Private company
bidding fee auction
Type of all-pay auction
A bidding fee auction, also called a penny auction, is a type of all-pay auction in which all participants must pay a non-refundable fee to place each small incremental bid. The auction is extended each time a new bid is placed, typically by 10 to 20 seconds. Once time expires without a new bid being placed, the last bidder wins the auction and pays the amount of that bid.2 Wikipedia text CC BY-SA 4.0
Last updated Oct 21, 2026.
Overview
- Industrytrade1
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A bidding fee auction, also called a penny auction, is a type of all-pay auction in which all participants must pay a non-refundable fee to place each small incremental bid. The auction is extended each time a new bid is placed, typically by 10 to 20 seconds. Once time expires without a new bid being placed, the last bidder wins the auction and pays the amount of that bid. The auctioneer profits from both the fees charged to place bids and the payment for the winning bid; these combined revenues frequently total more than the value of the item being sold. Empirical evidence suggests that revenues from these auctions exceeds theoretical predictions for rational agents. This has been credited to the sunk cost fallacy. Such auctions are typically held over the Internet, rather than in person.2
Controversies and legal
Criticism
Due to the possibility of participants spending significant amounts of money and still losing an auction, or ultimately spending more than the retail value of the item they end up winning, some analysts have criticized the model or compared it to gambling, even when operating without fraud. The Better Business Bureau warns consumers, "although not all penny auction sites are scams, some are being investigated as online gambling. BBB recommends you... know exactly how the bidding works, set a limit for yourself, and be prepared to walk away before you go over that limit." A penny auction may make the seller far more money than the item is worth.
Potential fraudulent practices which can disadvantage buyers even more include shill bidding, where a human or software (bot) bidder covertly acting for the seller places bids which make legitimate bidders continue bidding where otherwise the auction would end, and simply not sending out goods for which a price, albeit low, has been paid.
Some bidding fee auction sites have been shut down by state governments after investigations. Wavee US, LLC, settled with the Governor's Office of Consumer Protection in Georgia and agreed to close its website after the office received complaints about merchandise not being shipped in a timely fashion. Washington state shut down PennyBiddr after a lawsuit in which the state accused PennyBiddr of using shill bidding to drive up prices and extend auctions. In addition, several auction sites which claimed to be Better Business Bureau "Accredited" were not members of the BBB or had poor ratings with the BBB.
From Wikipedia’s article on Bidding fee auction, shared under CC BY-SA 4.0.3
Links
- WikipediaBidding fee auction
- WikidataQ2069187
Sources
The numbers on this page point here. Each one links to the record it came from.
- 1Wikidatabidding fee auction on Wikidata
- 2Wikipediabidding fee auction on Wikipedia
- 3