The Crack Cocaine of Auction Sites is the most efficient, addictive way to separate people from their money.

Mark Gimein in Slate (via The Daily Dish):

Money344 Consider the MacBook Pro that Swoopo sold on Sunday for that $35.86. Swoopo lists its suggested retail price at $1,799; judging by the specs, you can actually get a similar one online from Apple (AAPL) for $1,349, but let's not quibble. Either way, it's a heck of a discount. But now look at what the bidding fee does. For each “bid” the price of the computer goes up by a penny and Swoopo collects 60 cents. To get up to $35.86, it takes, yes, an incredible 3,585 bids, for each of which Swoopo gets its fee. That means that before selling this computer, Swoopo took in $2,151 in bidding fees. Yikes.

In essence, what your 60-cent bidding fee gets you at Swoopo is a ticket to a lottery, with a chance to get a high-end item at a ridiculously low price. With each bid the auction gets extended for a few seconds to keep it going as long as someone in the world is willing to take just one more shot. This can go on for a very, very long time. The winner of the MacBook Pro auction bid more than 750 times, accumulating $469.80 in fees.

Some winners do wind up with good deals. A few, on the other hand, wind up paying almost as much in bid fees as the item they're angling for was worth in the first place. Meanwhile, the losers can shell out hundreds of dollars in bidding fees before throwing in the towel, and end up with nothing. What makes Swoopo so fiendishly addictive is the tendency of people to think of the bids that they have already put in as a “sunk cost”—money that they have already put toward buying the item.

This is an illusion. The fact that you have already bid 200 times does not mean that your chance of winning on the 201st bid is any higher than it was at the very beginning.

More here.