Dutch books and Venus fly traps abound:
- You purchase bids in pre-packaged blocks of at least 30. Each bid costs you 75 cents, with no volume discount.
- Each bid raises the purchase price by 15 cents and increases the auction time by 15 seconds.
- Once the auction ends, you pay the final price.
I just watched an 8GB Apple iPod Touch sell on swoopo for $187.65. The final price means a total of 1,251 bids were placed for this item, costing bidders a grand total of $938.25.
So that $229 item ultimately sold for $1,125.90.
If traders are overconfident, as much as the finance literature alleges, there ought to be a way to exploit that tendency. And so there is. If you read the article you will see it is even worse than it sounds. Jeff Atwood concludes:
In short, swoopo is about as close to pure, distilled evil in a business plan as I’ve ever seen.
Or are the overconfident people sharing in the evil as well? For the pointer I thank Ambrose Wong, Kevin Markham, and Travis Allison.