Winner's curse? Try winner's and loser's curse. Swoopo is the self-proclaimed "home of exciting, fast-paced auctions on the internet." The prices on the site are significantly lower than on other auctions sites such as eBay, but there is a catch: bids are made in $0.15 increments and cost $1 each.For example, as you can see in the picture below, an Apple iPod Touch just sold for $95.40, $133 below market price. The winner, Jannlotz, also bid 35 times, which cost him/her an additional $35. So the total savings was about $100. But what about all of the other bidders? According to Swoopo, the auction price for all items starts at $0.15. For a winning price of $95.40, that would mean 635 bids were made on this item (600 of which were NOT by the winner). In a 10 minute span, I saw at least 100 bids placed by bidders that eventually lost the auction. So even though Jannlotz was the auction winner, the real winner was Swoopo ($600 in bids - $100 loss on the item for a total of $500!!). And I'm sure there are situations where the auction winner ends up paying more than the value of the item (because of the sunk cost of bidding). For example, say that you have made 100 bids on an item worth $100. If the price is still below $100, it is worth the $1 marginal bid to buy the item for under market price.
In conclusion, Swoopo is not a scam but rather an auction site for those with very high risk tolerance. Bid wisely...
