The rent to be gained from these auctions is amazing. I signed up to see what it was like. WIth my 50 bids I went out and bought a $25 subway giftcard for $5 and bid three times, so I spent $1.80 on bids and $5 on the item, but $5.00 in bids is equal to 500 bids, at $0.60 a piece that's $300 spent attempting to purchase a $25 card...thats $300 for $25. The community could have collectively bought 12 cards, but instead Quibids rakes in a $275 profit. Another auction I noticed was for the $1,300 MacBook Pr0. This MacBook sold for about $150, I do not know how many times the winner bid on it, but collectively there were 15,000 bids or about $9,000 spent trying to buy a $1,300 dollar computer. Does it seem like a waste of money? Probably not for the winner, the rent obtained is huge...but the dissipation was about692%.
This seems to model firm lobbying behavior perfectly: Firms must invest money to gain rent, each one will invest until their individual risk level keeps them from sinking anymore cash on the expenditure, HOWEVER, one ting that I certainly learned from Quibids is that the percent cost of the next bid is always lower than the last, after all if I've already dropped $600 on a macbook why not pay another $0.60? I believe firms must think the same way. Even if the amount of investment is equal to what the firm originally decided they would pay to gain government rent the incentive to increase their investment is large especially if there is still rent to be gained.
The idea of 'private rent seeking' is interesting, all the effects of rent seeking behavior are observed: wasted resources, high dissipation, and consumer, as well as producer DWL. Yet, it does not seem to be the cause of Government intervention on the free market, it IS a creation of the free market. Just some food for thought, but does it seem plausible that corporate rent-seeking behavior could exist even if Government stayed out of the free market? If rent seeking did exist regardless of Government, would it actually be better for the government to bring in the investemnt?
Read my comments if you want to read a bit about my experience and more about Quibid's legality.
1 comment:
On a personal note, I scored that gift card, as well as a $200 gold necklace for my mom's Christmas for $16. I was definitely the winner of this game!
Quibids allows the user to use their invested bid money toward buying the item at retail price. SO if you spend $600 on a Macbook and dont get it, you can buy it for another $700. This is so users don't feel compelled to win even after they've spent more than the item is worth. What's interesting is that this is a fairly new feature. The BBB got onto them before they opted to do this. People were complaining that they would spend hundreds of dollars and get nothing, so the BBB shut them down for awhile. But isn't it my right to waste my own money?
In effect, I believe that this feature does little to distort the rent dissipation. There is still a very large gap between $600 spent and $700 TO SPEND.While I might be willing to spend money on the chance for a cheap item, it is not exactly the case that I would spend even more money, I wanted the item cheap because I didn't want to buy it at retail...or I would have.
Another way to get bids is to play games, but you have to win the right to play the game...in an auction, so you better hope your good at the game!
Post a Comment