"Reverse Auction" sites--what's the deal?

I’ve lately been seeing a fair number of ads for so-called ‘reverse auction’ sites; one is beezid.com. There’s another, but the name is eluding me right now.

As near as I can tell, the concept is that you pay to bid, and that each bid reduces the price of the item. At some point, somebody can elect to buy the item.

This whole concept baffles the heck out of me. I don’t quite see how it benefits me to pay to bid, particularly since there is no guarantee that you’re actually going to get anything–you could, and I would imagine in most cases are, just throwing money down a hole. (At the bottom of that hole live the proprietors of these reverse auction sites. I do think I see how this makes money for them.) And, since the ultimate cost of the item is bid+price, why not ‘snipe’ it–come in at the end of the auction and make a single bid, snapping it up with minimum bidding cost? In fact, I can’t see why anyone would ever do anything else, unless the starting price is at or above retail.

I’m not particularly interested in the sites for my own purposes–something about them rubs me the wrong way. But I’d still like to understand 'em. Help me understand, folks!

There’s several variants of the idea. For the variant I’ve seen, also called a “Dutch Auction”, I think the key point you’re missing is that the SELLER bids, not the buyer. The first buyer takes it.

So the seller says “OK, I’ll sell this for $600 … $580 … $560 … $540 …”, at which point a buyer might say “OK”, and they get it for $540. It becomes a game of chicken between the buyers to see how low they’re willing to let the price drop before somebody is claims it. If you hold off too long, you lose out.

Sometimes done in slow motion as a store promotion - they place an item in the shop window, with an announcement that they are going to drop the price $10/day until somebody buys it. “Gryphon Stringed Instruments”, a well known higher end music store in the Bay Area used to do this regularly with one particular guitar at a time. It’s a good gimmick to get people into your store.

The Dutch Auction system is commonly used in high volume produce markets eg fish, flowers etc because it is more time efficient than standard outcry auctions.

They have been around in Australia for years. Usually you pay to bid and the lowest unique bid wins. The vendor knows how much they are getting because they know how many bids will be sold. Here is a typical site with an explanation.

Did a little looking around on beezid’s site; turns out I sort of had that one backwards. Apparently the auctions there start at $0.01, and get bidded up from there. Last bidder wins the auction. Easy enough to understand, but still seems rather unappealing–if you lose the auction, you lose whatever you spent bidding. But, I’m not a gambler; if you are, it might be more your speed.

The other one that I couldn’t remember earlier turned out to be DubLi.com. They’ve got two kinds of auctions going on–in one, the price is concealed until you ‘place a credit’ on the auction, which drops the price by $0.25 and reveals the price, as well as offering the opportunity to buy the item at that price for some period of time that’s not entirely clear. In the other, the lowest unique bid takes the item.

Anyway, I suppose that answers my own question; I understand how they work now, though they still seem like an awfully unappealing and convoluted way to buy stuff. :slight_smile:
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don’t ask**: Sure enough, DubLi seems to be associated with Australia somehow; one of the categories is “Australia & NZ.”

But on all these auction sites you have to pay to bid right?

Yep. A third site, Swoopo, describes itself as “entertainment shopping.”

I’m apparently not the first to notice that these “auctions” have an element of gambling to them; the Controversy section of Swoopo’s wikipedia page cites criticism from MSN Money, the NY Times, and The Register, and a professor who argued that they should be regulated as gaming sites.

Missed the edit window, but had to include this quote from Jeff Atwood’s discussion of Swoopo on his blog, Coding Horror:

(emphasis original)

Sort of like the TV Show “Eat Bugs For Money”. You have some disgusting creature and a high starting cash prize for eating it. Then competitors keep underbidding the starting price until you reach a point where no one would accept less money to eat the thing. The ‘winner’ eats the bug and then claims the remaining prize money.

Really. I am not making this up.

I believe most of these will automatically extend the end of the auction by some fixed amount of time for every bid, so that approach would not work.

Huh. So, it’s basically a raffle. I guess if they called it that, there’d be more regulations they’d have to conform to. :rolleyes:

Where did you view this program exactly?

Eating insects was a common occurrence on Fear Factor but I’ve never seen or heard about the show you’ve described.

Sorry for kidding around…perhaps I was too subtle…its a reference to a humorous creation of Dave Barry.

I did sign it “Really. I am not making this up” which is sort of Dave’s tag-line.

I debated changing my handle to “UncleDave” but got lazy.

Actually I have to admit I would probably watch that show.:smiley:

I Did swoopo, once. For $20 bucks.

The idea is one of those, “Why didn’t I think of that?!” moments.

You have to buy tickets to bid with.

You use a ticket to increase the price to the next increment.

Then, you still have to pay the price, if you happen to “”“Win”"".

Simple matter of math at that point, to charge more per ticket up front, than the ticket increments later in the auction.