Monday, August 31, 2009

Swoopo Promotion With a Twist

Swoopo sent me an email promotion on Friday night saying they would give me all my bids back on the first auction I won in the next 24 hours. The bids are refunded in the form of FreeBids and usable in the next seven days. It would be interesting if two people in this boat found themselves bidding against each other. I expect this would increase their willingness to expend bids to win the auction and this drive up the profit for Swoopo and the cost to the bidder(s) who doesn't win.

This concept does have its limits because people are only being refunded bids in the form of more bids and there is a limit to the amount of money anyone is willing to spend on bids. However, if Swoopo wanted to be truly diabolical they would refund the winner's spent bids in cash.

Imagine if two people who received this modified promotion found themselves bidding against each other. Each would expend ever larger amounts of money on bids, confident that eventually the money would be returned to them when they won the auction. However, as the auction progressed, each bidder would find himself desperate to win - having passed a point of no return in which they would see devastating losses if they failed to win the auction. The price of the auction item would easily go beyond MSRP with both bidders determined to win. The problem is that eventually someone must lose and when that happens one of the bidders will get out alive but the other will take a huge hit.

Swoopo isn't doing this though, and I'm glad they aren't. While a huge fan of free markets, self control and personal accountability, a system like this would be rigged to hurt people and penny auctions should be entertainment, not mechanisms of self destruction.

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