Why The Economy is Borked

#1 - Sept. 21, 2012, 6:09 p.m.

THE ISSUE

So for those of you that are not yet aware, you can use ‘custom bid’ to purchase items for less than the going rate, and then sell them back at the going rate. This is for the most part, risk free, assuming you don’t log out with purchases pending before going to bed, and increases your total assets by a percentage ammount.

Before you claim this is an exploit, it is providing a service – players that want instaneous purchases or sales rely on this type of trader. In addition Arena Net took down the trading post to look at just such things as this and did not make any change..

In any case, the issue here isn’t the exponential growth of one’s assets – although it is a part of it. The issue is that this form of trading is the best method of making money via trading. Crafting gear provides subpar returns and runs the extreme risk that people will continue to underbid your item by 1 copper and it will never be sold.

THE SOLUTION

There are however one of three fixes that I would like to propose:

The first proposes a removal of custom bidding, and all player control from the economy. Instead items are provided a value with both a ceiling and a floor, that should be obtainable with the current market data. Sales exceeding demand reduce the value of this commodity, while purchases exeeding supply increase its value. The economy would become a living organism, rather than a manipulated enterprise, and exponential growth based on assets would be curbed.

The second proposes an enforced 10% reduction on all sales lower than the going rate. That is to say if you post an item for 2.6 gold, that next person would either have to post it at 2.6 gold or 2.34gold. The market for items that are usuable by the community (other than consumables) will undoubtedly see an increase in supply, as the risk of being indefinately undercut would no longer be present.

The third would be to offer a range of prices on all sales, where the product is sold for the highest of any available range, and only the highest value is made puplic. To explain, if an item is put up for bid at 2.2 gold to 2.6 gold the player base will see an item available at 2.6 gold. If a second person puts an item up for 2.3 gold to 2.5 gold, the original poster’s item sale price will drop to 2.5 and the player base will see two items for 2.5 gold. If someone then puts that same item up for 2 gold to 2.2 gold, the original posters sale price will drop to 2.2 gold and the second posters item will return to it’s original maximum value. The player base will see 2 items for 2.2 gold and one item for 2.5. This might slow down sales a little though, and if possible I would recommend only offering a range to end products.

John Smith

#32 - Sept. 22, 2012, 11:01 a.m.

Wazabi.1439:
1. Custom bidding is not risk free.
Yes, I’m speaking in terms of turning a profit from putting a bid then sell the item, making profit as long as the spread is sufficiently wide. I do farm items with wide spread. For items with higher transaction volume, the spread usually don’t last long. For slow moving item, there can be a 40% spread like you say. I am merely fronting the payment to those who have no patient to post and wait for their item to sell, and earning premium for it. Although it is profitable and relatively low risk, it is not no risk at all. If the flavor of the month changes or if A-net changes something that impacts the demand of said item, I stand at losing. Also, I suffer from liquidity risk if the item doesn’t sell fast enough where I could had invested in a lower return investment and flip it quickly. This is how the market works.

2. Crafting is not supposed to be profitable.
I’ll put the blame on crafting being too easy to level and a global market. Not necessarily a bad thing as I’ve manage to buy what I can’t craft at an affordable price.

3. A ceiling/floor hurts the economy
There is a complicated explanation that I don’t think you guys are interested in hearing…I don’t know how to make it simple.

4. Transparency is better for the market.
Ok, this I misunderstood what you’re trying to say. What you propose is an auction system with a range of reservation price. I must say it is one of the more interesting ideas I’ve seen in forum post. No comment on that.

5. I just described the stock market! What’s the problem?
To many (me), trading is a game within a game…

6. These are real people, therefore it functions like a real economy.
All the factors you’ve listed determines price, true. From an economist’s perspective, we look at things on a more general view..so advertising, location and such are not considered in the model. What you describe falls more on to marketing…and looking more from a single company’s perspective. For an economic model of any kind, human behavior is an important factor. A game economy simply follows a much simpler model (still complicated) with less variables, and some unique constrains. The underlying foundation applies to both. Example: people prefer to pay less than to pay more for a homogeneous goods, price depreciates when supply exceeds demand. Prices of goods are all driven by people’s action.

Wazabi is almost dead on here.
Just a couple of things I would add. You’re last paragraph is correct, but only to a certain degree inside a game. There is much more examples in the game, than in real life, of people deciding not to maximize profit, or to have odd trade offs for personal preference inside the game that people don’t usually have in real life. People are still people in a sense, but people’s character in games often have very different preferences than the person in real life. This is a larger issue than I want to discuss here. I would argue that we have to be careful to remember that motivations in the game aren’t necessarily the same as motivations in real life.

Secondly, not related to Wazabi being correct, is that applying pressure through the trading system to attempt to modify scarcity of an item in the game isn’t the way to solve problems. If an item should be more scarce, then the faucet/sink of that item is off, not the manner in which it’s traded.

Overall great discussions here everyone, we have a set of clearly educated and intelligent people in this forums and it rocks.

John Smith

#33 - Sept. 22, 2012, 11:02 a.m.

John Smith.4610:
Wazabi.1439:
1. Custom bidding is not risk free.
Yes, I’m speaking in terms of turning a profit from putting a bid then sell the item, making profit as long as the spread is sufficiently wide. I do farm items with wide spread. For items with higher transaction volume, the spread usually don’t last long. For slow moving item, there can be a 40% spread like you say. I am merely fronting the payment to those who have no patient to post and wait for their item to sell, and earning premium for it. Although it is profitable and relatively low risk, it is not no risk at all. If the flavor of the month changes or if A-net changes something that impacts the demand of said item, I stand at losing. Also, I suffer from liquidity risk if the item doesn’t sell fast enough where I could had invested in a lower return investment and flip it quickly. This is how the market works.

2. Crafting is not supposed to be profitable.
I’ll put the blame on crafting being too easy to level and a global market. Not necessarily a bad thing as I’ve manage to buy what I can’t craft at an affordable price.

3. A ceiling/floor hurts the economy
There is a complicated explanation that I don’t think you guys are interested in hearing…I don’t know how to make it simple.

4. Transparency is better for the market.
Ok, this I misunderstood what you’re trying to say. What you propose is an auction system with a range of reservation price. I must say it is one of the more interesting ideas I’ve seen in forum post. No comment on that.

5. I just described the stock market! What’s the problem?
To many (me), trading is a game within a game…

6. These are real people, therefore it functions like a real economy.
All the factors you’ve listed determines price, true. From an economist’s perspective, we look at things on a more general view..so advertising, location and such are not considered in the model. What you describe falls more on to marketing…and looking more from a single company’s perspective. For an economic model of any kind, human behavior is an important factor. A game economy simply follows a much simpler model (still complicated) with less variables, and some unique constrains. The underlying foundation applies to both. Example: people prefer to pay less than to pay more for a homogeneous goods, price depreciates when supply exceeds demand. Prices of goods are all driven by people’s action.

Wazabi is almost dead on here.
Just a couple of things I would add. You’re last paragraph is correct, but only to a certain degree inside a game. There is much more examples in the game, than in real life, of people deciding not to maximize profit, or to have odd trade offs for personal preference inside the game that people don’t usually have in real life. People are still people in a sense, but people’s character in games often have very different preferences than the person in real life. I would argue that we have to be careful to remember that motivations in the game aren’t necessarily the same as motivations in real life.

Secondly, not related to Wazabi being correct, is that applying pressure through the trading system to attempt to modify scarcity of an item in the game isn’t the way to solve problems. If an item should be more scarce, then the faucet/sink of that item is off, not the manner in which it’s traded.

Overall great discussions here everyone, we have a set of clearly educated and intelligent people in this forums and it rocks.

John Smith

#91 - Sept. 24, 2012, 10:53 p.m.

Chiming in to say I’m reading this thread because it’s awesome. I don’t want to chime in with much because your debate doesn’t require me.

I have only two minor points this time:
1. This thread has split off into multiple topics, all of which are relevant, but may need to separated into different threads soon.

2. It seems that CdrRogdan may be arguing something a bit different from everyone else. If the disjointedness comes from a language barrier, or if it doesn’t, you are free to send me a PM in English/French/German/Korean/Chinese and we can work to understand what your concerns are.

Edit: You’re free to send me a PM in any language, but there may be a bit of a lag in some other languages