silly economists

[skolem_hull]

At the coffee shop, I overheard a few people (econ grad students? or something like that?) talking, one mentioning the auction website Swoopo (which I'd never heard of-- they sell various items with a starting auction price of zero, and you can pay $0.60 to make a bid, which increments the current price by $0.12--so the winner ends up with the item

Comments

[foxfour]

I'll check the paper later, but I think it's pretty well-established that swoopo is actually a scam.

[skolem_hull]

What do you mean when you say 'scam'? I have worries about this claim

[foxfour]

I haven't thought about Swoopo in a long time, but I remember a number of things that basically described it as a scam, mostly due to disingenuous self-description. You're right that people can know they're paying for entertainment, but I think a scam can be usefully said to be something which doesn't want people to know that that's what they're doing-and it seemed Swoopo was trying to get people to think that they were competing for bargains, rather than paying for entertainment. I seem also to recall that everyone pays for each of those bids, so the sale price is only a small portion of what Swoopo gets for a sold item? As I say, it's been a while since I thought about it.

[skolem_hull]

...the sale price is only a small portion of what Swoopo gets for a sold item?

Yeah. But it's pretty easy to figure out how much Swoopo did get, since each bid increments the price by a fixed amount, so you can divide to find out how many bids were made.

In some sense you are competing for a bargain... just like in other gambling you're competing for money, with this you're competing for a bargain. (And of course you lose something if you lose that competition.)