Penny Auctions: They're Gambling

http://www.codinghorror.com/blog/archives/001261.html

by w1ntermute • 17 years ago

51 29 17 years ago

edmccaffrey3• 17 years ago

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.

jerf2• 17 years ago

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• 17 years ago

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.

edmccaffrey3• 17 years ago

You are inventing absurd definitions of gambling to support your incorrect, defeated argument.

The fact that one will usually lose money with that site does not change the fact that the winner is the person willing to spend the most money.

"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."

If there is no cost of entry then it isn't a gamble, because a gamble requires you to risk money. Quit inventing definitions to support your defeated argument.

"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."

That is a red herring. Correctly pointing out the fact that it is not a gamble, does not mean that I think it is a wise use of my money. Do not use such intellectually dishonest tactics to try to change the subject from your failed argument to one that I did not address.

You are conflating the inability to control the price with the inability to control the outcome.

jellicle2• 17 years ago

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• 17 years ago

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).

ispivey2• 17 years ago

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• 17 years ago

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• 17 years ago

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.

pchristensen• 17 years ago

Sony VAIO VGN-AW220J/B 18.4-Inch Laptop

Totally unrelated but I have one of those and it's a wonderful laptop if your back can handle carrying it.

jellicle2• 17 years ago

Wow. That actually changes my opinion from "illegal gambling operation" to "illegal scam operation".

Stay far away from Swoopo.

ispivey2• 17 years ago

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• 17 years ago

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).

Penny Auctions: They're Gambling

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