Architect Archive
Thread: Supoer-Simple economics
Sorry, but there's no such thing as "simple economics". That's like offering a lesson in "simple nuclear physics".
There are myriad other possible ways to increase demand than just "create more customers, or create a recurring need for the same products". For example, see my thread on technological advancements as an alternative to the kind of rapid decay we'd need to prop up this unrealistic economy:
http://forums.station.sony.com/swg/board/message?board.id=architect&message.id=26551
This certianly isn't the only way, but it's the best method I can think of that can be implemented by the devs. Many other methods of increasing demand can be driven by the crafters themselves, but most players aren't that good at marketing and the game isn't very good at allowing versatile advertising.
It's not always supply & demand Dalyn. Microsoft for example, has a basically unlimited supply. They can produce a nearly limitless number of CD's for products. Their demand is also relatively high.
If they were to halve their prices accross the board, they'd sell more products, but make less profit.
Accross the servers, there is a very large number of weaponsmiths. There's a huge supply of guns. Yet, because most WS price at fairly high levels they make great profits. Arch seems to be the primary class where people tend to sell themselves out of a good profit.
Ok, i'll throw out a point of disagreement for ya since you guys are getting too carebear on me...lol
GMT - You've said many times that prices will go up on the good extractors... why?
Take this in the right way Dayin.... but you are the great defender of peoples right to charge what they want so I'm using you here (even though i agree with that idea).
If GMT and Dayin both have the same materials and create a nearly identical harvester, whats to stop Dayin from charging less for the same equipment as you GMT? So, now he's set a lower standard of pricing... now throw in Architect 3 who has been struggling to make a sale and is getting worried... he definitely needs to make a sale quick so he sells for less than Dayin. Now the price has dropped again... the economics work the same way with or without experimentation...Will some people still pay the higher price? yep... but they do that now... so, tell me how this changes with experimentation except to make some of my work worth less.
Even as a MA I fail a lot of experiments (I've been testing this the last few days since the patch notes came up) so now 20-30% of my work is automatically discounted and possibly worthless on the market and I have less time because i'm running to harvesters to do the things I enjoy like creating large displays in PA halls and customers homes.
I might still have the same quantity of materials available, but a lot of them will be worthless for building a quality extractor and will HAVE to go into building houses...
Oh wait, maybe I can find another arch who will buy wall modules off me...lol
Woah... back up/
Adune if you dont understand that simple rule about economics then you dont need to be in the conversation with the big folks.
Ropopock you didnt answer the question.
How would you reduce supply?
How would you increase demand?
Remember there are a limited number of people that can be on a server.
I believe I explained why prices would go up... but to reiterate...
To experiment up a good harvester will take 2 things. a) As many points in experimantation as possible (MA), and b) Raw materials with good stats.
If you need material with good stats you have just limited yourself to the top 25% (or less) of available material on the server. Now you have ALL of the architects trying to use a fraction of the raw materials. Supply has fallen, while demand has at best remained level (probably increased because of Harvester Demand Surge). It will be even worse if it turns out the stats we need are the same ones as wepon and armor smiths. Unfortunately this will probably be the case (UT, DU etc)
In your example of price undercutting you missed one important element. Dayln has no need to cut his price to get customers... demand far outstrips supply, and he can sell everything he produces with no problem. He can't even aim to grab market share, because he knows he can't fill those orders and still produce a quality product.
In reality we will probably see a stratification of the market. Those with the ability to obtain the high end materials will build top-end products that will sell for a very high price. Those who cant get the top end materials will have to sell junky product at a discounted price. If there were poor buyers then this wouldnt be an issue, but we all know that mining is a high profit business... Miners will be falling over one another to get the best equipment.
You only have to look at armor/weapon smiths to get an idea of what will happen. The only difference is that we need 100 times the raw materials.... which will mean HUGE money moving around.
Incidentaly, the top weapon smiths maintain their position by being able to excercise a large degree of control over the raw materials market. They made big money early, and then used this to buy ANY and ALL top end materials that came onto the market. This prevented competition.. and has made it very difficult for Novice Smiths to break into the market. Im realy realy glad ive built up a good bank balance. If this change goes in, it will be a usefull edge.
I am curious to see just how much of a price difference we get at the high end of the market. In weapons even a small difference has an exponential price effect. Doubt it will be quite that much for use.. but it would be nice. The only Artisan example I have experience with has been my Fishing Rods. I have seen 90-95% rods being sold for 500-100 creds. I have been selling my 100% rods for 25K ingood quantities.
Ahh, but you missed one major point.
Dayin has said time and time again that he will sell below your price. And that means that the guy struggling to make a sale will sell below his.
Architects did it to themselves in the beginning, why would this be any different?
I would love to agree, and maybe you're right, but the death spiral doesn't take much to get started.
What kind of prices are you expecting to get anyway? 10cpu? how many people are really going to pay 300k for that harvester that isn't as good as the one they had before that they paid 150k or less for?
Dayin - I wasnt' trying to address that point as I was just trying to throw out a point for you guys to argue with me, hehe.
but, to answer that question, increase demand by giving me color options on furniture... or walls... increase demand by letting me make something in the GCW, Increase demand by letting me make something that helps your harvester better. Increase demand by giving me something the public wants... add decay to the new items if you want... If they go in knowing it won't last (turrets or covert faction scanners for example) they have a different mind set then when you tell me that the item I paid 150k for is now going to go away. Hey, I might have only paid 100k if I'd known that ahead of time.
I would like to mention two rather important economics rules that no-one seems to have brought up... and which I think is relevant to these discussions...
"Price Elasticity of Demand/Supply"
Elasticity is a measure of just "How Much" a change in price willeffect the "Demand / Supply".
A good example.... Compare Bread and Airline Tickets....
If the price of Bread doubles then people will continue to buy it. People HAVE to eat. They may cut back a little, but fundamentaly you would have to make a HUGE change in the price to significantly alter the demand. The only thing holding bread prices in check is the fact that at much higher prices you would get a huge influx of supply.. and competition would again drive the price down. This sort of demand is "In-Elastic" (This effect, coupled with low supply, was seen in WWII, when barrow loads of cash were being used to buy food in Germany)
If the price of Airline Tickets doubles there is a HUGE decrease in demand. Those that dont have to fly wont. Other forms of transportation will be used. People have a choice. This demandis "Elastic".
This can be transfered to the game as follows....
Houses... they have no special benefits (besides putting in vendors). You can live without one, and they don't do much for you. Elastic demand.. increasing prices drives customers out of the market easily.
Harvesters... They are one of only 2 ways to generate wealth in the economy (raw materials ormission cash).All classesneed products which require raw materials. Fluctuations in price will not easily change the overall market for harvesters. This is In-elastic demand.
The Money Supply
We are in an economy which is generating more and more cash.
When cash becomes more plentiful economies experience inflation.
Simply put.. when people have more money they are less likely to modify their purchasing behaviour based on small increased in price. In effect thier Demand becomes more In-elastic. They will also be able to afford more product, thus increasing demand.. leading to higher prices.
(I think the money supply is one of the reasons I personally havn't seen any significant drop in demand in the last few weeks)
Ropock,
"Dayin has said time and time again that he will sell below your price. And that means that the guy struggling to make a sale will sell below his."
I have highlighted the importat part of that. It is certainly true that without decay (or something similar) we will return to this situation at some point (couple months?), but in the mean time no-one at the Master level will be struggling for sales. Personally I doubt we will be able to keep up. I can barely keep stock on-hand at 5cpu operating 20+ heavies and buying raw materials like mad (Bought over half a million in the last 24 hrs).
Those struggling will be the novice architects, those that have no points in experimentation... they will no longer be competative in the large harvester market. They WILL be able to compete on the small stuff.. so we will see stratification in the market. The only issue will be that MA's COULD chose to lock Novices out of that market also... by simply making stuff better and selling cheap (based on our profits at the high end).
I hadn't given the possible short term prices much thought, but I don't see any reason they couldnt go to 10 cpu. Heavy harvesters pay for themselves within a week already. Since raw material prices will almost certainly rise as a result of this, I can see it still taking < 2 weeks to recoup all costs. That is an unbelievably good return on investment. It is also one of the reasons that smart buyers will pay 20K more to get a heavy harvester right away.. it more than pays for itself in the time they would have been waiting.
Interesting times ahead I think.
Posi, let me ask this then:
As the devs do things to remove money from the economy that makes less money available to spend.
Almost every class needs raw resources to stay afloat, but many classes don't require large amounts of them and thus can get what they need from a personal harvester as opposed to a medium or large. Sure they might have to drop 2 instead of 1, but that isn't a major issue for most classes.
There are choicesavailable that don't require having large harvesters, i.e. personals, or running missions. You may take away the easy cash from some people that were mining, but again, that lowers the money in the economy and thus lowers the inflation level which thus lowers prices, does it not?
Ok, you counter that resource costs go up.... not so much for the architects as most of us mine most of our own to begin with (except additional travel costs and time to find the better resources).... so, your costs don't increase as a result, some people will make more money as there are fewer people mining and making easy cash, but this now represents a smaller portion of the community thus lowering the overall demand for the products, does it not? even if you decay the items... many of the miners are architects now so don't need to buy new ones and those that are not have seriously dwindled as many don't want to spend the time running to harvesters instead of killing Ewoks and Krayt dragons.
The only issue will be that MA's COULD chose to lock Novices out of that market also... by simply making stuff better and selling cheap
and right there you nailed it.... i know of a number of architects that do this already. Why are they not gonna do this because of experimentation?