Swoopo: Irrational escalation of commitment

Swoopo

Swoopo, a new kind of “entertainment shopping” auction site, takes Martin Shubik’s classic Dollar Auction game to a whole new, automated, mass participation level. It’s an example of the escalation of commitment, or a sunk cost fallacy, where we increase our commitment (in this case with real money) even though (in this case) most users’ positions are becoming less and less valuable.

Thee Cake Scraps has a good analysis of how this works:

It is a ‘auction’ site…sort of. Swoopo sells bids for $1. Each time you use a bid on an item the price is increased by $0.15 for that item. So here is an example:

Person A buys 5 bids from Swoopo for $5 total. Person A sees an auction for $1000 and places the first bid. The auction is now at $0.15. Person A now has a sunk cost of $1 (the cost of the bid they used). There is no way to get that dollar back, win or lose. If Person A wins they must pay the $0.15.

Person B also purchased $5 of bids. Person B sees the same auction and places the second bid. The auction price is now $0.30 (because each bid increases the cost by exactly 15 cents). Person B now has a sunk cost of $1. If Person B wins they must pay the $0.30. Swoopo now has $2 in the bank and the auction is at 30 cents.

This can happen with as many users as there are suckers to start accounts. Why are they suckers? Because everybody that does not have the top spot just loses the money they spent on bids. *Poof* Gone. If you think this sounds a little like gambling or a complete scam you are not alone. People get swept up into the auction and don’t want to get nothing for the money they spent on bids.

The key thing seems to be that some bidders will win items at lower than RRP, i.e. they get a good deal, but for every one of those, there are many, many others who have all paid for their bids (money going to Swoopo) and received nothing as a result. The house will always win.

Swoopo staff respond here and here (at Crunchgear).

As is obligatory with this blog, I need to ask: where else have systems been designed to use this behaviour-shaping technique? There must be many examples in auctions, games and gambling in general – but can the idea be applied to consumer products/services, using escalating commitment to shape user behaviour? Can this be applied to help users save energy, do more exercise, etc as opposed merely to extracting value from them with no benefit in return?

27 thoughts on “Swoopo: Irrational escalation of commitment”

  1. I guess I have to post this here, instead of where it is more on-topic, or it simply gets ignored.

    In the “London Design Festival: Greengaged” article there is a broken link to a Youtube video that does not apparently exist. Probably it’s a typo in the URL, but regardless: please change the link so that it works as originally intended.

  2. The YouTube link has still not been corrected, nor has there been any other response to my reporting the broken link.

    That is incorrect.

    Please respond in a correct and appropriate manner within five (5) days.

  3. Failed.

    There has been no response or correction when a serious bug in the web site was reported. There has been no new activity in three weeks. Site appears to no longer be maintained.

    Bookmark deletion scheduled.

    Good-bye.

  4. I foolishly bought bids on this site, yes I won an item, paid for it, and 5 weeks later I am still waiting for the item, this is to me has been a tough lesson in “you get nothing for nothing and nothing is free”, I may never get the item I “WON” so I will now make sure I tell everyone that this is just a scam. I would say its a form of gambling, but to chase the “hare” and never get it is just a con, this site shold be looked into.
    Warn everyone you know to keep well clear.
    Catherine

  5. Thanks everyone for the comments.

    I’m sorry I didn’t reply to None of 3’s comments quickly enough; I’ve been pretty much solidly occupied with other work recently and the blog had to take a bit of a back seat. I do apologise, but I’m not sure quite why it annoyed him so much. It wasn’t a typo in the URL: YouTube had removed the video because of an infringement claim.

  6. None of 3, are you a pain in the bloody neck! Go back and read the freaking manual, mate! The video was “removed because of an infringement claim”. This means YOU DON’T GET TO PUT IT BACK, you moron! It would infringe the copyright laws again! So stop harassing decent people and get a real job! @sshole!

  7. Moderator, please delete the inflammatory, exceedingly rude, and incorrect remark by “None of 1″.

    The video was purportedly removed because of an infringement claim. That does not mean it actually infringes anything. It just means somebody made an accusation.

    The video was, in fact, made available again and linked from the original blog post at issue, contrary to “None of 1″‘s claim that this was impossible. I have since viewed it, and it is quite clearly fair use: non-competing use, non-commercial use, use for academic purposes, and only a few minutes excerpted from the work. It meets all four of the traditional fair-use factors. It is textbook fair use.

    Ergo, the infringement accusation was a false one. The video is not infringing.

    “None of 1″‘s claim that the video was infringing is therefore incorrect. His assertions regarding my intelligence are also factually wrong. His other personal attacks are likewise inaccurate characterizations of me. And his “you don’t get to put it back” is also wrong, provably so, along with his accusation of harassment and his implication that I do not have “a real job”.

    As near as I can tell, there is not one single true statement to be found in “None of 1″‘s comment.

    Between that and its uncivil nature, it does not seem worthy of preservation at this site.

  8. A bid to win auction is one where one person or company has something to sell but isn’t sure of just how much he can sell it for. So he holds an auction where those who want to buy the item places a bid on it, the person who places the highest bid, wins the auction. According to the dictionary “a bid is the highest price a prospective buyer is willing to pay for an item at a given moment.”

    A bid to win auction might have many bidders involved. Bidding increments are set prior to the auction and can be as low as a penny or much higher, perhaps £500. At least two participants are needed in a bid to win auction, bidders may know other bidders or the bidding can be anonymous.

    Win to bid auctions also may have a “reserve price”, this is actually the lowest price the seller will accept and is usually the opening bid. Win to bid auctions used to be primarily used for the sale of paintings and artworks, but with introduction of the Internet, and sites like Yellmann and similar sites one can conduct an auction for just about anything. Generally, these are winning to bid auctions with specific rules and mimic traditional auctions. They can be great fun if one is trying to find some obscure item, or the newest in electronics. Many times, in a win to bid auction the last few seconds can be very exciting. One gets quite a charge by being the winning (high) bidder for their prize that they otherwise might not be able to obtain.

    Auction sites like Yellmann sometimes make bid to win auctions a bit different. For instance, on Yellmann one can only bid in increments of £.15. Also, on Yellmann the bidding controls the timing – each bid extends the auction by so many seconds.

    Bidders should make sure that they are familiar with the item they are trying to win in a Bid to win auction. They should also carefully check the auction site out before bidding. Finally, the keen excitement of the bidding war gets your adrenaline going, make sure you have set a limit for your bid and stick to it. Otherwise, in all the excitement of a bid to win auction you might pay more than you can afford or more than the item or service is worth.

    Bid to win auctioneers (the person running the auction) is paid by commission on the sale.

    Another type of auction is known as a reverse auction. The Encyclopedia describes a reverse auction as:

    Reverse auction is a type of auction in which the role of the buyer and seller are reversed, with the primary objective to drive purchase prices downward. In an ordinary auction buyers compete to obtain a good or service. In a reverse auction, sellers compete to provide a good or service by offering progressively lower quotes until no supplier is willing to make a lower bid.

    There are numerous reverse auction sites online. Originally started as a means of B2B procurement, there are now numerous sites for reverse auctions for consumer products. Where as in a bid to win auction, the seller attempts to get absolute highest price for an item. In a reverse auction, the buyer attempts to purchase the item at the lowest possible price. It works thusly, the seller sets a price for the item he wants to auction. Buyers, instead of using the starting price as the low point in pricing of the auction item, use it as the high point. Bidders in a reverse auction than submit bids below the starting price.

    In a reverse auction the bidders are not the buyers, they are the sellers. A reverse auction is won by the seller who is willing to accept the lowest price for a particular good or service. The reverse auction ends, when sellers stop bidding. In general, the lowest bid is the winning bid.

    Whether you participate in a bid to win auction or a reverse auction it is a fun and exciting way of getting goods and services. And, usually, you get them at a good price.

  9. This website is very informative, and I enjoy reading all about the ways in which architecture influences a person’s behavior. Sites like Swoopo and others are a scam, they are not breaking any laws. If someone really wants something, then that person must be willing to pay, with money, hard work, etc. I myself am interested in architecture and design, and this site has inspired me to pursue that career/ field. Thanks Dan for all the time you spent putting this site together. The worst thing that can happen is that a consumer protection agency or consumers report group list site like Swoopo as scams, and the site looses business.

    Post Script:
    The comments that ‘None of 1’ and ‘None of 3’ are ridiculous. They are probably from the same person just looking for attention. There are other ways to let a website know if a link does not work. Either send an e-mail that includes the title of the article, the URL of the web page, and the name of the link or the URL of the link, and explains what is wrong. Please do not belittle informative sites like this, reliable information that is free on the web is becoming scarce, there is no need to insult or create a situation where someone feels uncomfortable. Because this site is information based instead of advertising based, this site does not make money directly from the visitors.

    From Daniel F
    United States
    ©2009

  10. people get upset because they think they can get a TV for 10 bucks, but that never happens on swoopo! if you just use common sense along with some 3rd party research on the site, you won’t lose all your money. just don’t waste your bids early and use sites like http://www.swoopomanual.com for the research and you’ll do WAY better.

  11. Stay away from Swoopo!! I bid on a Canon camera a few weeks ago on Swoopo. As it was getting late, I created a BidButler (a device to place bids automatically for you up to a specified number of bids and a specified price). I authorized 200 bids, at 1 cent ber bid. My BidButler promptly bid all of the bids that I authorized, PLUS ANOTHER 20 BIDS! Not only that, but the bid price on the camera went up only about $1.80 – since the BidButler bid 220 times for me, the bid price should have gone up at least by $4.40 (my 220 bids plus the bids from the person(s) against whom I was ostensibly bidding). Not realizing what had happened, I authorized another 100 bids. This time, it used up all of 100 bids almost instantaneously, but the bid price went up only 1 cent.

    When I reported what had happened to Swoopo customer service (a misnomer if ever there was one), they basically said that everything went just peachy and it was too bad that I didn’t win.

    I don’t know if there is a deliberate attempt to defraud customers, or if their bidding algorithm is just seriously flawed, but I would not spend your hard-earned money on Swoopo.

  12. 1 tip for you, don’t be fooled into the current offers that Swoopo email out that tell you that all bids will be refunded to the winner of any auctions on a certain day. All this does is create more competition and will not help if your looking to pick up a great saving. Keep you bids till the next day and you’ll save yourselves a bundle!

  13. Just have a look at who is winning the products. Having studied the site for a number of days plus digging into to some of the winning bidders, It is clear that swoopo, computer programs or people bidding for swoopo are wining the items. Yes they let some through but a lot of items are won by the same name. After following one auction one bidder used at least 700 bids to win a camera. He’d already won the same camera plus 8 other items, that could have been the tip of the iceberg of what he had supposed to have won. I saw one bidder, bid on eight different cameras in one go, the only reason is so to get the price up.

    An item on the uk site is the same item on the US site and all the European sites. So a £100 item is also $100 and €100, its a good job the Euro is almost the same as the pound.

    This site is a gambling site with all the cards stacked with the house because the house cheats!!!

    Stay away, if your not convinced watch the site for a few hours.

    Thanks

    AB

  14. Hey everyone,

    There is a new site using this model that you might be interested in, http://www.yottabid.com. It is new, so there are way less users (much better odds of winning, if only just temporarily). They also are doing their best to be as transparent as possible and avoid some of the potential pitfalls of this model. Real items are won and shipped daily and you can actually get customer service to listen to you and help you.

    In the name of transparency and disclosure, yes, I am affiliated with the site, but not one of the owners.

    Thanks,

    Jani

  15. anybody that buys bids and then tries to win needs a brain transplant
    i found an item for sale on ebay for £2.00 i must say the best £2.00 i ever spent
    they email you sites that you can go into the admin side known as the back end
    and you can see for your self how easy it is for them to rip you off
    have a look under PAY TO BID AUCTIONS or item # 230341134113 or
    http://cgi.ebay.co.uk/ws/eBayISAPI.dll?ViewItem&item=230341134113&ru=http%3A%2F%2Fshop.ebay.co.uk%3A80%2F230341134113%3F_from%3DR40%26_trksid%3Dp2773.m38.l1313%26_nkw%3D230341134113%26_sacat%3DSee-All-Categories%26_naf%3D1%26_fvi%3D1&_rdc=1

  16. Yottabid is a legit site, swoopo I am not sure about but there are a TON of people on there. I have gotten a few good items on yottabid. sign up with this link and you also get five free bids. I really appreciate their website and think they need more members before they lose too much and have to shut down like other sites that are honest there just not enough members. http://www.yottabid.com/registration.php?ref=3771
    Please put in affiliate code 3771 too if you wouldn’t mind since I am telling you about this opportunity.

  17. People should really learn to read the instructions or bidding schemes for this site first before even considering to participate in the bids. As for Catherine, that’s too bad. Have you contacted them about your win? Because i’ve seen some blogs/posts about people that won and got their item.

  18. Sites like Swoopo are more for fun than for people actually looking for a bargain. I suggest you look around at the other auction sites similar to Swoopo. Hasteno.com is a new one that I’ve been playing on and I’ve actually won a couple things. Playstation 3 games going for $.08 (2 bids!) and a Nintendo Wii going for $2.16 is ridiculous. Before you completely discount the idea, you should check them out.

  19. I’m a proud muulu’er.

    Swoopo is so bad.
    Competition
    Over priced.
    etc.

    At muulu it’s 50 cents first pack, seocn 30 cents, free shipping, and 1 in 4 bids give you a extra bid.

    You muulu’ing yet?

    http://muulu.com

  20. ARF!!

    Not interested in any of the above “recommendations” but thought NONE OF 3’s posts at the start were priceless!

    His hilarious response to rightly being called a moron works best if you do it the voice of the comic shop owner off The Simpsons.

    Good site by the way, Dan.

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