(Or at least attempt to!) Will you win popular electronics and other desirable items for pennies? And will you always win items at 90% off? You really don’t have to read the rest, the short answer is no.
Have you ever come across an ad for a penny auction site, or a news report for that matter, that tells you that you CAN win items for pennies?
Well this is only half true, and people really need to be educated on penny auctions before they risk their money bidding on them! We’re not talking about bidding on the sites that are not scams- the ones that put up items and then interrupt the bidding process by shill bidding, those are the real scams, the other penny auction sites that are not employing autobidders, and are shipping items to users, now those are legit. We will not knowingly place ads here or even “promote” a penny auction site where we think/know they are scamming users.
No one should call the legit penny auctions scams, as not all are scams in the real sense of the word.
noun, verb,scammed, scam·ming. –noun
1. a confidence game or other fraudulent scheme, esp. for making a quick profit; swindle.
–verb (used with object)
2. to cheat or defraud with a scam.
You will see rip off reports and tons f complaints for penny auction sites that you have won items from, and users will even insist that you are a bot.
Yes, you are almost likely to lose money if you try penny auctions, there’s no doubt about that, but when you signed up and hopefully read the rules, after all you did agree to them, you should have known what you were getting into first before you bought bids and even before you make your unfounded chargebacks just because you did not win.
I agree, I too do not like companies/people who are intent on preying on people, or on chumps, as the popular media news outlets have named penny auction bidders.
I do not like it when penny auction sites claim a user won an item for a few pennies or a few dollars when in actuality they did not, yes this may have been the final price but they are also paying-per-bid and everyone that buys bids knows this.
For instance, a penny auction site X says bidder 928 won a great item for $8.91, the item’s retail value is only $100 and the user placed $150 in bids before everyone else stopped bidding and he won. By the time bidder 928 placed $50 in bids he was sweating, nervous but did not want to lose the money he had already invested.
There are no public reports on bidder’s losses, yes these losses translate into profit for penny auction site in most cases.
Why do users bid and continue to bid?
“Sunk costs are unrecoverable past expenditures. These should not normally be taken into account when determining whether to continue a project or abandon it, because they cannot be recovered either way. It is a common instinct to count them, however.”-About.com
“Sunk costs greatly affect actors’ decisions, because humans are inherently loss-averse and thus normally act irrationally when making economic decisions.”-Wikipedia
Toomas Hinnosaar has recently updated his equilibrium analysis of penny auctions, he has shown that the huge change in prices is in fact implied by fully rational bidders who are not prone to any sunk-cost fallacy.
It is the sunk nature of penny auction bidding that leads bidder to continue to bid.
“Once you’ve irrevocably paid for something you should take that into account when considering what to do next… The only time you should take into account sunk costs, is when you’re learning from previous mistakes.”-Plonkee
The sunk cost fallacy is what makes penny auctions so addictive.
Mike Gimien for Slate’s The Big Money, on Swoopo:
“The fact that you have already bid 200 times does not mean that your chance of winning on the 201st bid is any higher than it was at the very beginning. A new bidder can come in at any time and at the cost of a mere 60 cents jump into the auction in which you’ve already spent more than 100 bucks. The money you’ve put in has gotten you no closer to the goal than a losing raffle ticket.”
Penny Auction Bidding – Not Everyone Will Win
#1 Message that I would like to impart to you today- Do not bid unless you are willing to lose, but by no means will you always lose.
Like most anything in life, bidding on penny auctions involves risk, but many will argue that there is an element of skill. The truth is there will only be one “winner” on most penny auction items. The rest of the bidders will have lost the money they spent on bids to try and win, bidders are bidding on the chance that they might get that new iMac computer at a discount. On the current and most popularly accepted penny auction model, the sites without bid-to-buy options, and I would encourage that you bid on sites with this option, as you are less apt to lose your money on sites that offer this, there will only be one winner and many losers.
Many penny auction enthusiasts go into the game with the “win some- lose some” attitude, and they would be right to have this attitude because no they do not, and you will not, always win.
Is there one strategy for winning penny auctions?
The skill & strategy part is actually quite simple, you bid until you win, and you continue to bid until you win. However, many other factors need to be considered if you are intending on bidding until you win because you could end up losing a lot of money with this mentality, maybe not now but in the long run.
Real users are winning real items on penny auctions and some are even getting items at a discount.
The ones that are getting the items at a discount are really getting items at a discount, regardless of their penny auction bidding experience. Again, users that win can either be brand new to penny auctions or seasoned bidders who have learned how to bid on penny auctions and make a profit. Some penny auction bidders have even been able to abandon their jobs and support their families solely by bidding on penny auctions. When we say some we really mean just a few.
War of Attrition
Let’s say there are only two bidders bidding on any one item, both bidders are dead-set on “going the distance,” whatever it takes for them to win the item, both bidders may have this mentality but only one bidder will win.
“In game theory, the war of attrition is a model of aggression in which two contestants compete for a resource of value V by persisting while constantly accumulating costs over the time t that the contest lasts.”-Wikipedia
“There are some special cases, where penny auction is a version of well-known auctions. In two-player case the penny auction is similar to war of attrition, since the game continues only of both players continue being active in bidding and therefore incur costs. When bid cost converges zero, penny auction is converging to a dynamic first price auction.”-Penny Auctions, Toomas Hinnosaar 1/26/10
Just because you lost in penny auction bidding does not mean you were bidding against a bot, just that another user was willing to spend more money or wanted the item more than you.
Penny auctions likened to gambling?
“Tony Northcott of the Trading Standards Institute believes some people may spend more than they realise on bids.
“My concern about these online penny auction sites is that people will bid for goods and not realise at the end of the day they may spend quite a large amount of money,” he said.
The Gambling Commission said it could not comment on individual sites and was not convinced that penny auctions amounted to gambling.”-Penny web auctions under scrutiny, The BBC
And yes, like a gambling addiction users may acquire an addiction to penny auctions, they may not know how to control themselves and they may end up racking up credit card bills without even realizing it.
Don’t spend more money on bids than you can stand to lose! Even on legit sites you may not win an item with the bids you’ve bought, count the costs and watch your opponents. Keep a spreadsheet on Excel, or even just in a notebook, with the amount of money you have spent and the items you have won so you don’t get carried away!
Psychologist Stewart Beasley to News9 Oklahoma City, on QuiBids/penny auctions:
“Anything can be adrenaline producing, even this bidding could be addictive for people who get caught up,” Beasley said. “People will buy things they don’t need because it’s so cheap. It becomes a rush and a contest.”
Penny auction bidders need to keep track of their spending and exercise self-control.
There is much controversy surrounding online penny auctions. You will see that all over the Internet legitimate penny auction sites are being called scams; either by competitors, by a less-than-honest penny auction site owner who has been exposed here, or by real bidders. Legitimate penny auction sites are those that are really shipping items to users, and are not employing bots to autobid to make a certain % of profit. The sites that are employing autobidders to shill bid, the developers that are selling and building scripts to shill bid, now those are the real scams. Not everyone who bids on penny auctions, even on the legit auctions with real users and no shills, will win. And finally, penny auctions, like gambling can lead to an addiction, control your spending and get help if you need it.
Join our forum (http://pennyauctionwatch.com/forum) and ask questions about penny auctions and help us to determine what sites are safe to bid on and what sites are questionable.
Scam: http://www.flickr.com/photos/joelogon/ / CC BY-SA 2.0, Sinking ship: http://www.flickr.com/photos/x-ray_delta_one/ / CC BY-SA 2.0, Michael Phelps http://www.flickr.com/photos/joemad/ / CC BY 2.0, Gambling http://www.flickr.com/photos/waldoj/ / CC BY-SA 2.0
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