not a game of chance because you get to CHOSE if you are going to win,
and they TELL you if you will before the conclusion of the auction (or game,
in your description).

You _ARE_ simply confused about this, because it isn't possible for a
rationally thinking person to make the argument that you are and mean it.

~~~
diego
The difference is that in the cases you mention you know the price you are
going to pay in advance. In this case you don't. The price changes as you
spend more money to bids. You have no way of knowing what the final price will
be and you are gambling on whether you'll get a good price. I repeat, if you
have infinite money you will get the item if you want but that's not what you
are gambling on.

In a real case, if there are two or more people as determined as you, it is
impossible to predict who will get the item. All will be spending money in
advance without knowing who of them will get it. That's why it's a gamble.

~~~
blhack
Does the auction keep all of your money if you lose the item?

As in...if you bid $10, then $12, then $14, are you actually spending $36 +
bidding fees?

Because if you're only paying for the item once you win it, that is _NOT_ a
gamble.

Yes, there are fees involved. This is customary for EVERY auction. (I don't
know about ebay, but visit a real-world auction sometime).

