At that point you're starting to wonder why no one has tried to build a corporation around this, and unsurprisingly, the online auction site Swoopo appears to be exactly that. More surprisingly, they seem to have gone bankrupt last year, suggesting that maybe H.L. Mencken was wrong and someone has gone broke underestimating people's intelligence.

Actually, what happens is that most users realize that they are being taken for a ride and quit; without enough of a flow of naive users, the business is no longer profitable. See the 3 papers in http://www.gwern.net/Sunk%20cost#fn35