As analyzed on Freakanomics blog, Swoopo is an all-pay auction. Game theory predicts final prices higher than the retail price of the item. But we don't see this. Why? Create a model which realistically predicts the outcome of this game.
The company does make a considerable profit (It appears still in business in this economy! Even after public criticism!) even if the price is lower than the retail price. Perhaps people's notions of fairness are at play?
There are multiple firms offering variations of this same service. Buyers go to the one offering on average lowest prices. What effect does this have?
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