Bidding fee auction
Encyclopedia
A bidding fee auction, also called a penny auction, is a type of all-pay auction
in which participants must pay a non-refundable fee to place a small incremental bid. When time expires, the last participant to have placed a bid wins the item and also pays the final bid price, which is purportedly significantly lower than the retail price of the item. The auctioneer makes money in two ways: the fees for each bid and the payment for the winning bid.
article on MadBid, one such site, called this model "a license to print money."
Some auction websites offer a 'Buy It Now' feature which allows users to apply the money spent on bids during an auction to the full retail price of the item, which can usually be found else where on the net for much cheaper.
Some bidding fee auction sites have been shut down by state governments after investigations. Wavee US, LLC, settled with the Governor's Office of Consumer Protection in Georgia and agreed to close its web site after the office received complaints about merchandise not being shipped in a timely fashion. Washington state shut down a site called PennyBiddr after a lawsuit in which the state accused PennyBiddr of using shill bidding to drive up prices and extend auctions. In addition, several auction sites which claimed to be Better Business Bureau
"Accredited" were not members of the BBB or had poor ratings with the BBB.
Some Craigslist
users have fallen victim to scams where a "seller" of an item on Craigslist refers would-be buyers to sign up for a bidding fee auction site. These sites then charge customers an up-front fee for a pack of bids and pay a commission to the scammer who referred a new customer to the site. The CEO of one site implicated in an MSNBC investigation blamed this behavior on rogue affiliate marketers.
All-pay auction
In economics and game theory an all-pay auction, is an auction in which all bidders must pay regardless of whether they win the prize, which is awarded to the highest bidder as in a conventional auction...
in which participants must pay a non-refundable fee to place a small incremental bid. When time expires, the last participant to have placed a bid wins the item and also pays the final bid price, which is purportedly significantly lower than the retail price of the item. The auctioneer makes money in two ways: the fees for each bid and the payment for the winning bid.
How it works
Participants pay a non-refundable fee to purchase bids. Each bid increases the price of the item by a small amount, such as 0.01 USD (1¢) or 0.01 GBP (1p), and extends the time of the auction by a few seconds. Bid prices vary by site and quantity purchased at a time, but generally cost 10–150 times the price of the bidding increment. Once the auction is over, the auctioneer collects the final cost of the item in addition to the monies already collected by selling bids. A TechCrunchTechCrunch
TechCrunch is a web publication that offers technology news and analysis, as well as profiling of startup companies, products, and websites. It was founded by Michael Arrington in 2005, and was first published on June 11, 2005....
article on MadBid, one such site, called this model "a license to print money."
Some auction websites offer a 'Buy It Now' feature which allows users to apply the money spent on bids during an auction to the full retail price of the item, which can usually be found else where on the net for much cheaper.
Criticism
Due to the possibility of participants spending a lot of money and still losing an auction, or spending more than the retail value of the item they end up winning, some analysts have criticized the model or compared it to gambling.Some bidding fee auction sites have been shut down by state governments after investigations. Wavee US, LLC, settled with the Governor's Office of Consumer Protection in Georgia and agreed to close its web site after the office received complaints about merchandise not being shipped in a timely fashion. Washington state shut down a site called PennyBiddr after a lawsuit in which the state accused PennyBiddr of using shill bidding to drive up prices and extend auctions. In addition, several auction sites which claimed to be Better Business Bureau
Better Business Bureau
The Better Business Bureau , founded in 1912, is a corporation consisting of several private business franchises of local BBB organizations based in the United States and Canada, which work through their parent corporation, the Council of Better Business Bureaus .The Better Business Bureau, through...
"Accredited" were not members of the BBB or had poor ratings with the BBB.
Some Craigslist
Craigslist
Craigslist is a centralized network of online communities featuring free online classified advertisements, with sections devoted to jobs, housing, personals, for sale, services, community, gigs, résumés, and discussion forums....
users have fallen victim to scams where a "seller" of an item on Craigslist refers would-be buyers to sign up for a bidding fee auction site. These sites then charge customers an up-front fee for a pack of bids and pay a commission to the scammer who referred a new customer to the site. The CEO of one site implicated in an MSNBC investigation blamed this behavior on rogue affiliate marketers.
See also
- AuctionairAuctionairAuctionair.co.uk is an online retailer based in the UK operating a sealed-bid auction system where bidders cannot see what others have offered.There are two bidding products, the High Bid and the Low Bid.- History :...
, an auction based web site that charges bidding fees. Has both High and Low Bid auctions. - Dollar auctionDollar auctionThe dollar auction is a non-zero sum sequential game designed by economist Martin Shubik to illustrate a paradox brought about by traditional rational choice theory in which players with perfect information in the game are compelled to make an ultimately irrational decision based completely on a...
, a game theoryGame theoryGame theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...
experiment similar to penny auctions - SwoopoSwoopoSwoopo was a bidding fee auction site where purchased credits were used to make bids. Prior to changing its name to Swoopo in 2008, the website was called Telebid. Swoopo was operated by Entertainment Shopping AG and based in Munich, Germany...
, a defunct web site which charged bidding fees - Unique bid auctionUnique bid auctionA unique bid auction is a type of strategy game related to traditional auctions where the winner is usually the individual with the lowest unique bid, although less commonly the auction rules may specify that the highest unique bid is the winner...
, another auction style in which bidders pay for entry and ending prices are very low