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  #1  
Old 03-31-2011, 05:09 PM
Stink Fish Pot Stink Fish Pot is offline
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how are "auction" sites like quibids legal?

I finally took a look at one of these auction sites, and I don't really understand how they are legal.

For example, quibids.com charges 60 cents a bid.

There is a ton of nice things to bid on, so if I look at an iPad with 16GB WiFi + 3G.

The price on apple's website is $629.00.

The high bid right now is $40.57 and climbing. Not bad to get a $630 item for a bit over $40. However, that's really not what is being paid for this item. 4057 bids have been put in (at 1 cent/bid), which comes to $2434.

That is one hell of a markup on an item. 4x retail. But the winner doesn't care, since they've paid much less than the $629. apple doesn't care, since the item was purchased at cost (or close enough). So what's the problem?

Isn't this more like a raffle than a lottery? If I buy 10 bids, I'm out 6 dollars, not unlike buying a raffle ticket for an iPad. I lose, so I walk away. Basically the same thing on the website, but there are a few problems that I can see with this.

1) the website can easily create shill bidding accounts, to make sure that the item is never sold for less than the price that quibids.com pays for it.

2) Someone can get caught up in the bidding, and end up spending a significant amount of money without winning. I know that's everyone's tough break, but if you are actually on these websites, I can't imagine you are very bright and are thinking things through. Plus, you get caught up in a bidding war, and see the price increasing by only a cent. if you quit, you lose that item and will kick yourself, so you stay in as long as possible.

3) quibids doesn't have to maintain any inventory. Throw up any item they want, THEN they go buy it. Not a bad way to run a business, when you think about it.


I guess this seems like gambling to me. So the questions I have are:

1) How is this legal?
2) If it's not gambling, what is the legal definition?
3) If it IS gambling, are these servers outside the US, and like internet poker, just work through a loophole?

4) just curious - has anyone used one of these sites, and if so, can you share your experience?

Thanks
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  #2  
Old 03-31-2011, 05:15 PM
tellyworth tellyworth is offline
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I can't answer your questions directly, but I can tell you it's called a bidding fee auction.

Also, the best known of these sites just went bankrupt.

Oh, and the get-rich-quick folks are all over these things, which I take as a good sign they are big holes into which money vanishes, never to be seen again.

Last edited by tellyworth; 03-31-2011 at 05:19 PM..
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  #3  
Old 03-31-2011, 05:44 PM
gazpacho gazpacho is offline
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It is legal because it has not come to the attention of the authorities in a big enough way that someone thinks that they can advance their career by getting rid of this form of online gaming.
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  #4  
Old 03-31-2011, 05:44 PM
Exapno Mapcase Exapno Mapcase is offline
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Long recent thread on penny auction scams.
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  #5  
Old 03-31-2011, 05:58 PM
Stink Fish Pot Stink Fish Pot is offline
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Originally Posted by Exapno Mapcase View Post
Thanks for the link. Not to be critical, but did you read the OP? Stoid was giving her experience on bidding (she didn't understand how it worked... not good on a site like this!) and she was suggesting strategies to win. I'll look through the thread, but I don't want folks to mistake her thread for this, which, at least at the OP level, seems to be asking two different things.
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Old 03-31-2011, 06:06 PM
Exapno Mapcase Exapno Mapcase is offline
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Quote:
Originally Posted by Stink Fish Pot View Post
Thanks for the link. Not to be critical, but did you read the OP? Stoid was giving her experience on bidding (she didn't understand how it worked... not good on a site like this!) and she was suggesting strategies to win. I'll look through the thread, but I don't want folks to mistake her thread for this, which, at least at the OP level, seems to be asking two different things.
Stoid was told repeatedly that there are no strategies, because it's a scam. Did you not read this?

Quote:
Originally Posted by Alka Seltzer
There is no way for an individual to find a winning strategy at a penny auction site, assuming they have set it up in a competant manner. The model of automated bidding and rolling auction times ensures this, assuming they can generate sufficient interest in their site. The user community as a whole could beat them, by religiously avoiding bidding against each other. Good luck with getting that organised, and anyway, at the point the site is giving out bargains it will close down, and you probably won't recieve your item.
How is it legal? It's not. The servers are not in the U.S. but even if they were there are thousands or millions of illegal sites and it often takes years to make a case that someone is illegal. By that time the original site may have gone out of business but 50 others have taken its place. That posts in that thread are good explanations of answers to your questions.
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  #7  
Old 03-31-2011, 06:10 PM
Peremensoe Peremensoe is online now
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Originally Posted by Exapno Mapcase View Post
How is it legal? It's not.
Yet they can advertise on TV?
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  #8  
Old 03-31-2011, 06:23 PM
Exapno Mapcase Exapno Mapcase is offline
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Originally Posted by spark240 View Post
Yet they can advertise on TV?
Until somebody makes an official declaration that a particular site is illegal, who's going to stop them?
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  #9  
Old 03-31-2011, 10:22 PM
Stink Fish Pot Stink Fish Pot is offline
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Originally Posted by Exapno Mapcase View Post
Stoid was told repeatedly that there are no strategies, because it's a scam. Did you not read this?
not initially. Based on her OP, I didn't think the thread was asking the same questions. But it quickly does go in the direction of scam.

I don't know Stoid, but I'm curious as to how many people out there truly think this is a good way to buy something. The link provided by Tellyworth is about swoopo.com, and that link leads to a few interesting articles.

The best quote from my searching is something like this: Joshua was right. "the only winning move is not to play."
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  #10  
Old 03-31-2011, 10:41 PM
drachillix drachillix is offline
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As I understand it, the element that makes them legal is, you still have to pay for it at the end.

Its like a variation on that furniture store that makes you buy a $5000 membership go get access to their great prices..Price Club or something like that.

Or you can pay $35 to join Costco and shop a limited selection of huge packages of things

I would be willing to bet you could make a working business model that is far less scammy just by bringing the bid fees down to $0.10-$0.25. Still pretty much printing money.

I am willing to bet many of these sites suffer from greedy management, see the money pour in, start assuming the money is endless, grab high dollar real estate, decorate office with picassos, jack up salaries, someone gets stupid, someone demands more, lawers engaged, everything unravels.
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  #11  
Old 03-31-2011, 10:54 PM
Little Nemo Little Nemo is offline
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I guess I'm not seeing how they attract bidders. Do people think that they might get lucky and nobody else will bid? Or is it like a lottery and people think it's like a lottery in that the odds are against them but they might make the winning bid? Or do they figure the bidding fee is a meaningless token and only think about the price they'll pay if they win?
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  #12  
Old 03-31-2011, 11:11 PM
gazpacho gazpacho is offline
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Originally Posted by Little Nemo View Post
I guess I'm not seeing how they attract bidders. Do people think that they might get lucky and nobody else will bid? Or is it like a lottery and people think it's like a lottery in that the odds are against them but they might make the winning bid? Or do they figure the bidding fee is a meaningless token and only think about the price they'll pay if they win?
They attract bidders by showing past auctions/lotteries and showing how much the winning bid paid for the item. Who doesn't want an Ipad for $27.75? If you don't analyze how it works you might not notice for a while that you don't seem to be winning any auctions. Eventually people will notice they don't win any bids but the bidding fees are mounting up. So the site needs to advertise like crazy to keep the next set of uninformed people to keep things going.
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Old 03-31-2011, 11:56 PM
Stink Fish Pot Stink Fish Pot is offline
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Here is a link to an interesting article about swoopo.com, which is currently undergoing some sort of financial issues.

He shows how the site works, the futility of bidding... it's really a good read.

it's not like a raffle at all, really. A raffle has a finite amount of tickets to be sold, with a guarantee winner. It's not a lottery, either, since there is no guarantee of a winner in a lottery. It is a revenue generator, pure and simple.

think about the "auction" set-up. a 24 hour time limit. Think the first person has a chance to win? Nope. once the auction is discovered, and the automatic bid software begins to kick in, the only bids that have a chance are those placed within the last second of the 24 hours. And since each extra bid adds time to the auction, the auction can theoretically go on forever. It doesn't of course, but that's something else that can easily be controlled by software.

Winning seems to be pure luck, and not a good investment. I still can't figure out how these sites are legal.
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Old 04-01-2011, 12:40 AM
Little Nemo Little Nemo is offline
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So if I'm understanding it, the only way to have any chance at winning is to use their automatic bidding option. Anyone using the autobid will be forced to make multiple bids by the way it's designed but one of the autobidders will end up winning. The people who don't do this and try to bid earlier are newbies who don't understand how the system works because early bidders never win - it always comes down to a last second autobid.
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  #15  
Old 04-01-2011, 02:33 AM
BigT BigT is offline
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I'm not sure I understand why they wouldn't be legal. You are told all of this up front. There's no deception involved. It's not like a pyramid scheme where the creator is lying to you. I went there, and realized it was pretty unlikely to be worth it.

The reason I got there might be deception, though. I was redirected by someone on craigslist who said they'd already sold their item, but that they got it on quibids.com, and that I should try there. Seeing as the person used a hushmail address that would not accept incoming messages, I'm pretty sure they were a shill. I guess Google knew what they were doing when they called it spam.
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Old 04-01-2011, 02:50 AM
Little Nemo Little Nemo is offline
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Originally Posted by BigT View Post
I'm not sure I understand why they wouldn't be legal. You are told all of this up front. There's no deception involved.
Do they tell people up front that any bids made before the final few seconds won't win? Or that only autobids will win? Or that you have to make multiple bids to use the autobidder?
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Old 04-01-2011, 05:53 AM
Mijin Mijin is offline
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Originally Posted by BigT View Post
I'm not sure I understand why they wouldn't be legal. You are told all of this up front. There's no deception involved.
Few cons involve explicit deception. The guy running the shooting game at the funfair is unlikely to say "Honestly, the coconuts are not glued down".

I think the way the law works is:
  1. Are people putting money into this scheme and getting nothing back?
  2. Are lots of people unhappy with the results?

If so, you're running a casino or lottery without a permit.
Ergo, illegal.
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  #18  
Old 04-01-2011, 06:15 AM
Khaki Campbell Khaki Campbell is offline
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How are those "auction" sites different than a lottery ? Maybe because - as I understand it anyway - not all bidders have an identical chance to win ?
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Old 04-01-2011, 09:08 AM
md2000 md2000 is offline
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Originally Posted by BigT View Post
I'm not sure I understand why they wouldn't be legal. You are told all of this up front. There's no deception involved. It's not like a pyramid scheme where the creator is lying to you. I went there, and realized it was pretty unlikely to be worth it.

The reason I got there might be deception, though. I was redirected by someone on craigslist who said they'd already sold their item, but that they got it on quibids.com, and that I should try there. Seeing as the person used a hushmail address that would not accept incoming messages, I'm pretty sure they were a shill. I guess Google knew what they were doing when they called it spam.
I ran across a site like this once. Essentially it is time-based gambling, like betting on when a cow will wander onto the marked square at the county fair or what time the first runner will cross the finish line. "Bids" is a misnomer - you are staking claim to a time until the next bid comes along. Whoever has the "high bid" when the "auction" ends at some unpredictable time is the winner.

The system is totally random. The site I saw had no logic to the time element - which is how an ipod could go for $3.60; to hit the right time, you still would spend hundreds of dollars on "bid coupons" - assuming the site was in any way honest. With no element of skill, it is essentially a complete game of chance - aka gambling.

How is this different from state lotteries? Because state lotteries and casinos are legal, and supposedly regulated so the rules, odds, winners, etc are all open and above board. You cannot run your own lottery and sell tickets in the USA*; even if it is a legitimate foreign lottery you cannot sell entries in the USA. The US even attempts to block all foreign gambling websites, and has arrested executives of gambling sites if they visit the USA.

*except licensed lotteries, which have to abide by the laws and generally are only allowed to benefit registered charities.
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Old 04-01-2011, 09:19 AM
SenorBeef SenorBeef is offline
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Now I bet these sites could make a ton of money even if they're legit - if they really sell the winner the item for the final price.

But is there anything keeping them from being a complete 100% scam that never has to actually acquire/sell any items? It seems to me that if the auction is about to end, they could just have a computer instantly generate a shill account to make one more bid. If someone outbids you again - great, you just made whatever the price of a bid is and kept the auction going - and if no one does, then the shill bidder wins the item, they don't actually have to acquire that ipod to sell it to someone for $29.53, and the company makes all the money from the bids to that point. You could have 100% of your auctions won by your shill accounts, never actually pay out any items, and rake in the dough.

I can't think of a way to actually ensure such sites aren't a total scam, rather than the sort of real semi-scans they claim to be if they are indeed on the up and up.

Last edited by SenorBeef; 04-01-2011 at 09:22 AM..
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  #21  
Old 04-01-2011, 11:36 AM
md2000 md2000 is offline
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Originally Posted by SenorBeef View Post
Now I bet these sites could make a ton of money even if they're legit - if they really sell the winner the item for the final price.

But is there anything keeping them from being a complete 100% scam that never has to actually acquire/sell any items? It seems to me that if the auction is about to end, they could just have a computer instantly generate a shill account to make one more bid. If someone outbids you again - great, you just made whatever the price of a bid is and kept the auction going - and if no one does, then the shill bidder wins the item, they don't actually have to acquire that ipod to sell it to someone for $29.53, and the company makes all the money from the bids to that point. You could have 100% of your auctions won by your shill accounts, never actually pay out any items, and rake in the dough.

I can't think of a way to actually ensure such sites aren't a total scam, rather than the sort of real semi-scans they claim to be if they are indeed on the up and up.
If you are essentially bidding/betting or whatever you call it on hitting a random time point, it is a game of chance. Legitor not, it is a violation of US gambling laws. The possibility that in fact they never have to pay out - adds to the stupidity factor afflicting their customers.

The ability to run the game out of the scrutiny of the authorities, and thus perhaps enahance the house's odds - just adds to the "chance" element. Even if the items were actually bid for and won by unrelated 3rd parties - legitimate participants - still does not take away from the fact that it is gambling and thus illegal.

Last edited by md2000; 04-01-2011 at 11:38 AM..
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  #22  
Old 04-02-2011, 11:02 AM
Stink Fish Pot Stink Fish Pot is offline
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Originally Posted by SenorBeef View Post
Now I bet these sites could make a ton of money even if they're legit - if they really sell the winner the item for the final price.

But is there anything keeping them from being a complete 100% scam that never has to actually acquire/sell any items? It seems to me that if the auction is about to end, they could just have a computer instantly generate a shill account to make one more bid. If someone outbids you again - great, you just made whatever the price of a bid is and kept the auction going - and if no one does, then the shill bidder wins the item, they don't actually have to acquire that ipod to sell it to someone for $29.53, and the company makes all the money from the bids to that point. You could have 100% of your auctions won by your shill accounts, never actually pay out any items, and rake in the dough.
This was exactly my thought. If I owned one of these sites, what I would do to get around the shill bidding account ever winning would be to have a minimum price the item would have to reach before selling it. Once this amount is met, the shill account bots could shut down, and the automated bid software could run until the item is finally won.

From what I've been reading, IMO these sites also approach the concept of a pyramid scheme. When a site is just starting and not well know, it appears that people actually do win prizes and save a lot of money. Then, as more people hear about the site, more bidders bombard the auctions and your odds of winning are greatly reduced. Once this happens, people deplete their accounts with the autobid software, then move on to another newer site that has less members.

Like a pyramid scheme, only the folks in at the beginning have any real shot of getting their money back. (yes, I know it's not an ACTUAL pyramid scheme).

The autobots are interesting because there is virtually no way you could prove the site you were using was on the up and up. There is actually code out in cyber space to set up a site like this, so people have been coming out of the woodwork lately setting up these sites. That software includes an illegal shill bidding bot (according to someone who downloaded it and looked at the code).
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  #23  
Old 04-02-2011, 01:11 PM
Little Nemo Little Nemo is offline
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The smart thing to do would be to play it straight. Do exactly as you promised and sell the merchandise to a real bidder. You've got a system that's making you a fortune legally - why risk it all by breaking the law for a small extra amount of money?

But in reality, people do dumb things like that all the time. They're not satisfied with taking home a legal million dollars a year - they have to steal a thousand dollars on top of that. And they often get caught stealing the thousand and end up losing the million as well.
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Old 04-02-2011, 02:10 PM
Alka Seltzer Alka Seltzer is offline
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Originally Posted by SenorBeef View Post
But is there anything keeping them from being a complete 100% scam that never has to actually acquire/sell any items? It seems to me that if the auction is about to end, they could just have a computer instantly generate a shill account to make one more bid. If someone outbids you again - great, you just made whatever the price of a bid is and kept the auction going - and if no one does, then the shill bidder wins the item, they don't actually have to acquire that ipod to sell it to someone for $29.53, and the company makes all the money from the bids to that point. You could have 100% of your auctions won by your shill accounts, never actually pay out any items, and rake in the dough.
Without independantly auditing every auction, it's impossible to know if this sort of thing goes on. However, with the model the penny auction sites use, there is absolutely no need for them to play games like this, and it would be likely to backfire if they overdid it. The publicity generated from the small amount of people who do get a bargain is helps keep these sites going. I wouldn't be suprised if it happens somewhere though.

Also bear in mind, the sites can tailor the number of auctions to the number of users they have at any one time, to ensure they do not make a loss on the actual auctions. They don't even have to order any items until the auction ends, so have zero stock costs. All they need to be viable is enough users to cover their infrastructure and advertising costs.

Probably nothing will be done about them until a large site goes bust. It's very clear to anyone who understand how these things work that they are not simply gambling, but a particularly unethical form of gambling. The ratio of payouts to stakes is very low when compared to more traditional forms of gambling.

I've been meaning to email my MP about these sites, I've seen a couple advertised on the TV over here in the UK, but haven't got around to it yet.
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Old 04-02-2011, 02:35 PM
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Is this "gambling"? Is a produce stand offering "half off on lettuce while supply lasts" offering a gamble? How about fire insurance, etc.? If to buy or sell insurance is not to gamble ("To bet on an uncertain outcome"), I'd be curious what dictionary you're using. ("bet" = "An agreement usually between two parties that the one who has made an incorrect prediction about an uncertain outcome will forfeit something.")

At one time in California, card clubs could offer lowball poker but not draw poker, because lowball was judged to be a game of skill, while draw poker was judged gambling!!

Anecdote:
SPOILER:
I once had the chance to serve as an expert witness as to whether a certain game had "skill" and therefore should be legal in California clubs. It would have been a fun bullet for my resume, but I had to turn it down because I'm so candid and outspoken. My client would not have been happy with what I'd say under any clever cross-examination.


Quote:
Originally Posted by tellyworth View Post
Also, the best known of these sites just went bankrupt.
I wouldn't take this as proof that the founders of that site lost money. We know they were scamming their users; why not scam their investors as well?
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Old 04-02-2011, 10:11 PM
Meeko Meeko is offline
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I don't understand why there is a question of legality to begin with. Random observations that hopefully can be taken piecemeal to get at my point :

You can buy Cecil brand Peanuts for 3.99 at Store A.

You can buy Cecil brand Peanuts for 3.90 at Store B.

And yet stores chose to be price leaders and customers chose to boycott them. [Wal-Mart]

Nothing illegal there.

People willingly pay the extra nine cents. For what?

You can donate money to a church, and have no tangible associated with it.

Supply and Demand is based on perceived value of a good.

Depending on situation or need, you might pay twice (or more) the price for a good than you normally would [Beer at a Sporting event]

On top of that, the bidding implies consent. If there is consent then people accept what is happening.

Again, I don't really understand what the legal question is.

Full disclosure : I put money into Swoopo to understand how it worked first hand. After a bid or two, I figured out the scam of it. [Too bad I had 18 bucks or so left to go. Hey, I could get "lucky" right?]

But I think that most people don't know that they are being taken.

I'm not sure you can make laws to protect the stupid. And if you could, I think you would be better off protecting us from the stupid*.

* Cue people calling me stupid for putting $20 into swoopo.



Its "legal" because price and human intelligence is fickle. Projected over a given population there would be a vast variance. Knowing how to tap that variance yields a market. [That I thought would last longer than it has. What, not even 3 years?]
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Old 04-03-2011, 12:14 AM
Little Nemo Little Nemo is offline
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If I go to a store and they put a price sticker on a bag of peanuts, the offer is pretty clear - I give them that amount of money and they give me that amount of peanuts. It might not be the best deal being offered but the terms of it are clear.

If a church asks me for money, they aren't going to promise me anything tangible in exchange. Again, I may not think it's a good offer but there's no confusion involved.

If I am gambling, I'm being offered an opportunity to buy a chance at winning a prize. I may not win the prize, but the offer says the prize exists and I have a chance of winning it.

When you submit a bid to an auction site, you presumably think you are receiving a chance at winning the prize in return. As has been documented here, this is often not true.
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  #28  
Old 04-03-2011, 05:12 AM
Alka Seltzer Alka Seltzer is offline
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Again, I don't really understand what the legal question is.
I'm no lawyer, but I think the legal angle is that the penny auction sites are a form of gambling, but are not advertised or regulated as such. There are rules that prevent casinos from completely ripping off their customers. No such protection is in place on the penny auction sites, they can manipulate the odds by adjusting the number of auctions they run, and so control the number of people bidding against each other. These odds are never made public.
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  #29  
Old 04-03-2011, 06:53 AM
Mosier Mosier is online now
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To answer the question about the mindset of people who bid on these auctions, take the example of my grandfather, who is otherwise an actual measurable honest-to-goodness genius. He disregards the cost of the bids. 40 cents a bid a hundred times just to lose an item feels insignificant, because he never even gave them one dollar. The auction style preys on people psychologically much more than it preys on their intellect.
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Old 04-03-2011, 07:03 AM
Alka Seltzer Alka Seltzer is offline
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Yes, and it also exploits the sunk cost fallacy. Once people have made a number of bids for an item, they are likely to keep bidding on it, to ensure their earlier bids were not a waste of time (not realising that as soon as any bid is superceded, it is lost).

Lots of people are going to get caught out by these sites. I was forewarned, I don't think I'd have realised quite how extortionate they are by myself, as I wouldn't have done the maths.

Last edited by Alka Seltzer; 04-03-2011 at 07:07 AM..
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  #31  
Old 04-04-2011, 02:34 AM
Stink Fish Pot Stink Fish Pot is offline
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Originally Posted by Alka Seltzer View Post
Yes, and it also exploits the sunk cost fallacy. Once people have made a number of bids for an item, they are likely to keep bidding on it, to ensure their earlier bids were not a waste of time (not realising that as soon as any bid is superceded, it is lost).

Lots of people are going to get caught out by these sites. I was forewarned, I don't think I'd have realised quite how extortionate they are by myself, as I wouldn't have done the maths.
Indeed it does. the bidder (not bettor, if you've noticed), sees that all of his bids were losers, looks at his resources he has left, and makes a decision pretty quickly: "Do I stop bidding on this item, eating my losses completely (the sunk cost scenario), or continue, thereby not "losing" the money I've already put in (which they have). Stopping the bidding guarantees they lose the item. Staying in until it's either won or you've run out of money. Either way, you've lost a bunch of money, but the second scenario allows you to feel like you really had a chance until the end.

"You can't fix stupid"*. And if there weren't so many stupid people out there, these sites wouldn't keep popping up out of the woodwork.


*Ron White, who should know with that gang he hands out with.
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  #32  
Old 04-04-2011, 10:00 AM
Trom Trom is offline
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Originally Posted by Stink Fish Pot View Post
Indeed it does. the bidder (not bettor, if you've noticed), sees that all of his bids were losers, looks at his resources he has left, and makes a decision pretty quickly: "Do I stop bidding on this item, eating my losses completely (the sunk cost scenario), or continue, thereby not "losing" the money I've already put in (which they have). Stopping the bidding guarantees they lose the item. Staying in until it's either won or you've run out of money. Either way, you've lost a bunch of money, but the second scenario allows you to feel like you really had a chance until the end.

"You can't fix stupid"*. And if there weren't so many stupid people out there, these sites wouldn't keep popping up out of the woodwork.


*Ron White, who should know with that gang he hands out with.
But since when is exploiting cognitive biases illegal?
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  #33  
Old 04-04-2011, 12:27 PM
Alka Seltzer Alka Seltzer is offline
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Originally Posted by Trom View Post
But since when is exploiting cognitive biases illegal?
It doesn't, it mearly makes them unethical. It the fact that it's a form of disguised and unregulated gambling that means it's likely to be ruled illegal (in my opinion) if it ever gets taken to court.

You do realise that gambling is heavily regulated? For example, a casino must hold a large cash reserve, to ensure it can honour any bets, even if you casino has a really unlucky night. That's a level of protection users of penny auction sites don't have.
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  #34  
Old 04-04-2011, 03:17 PM
md2000 md2000 is offline
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If this is like the site I looked into - you keep bidding until, at a random time, the auction ends and the winner is the last bidder. The key element here is "ends at a random time". Real auctions end when people give up bidding. Random time means "game of chance", no predictability. Also, in this scenario, a bid is actually spent, each bid costs you money (or there is a fee to place each bid); unlike a real auction, where you only pay your bid amount, and only if you win.

It's gambling, pure and simple, guess a random point in time - with a funny name "auction" stuck on it.

Gambling outside the licensed rules is illegal in the USA, and foreign locations allowing US-based participants are breaking the law too; the actors in the process will be prosecuted if the USA can get their hands on them.

Gambling, pyramid schemes, loan-sharking, etc. ... just because some activities involve the willing or unwitting participation of stupid people does not make them OK. Many governments pass laws to protect stupid people from themselves, with varying success.

Last edited by md2000; 04-04-2011 at 03:19 PM..
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  #35  
Old 04-04-2011, 03:25 PM
Trom Trom is offline
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Quote:
Originally Posted by md2000 View Post
If this is like the site I looked into - you keep bidding until, at a random time, the auction ends and the winner is the last bidder. The key element here is "ends at a random time". Real auctions end when people give up bidding. Random time means "game of chance", no predictability. Also, in this scenario, a bid is actually spent, each bid costs you money (or there is a fee to place each bid); unlike a real auction, where you only pay your bid amount, and only if you win.

It's gambling, pure and simple, guess a random point in time - with a funny name "auction" stuck on it.

Gambling outside the licensed rules is illegal in the USA, and foreign locations allowing US-based participants are breaking the law too; the actors in the process will be prosecuted if the USA can get their hands on them.

Gambling, pyramid schemes, loan-sharking, etc. ... just because some activities involve the willing or unwitting participation of stupid people does not make them OK. Many governments pass laws to protect stupid people from themselves, with varying success.
I was under the impression that these auctions don't end randomly. They end when the clock runs out after the last bid. The uncertainty is in the fact that you don't know when everyone else will give up.
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  #36  
Old 04-04-2011, 03:45 PM
md2000 md2000 is offline
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Originally Posted by Trom View Post
I was under the impression that these auctions don't end randomly. They end when the clock runs out after the last bid. The uncertainty is in the fact that you don't know when everyone else will give up.
Oh, so it's a real auction? Considering how many complaints there were against a relatively open site like eBay, why anyone would participate in a pig-in-a-poke auction is beyond me. It would still be fraud unless there was no collusion between the auction site or multiple bidders. If you have t pay for each bid too, that's a pyramid scheme.
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  #37  
Old 04-07-2011, 01:28 AM
Stoid Stoid is offline
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Quote:
Originally Posted by BigT View Post
I'm not sure I understand why they wouldn't be legal. You are told all of this up front. There's no deception involved. It's not like a pyramid scheme where the creator is lying to you. I went there, and realized it was pretty unlikely to be worth it.


Quote:
Originally Posted by SenorBeef View Post
Now I bet these sites could make a ton of money even if they're legit - if they really sell the winner the item for the final price.
That's the reason I don't think there's that much genuinely UNgenuine selling going on: the setup makes the owners boatloads of money without having to lie or cheat or fail to send the item. If you do the math, they end up making some ridiculous amount like 20X retail.

Bidder 1 bids 70 times - Paid 50 Cents per bid, = $35 spent to try and win, $35 that goes in the pocket of the owners.

Bidder 2 bids 40 times, $20 to the owners

Multiply that and you can see how they make their money, making it no sweat to fulfill the winning bid.

It cuts somewhat into profit when people then apply their bids to something, but since everything sold is sold at top dollar, they make a profit no matter what - nothing needs to be dishonest or illegal.

It's an expensive bet, and most people don't win it, which is why it smells skanky, but if the system includes ways to actually get something no matter what, even if it's at top dollar, then its legal. What they probably count on, and is probably true, is that very few people pursue using their credits or bids or what have you to pay full price for anything, so all those wasted bids that were paid for are pure profit.
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  #38  
Old 04-07-2011, 01:33 AM
Stoid Stoid is offline
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Quote:
Originally Posted by md2000 View Post
If this is like the site I looked into - you keep bidding until, at a random time, the auction ends and the winner is the last bidder. The key element here is "ends at a random time". Real auctions end when people give up bidding. Random time means "game of chance", no predictability. Also, in this scenario, a bid is actually spent, each bid costs you money (or there is a fee to place each bid); unlike a real auction, where you only pay your bid amount, and only if you win.

I've never seen one that ends at a random time, although I'm not questioning that you did. All the ones I've seen end have a particular "semi" end point, which is actually the beginning, for all intents and purposes: it's the point at which people start to bid in earnest. The bidding ends when no one makes a bid for 30 seconds. So you are bidding in hopes that no one will bid after you, because every new bid resets the clock back to 30 seconds. Eventually the auction ends because people don't want to waste any more bids, and the person who was last to bid at that point wins.

Which, by the way, was the thing I was looking at in terms of strategy: see how different items at different times of day end up. Don't bid at all until it's getting close to what looks like the average point at which people win. Bid just a few times. Not much of a "strategy", but better than bidding like crazy from the very start, since each bid costs money and it's guaranteed people will bid behind you while it's still low.

Last edited by Stoid; 04-07-2011 at 01:35 AM..
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  #39  
Old 04-07-2011, 07:00 AM
Alka Seltzer Alka Seltzer is offline
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Originally Posted by Stoid View Post
Which, by the way, was the thing I was looking at in terms of strategy: see how different items at different times of day end up. Don't bid at all until it's getting close to what looks like the average point at which people win. Bid just a few times. Not much of a "strategy", but better than bidding like crazy from the very start, since each bid costs money and it's guaranteed people will bid behind you while it's still low.
While that's a better strategy than bidding early in one of these auctions (which is simply throwing money away), it's still not a winning strategy. Problem is, everyone else is trying to do the same thing. You can try to bid just before an auction expires, but with most sites you are competing with automated bidding tools running on the server. This has been looked into in a lot of detail.

The people who run these sites hold all the cards, the best strategy is not to play.
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  #40  
Old 04-07-2011, 08:39 AM
md2000 md2000 is offline
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Originally Posted by Stoid View Post
I've never seen one that ends at a random time, although I'm not questioning that you did. All the ones I've seen end have a particular "semi" end point, which is actually the beginning, for all intents and purposes: it's the point at which people start to bid in earnest. The bidding ends when no one makes a bid for 30 seconds. So you are bidding in hopes that no one will bid after you, because every new bid resets the clock back to 30 seconds. Eventually the auction ends because people don't want to waste any more bids, and the person who was last to bid at that point wins.

Which, by the way, was the thing I was looking at in terms of strategy: see how different items at different times of day end up. Don't bid at all until it's getting close to what looks like the average point at which people win. Bid just a few times. Not much of a "strategy", but better than bidding like crazy from the very start, since each bid costs money and it's guaranteed people will bid behind you while it's still low.
The site I saw, every bid cost you some money. With the process you describe, why would anyone bid on anything while it was well below the going price, pay to be inevitably outbid? The bids that push it up close to the final bid have to be either insider bots, or really really stupid people if bidding is not free. If they take your money for a bid and then use inside knowledge and special program access to outbid you, then that's fraud, which is more of a crime than gambling.

Either way, the complete lack of transparency would suggest it's not legit.
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  #41  
Old 04-07-2011, 04:45 PM
Stoid Stoid is offline
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Quote:
Originally Posted by md2000 View Post
The site I saw, every bid cost you some money. With the process you describe, why would anyone bid on anything while it was well below the going price, pay to be inevitably outbid? The bids that push it up close to the final bid have to be either insider bots, or really really stupid people if bidding is not free. If they take your money for a bid and then use inside knowledge and special program access to outbid you, then that's fraud, which is more of a crime than gambling.

Either way, the complete lack of transparency would suggest it's not legit.

My point is: the structure itself makes it unnecessary for there to be any kind of bots, insider bidding, or cheating. It's actually kind of genius in that sense: it's just exploiting people's natural desires to win something for nearly nothing, to score a deal, to ignore the fine print, etc. It doesn't require illegality or cheating in order to make a mint. But just because they aren't actually cheating doesn't mean that what they are doing is good, or wise for the bidders. There's a lot of things that are perfectly legal and legitimate that nevertheless depend on exploiting peoples' weaknesses to varying degrees. This happens to be a particularly egregious example of profiting from a variety of human weaknesses.
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  #42  
Old 08-14-2011, 11:53 AM
stanger stanger is offline
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I, personally, don't think that QuiBids is illegal, but I realize that some part of their operating parameters may technically be so in some states.

I don't think it is a scam, either, or truly misleading. It's just that if you don't read the information they glady provide on their website, and don't iunderstand how it can work for you AND against you, you might feel taken advantage of.

Sure, I see that they often quote the example of a guy who won a new LCD HDTV for a few bucks, and some people may think thay anyone can do that at almost any time on the auctions, but that is bad thinking on their part. Nothing in the advertising says you WILL be able to get that kind of deal, but SOMEONE did, and you MAY also.

Okay, where they make all their money is that you have to BUY bids at $0.60 each. Unlike eBay, you don't get to bid for free.
HOWEVER, you can also bid on bids. All day long there are auctions where you can bid on a block of 25, 50, 100, 250 bids, and if you play the auction right, you can easily get the win for less cost than the bids you have won.
This explains how some of the bidders will bid huge amounts of bids on an item that is worth less than the apparent cost of their bids.

How much the auction ends at is relatively unimportant. The true cost to the bidder is how many bids they place, and whether they win.

If you lose, then all the money you spent on the bids is gone.
Sorta.
There is a Buy It Now option that allows you to "recoop" you wasted bids.
If the item is listed as retailing for $100, and you use $50 worth of bids to try and get it, and fail, for up to 2-hours after the auction end, you can pay the difference - $50 - and get the item at full listed retail price.
So, you have a chance to get your money back - you just won't be getting that "great deal" like you had originally hoped for.
Oh, and you could probably find the same item cheaper at a dozen other places than Quibids listed retail price, but they do give you an option to get your bid money back - in a way.

You aren't going to just go into QuiBids and start getting tremendous deals very easily. You have to watch and play smart.

I saw an auction for a $25 Outback Gift Card that was bid up to about $5.50. That was 550 one-cent bids that cost (basically) $0.60 each, so there was $330 made on that $25 gift card. I watched the auction and saw the same names bidding over and over again. This was a typical bidding frenzy like I used to see on eBay years ago. I am sure that all those bidders spent more in bids than the card was worth.

But there was a catch, or should I say, incentive. The auction also included 20 bids as part of the deal. Twenty extra bids, worth $0.60 each. The bidders were going crazy on the auction partly because they figured, if they won, that 20 of their bids would be covered by the auction.

Maybe. But with several people placing 550 bids, I think it likely that many people bid more for the card than it was ultimately worth.

BUT, there was an identical auction going on at the same time where the bidding got up to about $0.37, so the bidders in that auction only placed maybe 4-5 bids each, so the winner got a good deal.
You have to pick your auctions carefully and walk away from the ones with bidding frenzy.

Some people complain about the fact that the auctions, initially, have a set ending time, but if bids continue to come in, then the end time is reset with each new bid by 20, 15, or 10 seconds, depending on the auction and action. No last second sniping here.
This is something that a lot of people wanted installed on eBay auctions, just to cut down on the effectiveness of sniping and allowing more bidding on items.
If you understand how the QuiBids end timing works, it is still best to only bid at the last second - it just doesn't promise a winning bid.

I don't see these situations as illegal, but the carrot-dangling is well done by the auction site.

It is fairly easy to win Gift Cards at a great price, and there are some other good deals to be had on lower priced items, but if you want that big LCD TV, you will have to work at it.

I watched an auction the other night for a 32" LCD HDTV because a buddy of mine was looking for one and wondered about using Quibids after seeing a commercial on TV.
The auction ended at $6.54.
Of course, that is 654 bids at $0.60 each for a total of $3924.00, all for a TV listed as being worth $799.99.

I am sure some people in the auction started bidding early and burned through their bids quickly. Certainly, the profit on the auction was fantastic. Illegally or immorally high profit - maybe?

But if someone did research on past items, which Quibids lets you do, and you see what that exact same item sold for before - you could enter the auction at a point just under where they usually sell at, do you bidding carefully, cover about a 100 bid spread with your $60 worth of bids, and you stand a good chance of winning that auction. If it ends up closing earlier, or the bidding seems to be going crazy, there will be another auction on the same item in a few hours.

I think the basic idea behind QuiBids is genius. It may be set up to take advantage of people who don't research a bit, and who are prone to get in a bidding war over a particular auction, but I don't see a real problem with QuiBids for it. Anybody who thinks they can just join up and immediately win an auction for a high dollar item for only pennys, will be taken advantage of by all sorts of things in their lives.
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  #43  
Old 08-14-2011, 01:43 PM
Alka Seltzer Alka Seltzer is offline
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Originally Posted by stanger View Post
I don't think it is a scam, either, or truly misleading.
Then you either haven't read or haven't understood the earlier posts in this thread. There is no winning strategy for the bidders, only less bad ones. Here is another thread about them.
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  #44  
Old 08-14-2011, 02:22 PM
stanger stanger is offline
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Originally Posted by Alka Seltzer View Post
Then you either haven't read or haven't understood the earlier posts in this thread. There is no winning strategy for the bidders, only less bad ones. Here is another thread about them.
Oh, I read them.

It is an auction, in one sense of the word, so there are no guaranty to win, but there are strategies that can help you win and increase your chances, just like with other auction sites.

I don't see that they hide any important information about how their auctions work, and I could see the bad points about it, so I don't think it is much of a scam.

The profit they make from the auctions, and the various incentives they have set up to get people to bid and buy bids is insanely clever, but I don't know if there is anything illegal about them.
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  #45  
Old 08-14-2011, 03:11 PM
Alka Seltzer Alka Seltzer is offline
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Originally Posted by stanger View Post
It is an auction, in one sense of the word, so there are no guaranty to win, but there are strategies that can help you win and increase your chances, just like with other auction sites.
Sorry, you do not understand, there are no winning strategies, as each bid increases the auction time. The site you mention provides an automated bidding process, which places bids at the server side. It's this combination that kills any strategy. Also, the auction site can manipulate the number of auctions, to ensure there is enough competition on each auction (on average) to ensure obscene profits. The penny auction sites are exploiting people's ignorance to sell items at multiple of their retail price (total paid by all bidders, not the auction winner). They don't even have to hold any stock, they can simply order the items on demand once the auctions expire.

Here is an article which explains how unethical the business model is, and here is a technical account of an attempt to game an auction site.
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  #46  
Old 08-14-2011, 03:50 PM
Bosstrain Bosstrain is offline
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Originally Posted by gazpacho View Post
It is legal because it has not come to the attention of the authorities in a big enough way that someone thinks that they can advance their career by getting rid of this form of online gaming.
This is probably the best answer. I know a little bit about banks and banking laws, I've dealt with a lot of bankers believe me. Banks look out for money laundering like the plague, and online gambling where it's illegal, but only because they could recieve heavy fines and even get severe criminal charges, they're not looking out for you and me, that's for sure.

Freddie and Fannie only get revised if there's a need, one of the latest things has been a 'clear and conspicuous' disclosure clause that tells mortgage and finance companies they must read the fine print slowly in commercials to give the people a better chance of shopping around for low rates and stuff. Banks are under so many thumbs they can't even see straight, it'll most likely be several years before laws against online bidding start being written in, mostly cause they're still trying to get everyone squared away with the new sets of laws that fly in all the time.

To me, bank employees are some of the most lazy scum of the earth, they sit around passing memos back and forth (watch Office Space, this is a very mild version of what is happening, it's much worse in real life) and then basically the next day after everyone's been told what not to do, they all do that very thing, like everyone forgot (that's not always the case but it's happened, I'm just being over dramatic here). So it will be a long time IMO before anything is done about online bidding, there are so many loop holes they've jumped through merely by having an actual product to give people, there's no way anyone will veiw it as gambling, and the lawyers (a bankers best friend) will make sure of it, trust me.
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Old 08-14-2011, 05:10 PM
Toucanna Toucanna is offline
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[/digression]
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Originally Posted by drachillix View Post
{snip}Or you can pay $35 to join Costco and shop a limited selection of huge packages of things...{snip}
I must protest! First, it's $50 for a basic Costco's membership. Second, it works if you crunch the numbers before joining. Costco's works for our household, Sam's doesn't--even though my husband has a business membership with them. Third, Sam's and Costco's inventories are not limited to their physical stores. They have additional products available through their online catalog. As always, YMMV. (I'm not a shill, I swear! )[/digression]
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  #48  
Old 08-14-2011, 06:07 PM
Speak to me Maddie! Speak to me Maddie! is offline
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Originally Posted by stanger View Post
It is an auction. . .
It is not an auction. In an auction only the person who wins pays any money, and the person who pays money always gets the item in return. These sites offer a form of lottery -- an unregulated lottery with near impossible odds. At least when people throw away money on a powerball ticket there is the chance (infinitesimally small) that the payout is large enough to excuse one's foolishness for gambling in such a high-risk game. With these sites people are throwing away mounds of money for cheap plastic electronics with short lives of operation.
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  #49  
Old 08-15-2011, 01:32 AM
stanger stanger is offline
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Alka Seltzer and Speak to me Maddie!, I do not disagree with your basic distaste for the QuiBid system, but .....


Sorry, you do not understand, there are no winning strategies, as each bid increases the auction time.

True. But at a regular auction, doesn't it continue as long as bids are coming in?

There are no true "winning strategies", as you say. Even at a real auction, you have no idea how high people will bid against you. I'm just saying that there are ways of bidding that can cut down on how many bids you may have to make to win.


Originally Posted by stanger
It is an auction. . .

It is not an auction. In an auction only the person who wins pays any money, and the person who pays money always gets the item in return.

What I said was "It is an auction, in one sense of the word, so there are no guaranty to win", and I think it more closely resembles an auction than a lottery. At least in an auction, a third party doesn't announce the winner from a pool of everyone who placed a bid.

And though I have never attended a formal auction myself, I have heard that there are auctions where the bidders must pay a fee in order to participate in the auction, which is not totally unlike the QuiBid bidders who must pay for their bids in advance. The bidder at an auction that pays an entry fee pays money even though they may never place or win a bid.
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Old 08-15-2011, 04:11 AM
Alka Seltzer Alka Seltzer is offline
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Originally Posted by stanger View Post
True. But at a regular auction, doesn't it continue as long as bids are coming in?

There are no true "winning strategies", as you say. Even at a real auction, you have no idea how high people will bid against you. I'm just saying that there are ways of bidding that can cut down on how many bids you may have to make to win.
The difference is that in an auction, losing bidders are not expected to pay. In the example in the first article I linked to, a winner won an iPod Touch for $187, about $45 dollars below retail. The site sold that item for $1,125 when you consider all bids.
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