My dad sent me a link to quibids.com, an online auction site that allows you to buy items by bidding on them. Sounds familiar? The twist is that this site is a type of penny auction site where each bid costs money. A second catch is the auction has no set time limit. It has a count-down timer but it adds on 10 seconds each time someone bids. It’s great to see a live auction because I always imagine the disappointment had by the winning bidder as the time goes 4…3…2…1…………….14….13 (with a new winning bidder).
Anyway, this place makes a load of cash on the simplest of items: gift cards. Here is a completed auction for a $50 Outback Gift Card.
This deceptive webpage puts the savings at $18.10 for a $50 dollar card. Inconceivable!
The Consumer math kids broke down the cost to “saltyfish13”. Saltyfish13 made 43 bids and eventually paid $6.10 for the card. A hidden fact regarding the bids, is that while the bids go up by 2 cents at a time, we assume that they must cost 2 cents. However each bid is 60 cents! So saltyfish paid $25.80 for the bids and $6.10 for the card, $31.90 overall.
How does this company make money if they are giving money away on each bid?? Well even the losers to the auction pay 60 cents per bid. Since this auction went up by 2 cents at a time, there were 305 bids. The revenue for this bid is $183 plus the $6.10 for a total of $189.10 on a $50 gift card!! Wow that’s a nice profit!
We went on to talk about how there are plenty of auctions where they may lose a bit of money, but how that is certainly outweighed by the massive profits of a couple of random auctions. They picked up on the idea that the person feeling the worst must be zane51, the second-to-last person to bid on the card. Who knows how many times this person has bid to try to win this $50 card.
The students went online in pairs to find 3 types of auctions, one big profit, one break even, and one loss.
I hope to continue these type of lessons to give the students a shot at not being ripped off nearly as much as many.
My favorite part of the day was when somebody described it as a game of musical chairs, where everyone pays a fee for each round that they stay in and the final person keeps the prize. I couldn’t have (and didn’t) described it better.