Ever since I read Jeff Atwood's article about Swoopo on Coding Horror, I've been fascinated about the strategies involved in bidding on such a site. Not fascinated enough (or indeed interested enough) to actually use real money of my own to do so, but to my mind it has all the hallmarks of some kind of remarkable result in advanced game theory. Basically Swoopo is an auction site where they're the ones putting up the items for auction. The suckers -- sorry, bidders -- bid for the items, but each bid costs money to place (something like 75 cents) and each bid extends the end time of the auction.
I'm glad to note that some computer science researchers from Harvard and Boston universities have done some thought-provoking work in this area: Information Asymmetries in Pay-Per-Bid Auctions: How Swoopo Makes Bank (pdf). They've not only analyzed the "game" from the viewpoint of all players being fully rational and having perfect information but also analyzed thousands of live auctions to see what actually happens. One (obvious) result is that Swoopo rakes in the big bucks from these auctions no matter what. Indeed, they discovered that if some bidders pay less to bid than the majority, Swoopo makes even more money. They also consider themes such as collusion (bidders forming a coalition to avoid bidding against each other), shills (bidders employed by the auction site to drive up the bidding frenzy), and how Swoop It Now turns auctions into games of chicken.
Posted via email from Julian's posterous
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5 Responses
#1 Alex said...
07-Jan-10 11:39 AMJulian, great post. I can't believe that harvard did a full blown study on these penny auction sites. I came across swoopo a while ago and loved the idea, I purchased a similar script that many of these pay per bid auctions are running, and found out A LOT. I have access to the administration panel and know exactly how it works.
Awesome post, keep em coming.
#2 Yona Dean said...
17-Nov-10 11:05 PMNice post Julian, interesting to read about the deep psychology that goes behind these penny bidders.
Also, loved the Harvard study, shocking!
Thanks!
#3 Penny Auctions said...
04-Feb-11 5:46 PMHey Julian,
At the time of your post, collusion was fairly easy for auction sites to detect. However, the number of bidders has grown exponentially since early 2010, and some of those bidders are now using forums and other means to collude. However, auction sites have a tougher time detecting their fraudulent actions.
Josh
#4 julian m bucknall said...
27-Mar-11 10:02 AMAll: I will note in passing that it seems Swoopo filed for bankruptcy on Wednesday, March 23, 2011. http://jmbk.nl/g9R3K
Cheers, Julian
#5 penny auction strategy said...
31-Jul-11 11:38 PMI just discovered that swoopo pulled the plug. I have over $1000 in my account that I want refunded. Bids were purchased for bidding, now that the site is gone, it defeats the purpose. I am very surprised that there's not one complaint about getting your money back from swoopo. Imagine how much money Power Bidders have in their accounts thousands!
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