Don’t Play Defensively

Swoopo Strategy

By: Stephen R. Smith (AnCapMan)

No doubt you have read manuals and other types of studies on penny auctions. I did too! I paid for all of them when I first stumbled on Swoopo, a site I no longer play on. These manuals and advice sites always say the same thing; bid at the last second. This makes rational sense to us as it would seem to be the way to utilize the least number of bids possible. Unfortunately, in the penny auction game,  rational strategy like this will lead to losing.

In order to understand why this fails miserably, it needs to be shown how you win. In order to win the auction you must be the high bidder as the auction closes. Read that sentence again; In order to win the auction you must be the high bidder as the auction closes. If one is bidding only at the last second, they will not be the high bidder when the auction closes. The last second bidder is playing Defense. You cannot win this game by defense. Even worse, this strategy traps you into a place where you are defending your bids, hoping others will bid instead of you, thus saving you a bid. If it isn’t obvious, you can’t win without bidding. This cycle of a few people trying to save their bids by bidding at the last second actually helps the person who is not playing this way win. The scientific term for this is called Volunteers Dilemma.

Volunteers Dilemma occurs whenever 2 or more individuals have a choice of taking an action or not taking an action. This action can cost, money, time, energy or a combination of all 3. In the game of volunteers dilemma the winning move is to not take the action and save money, time, or energy at the expense of the one who volunteers. Sometimes however NOBODY will take action, and the entire group loses. Let me paint a picture of volunteers dilemma using the classic example used by economists:

Say the power goes out in a neighborhood, and let us assume the power company has no way of knowing unless an affected customer calls them. In order to get the power restored one of the neighbors must call. However calling takes time and energy. Some people will assume that someone else has called, Some will be lazy, and the group hopes at least one person will call, so they won’t have to.

What do you think usually happens in this scenario? Well there are a few possible outcomes but the most common are: a majority of neighbors call, and NO ONE CALLS because they assumed someone else already did.

Now instead of calling in the above scenario, insert bidding. Can you see why the last second method is a surefire way to lose? Each time the counter approaches 00:00:00 these bidders play the volunteers dilemma. And unless they get extremely lucky they will NEVER win. Sometimes they will be the only bidder, sometimes there will be a number who bid at the last second, and then sometimes NO ONE BIDS, and the Auction ENDS.

So if all those manuals with all those databases are wrong, how do the consistent winners win? For that you will need to tune in next week, for the first of many ways to win; “Domination.”

(Wasn’t that a great post? Please thank Stephen! 🙂 )

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5 comments… add one
  • monika barnes September 24, 2009, 6:12 am

    this is a wonderful article !!!!

    Reply
  • Eileen September 24, 2009, 9:41 am

    Fantastic article!

    ohh, that's happened to me sooo many times…I finally get it!

    Reply
  • Perno January 9, 2010, 1:05 pm

    What if I am one of those last-second bidders, and I commit myself to always bidding when the clock strikes :01, unless I'm the leading bidder? That way I'm not waiting on anyone else to bid and I'm not assuming anyone will "call the power company" (bid) because I will "always call the power company" (bid) when the "power goes out" (clock hits :01). I have yet to bid on any of these sites, but I've been studying them for a couple days to figure out when/where to make my move.

    Reply
  • auctionwatcher January 11, 2010, 9:37 am

    Yes, you can bid at 01, but it really does depend on the site you’re bidding on and lag times. Sometimes if you bid at 01 it will get through, other times it wont. Once you’ve spent a certain amount of money it’s not the wisest decision to wait until 1 second to place a bid because you could just lose the item! Please feel free to join our forum to learn more http://www.pennyauctionforum.com

    Reply

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