Monday, December 22, 2008

Bidding Gambling and Voting

There 's stuff in the news about "penny auctions". For example the BBC reports:
I think bidding on penny auction sites is akin to a gambling-like experience," Professor Griffiths said. "Obviously, when people are bidding again and again and again and they don't actually win the item in the end, that's very much like gambling."

However, Juha Koski from online auction site Madbid.com disagrees. "We have two experts who have given us their opinion on this. This is definitely a game of skill and would not form under any circumstances under the definition of gambling."

That was the most surprising disagreement since Madoff disagreed with proposed hedge fund regulation. Five reasons why these auctions are really lotteries:

1. The gambler pays for every "bid", each bid is essentially a non-refundable ticket

2. The final price of the item bears minimal relation to the value of the item on the open market

3. The lottery operator (or seller) gains most profit not from the winning bidder but instead from the number of bids made (or tickets bought)

4. The operators argue that entry needs significant skill. Actually I agree - in the same sense that choosing lottery numbers requires significant skill

5.Sometimes the winning price is the lowest unique bid, that essentially proves it

It's obvious. If the supposed regulators cannot work this out then they are either incompetent statistical morons or subservient slaves of the gaming industry.

[note: yes I know that choosing lottery numbers requires some "skill" to avoid picking the obvious numbers that other people are more likely to have picked]

15 comments:

acardus1 said...

Er. Don't understand. If you pick numbers that are less popular choices you have exactly the same odds as anyone else for winning the top prize. The only difference is the number of people sharing the big prize. Have I missed something?

And I've never understood those penny auctions, or been tempted to participate.

R N B said...

You do understand. So many people have picked 1-6 that the prize would be shared hugely if you win, similarly 1-30 are very popular numbers. You knew that, obviously those who choose birthdates etc don't.

Penny auctions are a con (hence the post), a lottery disguised as an auction to get around gambling laws.

I started all this following pub discussion on celeb tv voting but veered off topic.

Faisal said...
This comment has been removed by the author.
Faisal said...

What's a penny auction? Don't think we have them in the states.

R N B said...

There's a "penny auction" going on the radio at the moment, the lowest unique bid wins a car. It's a game. The "seller" gets their money from thousands of tickets bought at a few dollars per "bid", the actual amount of the winning bid is negligible.

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Agree to you but not in all penny auction sites it occurs. In many sites you have chance to win the product too. e.g. bidchargers.com

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