Matrix scheme
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A matrix scheme or elevator scheme is a business model involving the exchange of money primarily for being added to a waiting list for a product. Once a list receives enough new members, the person at the top of the list receives the product, and the next person in the list moves up. Matrix schemes are heavily promoted across the Internet, especially on sites such as eBay and craigslist.
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Operation
The operation of matrix schemes varies. To move upward in the list, the person must wait for new members to join, or refer a certain number of people to the list. The rewards for those at the top of the matrix list are usually high-demand consumer electronics, such as portable digital audio players, plasma and high-definition television sets, laptop computers, and cellular phones. More people joining a list improve the likelihood of people near the top receiving the product, but the numerosity of newcomers decreases the likelihood that sufficient quantities of new people will join the list to assure all the more numerous recent joiners will reach the top. Critics note that since mathematically this process cannot continue, eventually the matrix must collapse. Supporters claim that additional revenue streams from advertising are used to keep the lists moving, but since the key for keeping the list moving is new members, not money, this does not work.
The amount of time needed before a given individual will receive the product in question is often mistaken. In a matrix in which 50 people are required before it will cycle, the first person to join only needs 50 sign ups, but the secopnd person needs 99, 49 more for the person above him, and then 50 more for himself. The third person on the list likewise needs 148 more signups, 48 for the person on top of the list, 50 for the person directly above him, and then 50 for himself. And then number of people required continues to grow exponentially for each new person joining the list.
Unlike most pyramid schemes, a side product is delivered to each newcomer in the course of the enrollment purchase. Most matrix site owners sell electronic books or software CD-ROMs as the product, and then add the purchaser to the product list as a "bonus." However, Steven A. Richards, a lawyer dealing with these issues, states that if the item in question isn't actually worth the amount of money tendered for it, and most people would not make the purchase if not for the bonus in question, it's probably illegal. 1 (http://msnbc.msn.com/id/3078976)
Legality
The legality of matrix schemes is still unclear. Matrix site owners claim their sites are within the law. The U.S. Federal Trade Commission and the U.K. Trading Standards have issued warnings to the public about the sites. Further, the U.K. Office of Fair Trading considers them to be illegal scams. Several matrix sites have been shut down due to overwhelming legal fees defending lawsuits, such as the legal action taken against the grandfather of the matrix site, EZExpo.com.
Matrix site supporters acknowledge that considerable research should be performed before investing in any such venture, but argue that the rewards for investing in a good matrix scheme are substantial.
External links
News articles
- $150 for a plasma TV? A bad bet (http://msnbc.msn.com/id/3078976) - MSNBC
- $150 plasma TV site faces lawsuit (http://msnbc.msn.com/id/3078957) - MSNBC
- Warning over iPod scam (http://www.thisislondon.com/news/articles/11783353?source=Evening%20Standard) - This is London
- eBay scam uses iPods as bait (http://www.wired.com/news/culture/0,1284,62226,00.html) - Wired