Business And Economy Archive
Thread: Economic Reform
I suggest that an upgrade focusing on the economy be put in the works. This would deal with issues that touch on all players and all profession. I am tempted to suggest calling the upgrade: "The Great Leap Forward," but that might be tempting fate. I might also suggest "The Wealth of Galaxies," but the reference to Adam Smith is a little vague. So instead I will suggest the simple, but accurate, "Economic Reform" as a title.
Principles
Before I get into specifics, I would like to lay down some guiding principles here.
1) Make the act of buying and selling basic items a simple matter for players who just want to buy their equipment so they can play the way they want to play.
2) Create an economy that is stable enough for players to play an economic strategy game if they wish, but still challenging enough to be fun in the long term.
Issues
Ok the next important step is to list the issues. I am not going to even attempt an exhaustive list here, I am just going to list those issues for which I can suggest solutions.
1) Resource pricing. Resources can be harvested for about .5-.8 cpu (credits per unit) and are sold for 4-10 cpu. A profit margin of over 1000%! This is not the fault of the players, they are charging what the market will support. Clearly though, resource prices are way out of proportion, since they are the foundation of the economy, this throws the economy into chaos.
2) Competition. There is a lack of real competition in the economy. There is some, but it is not anywhere near the level it should be. This lack of competition causes the wild variance in the price of goods. It also means that players who play the game as crafters have no real challenges. Crafters become very rich without the need for any ingenuity at all. Succeeding as a crafter is not challenging or fulfilling.
Resources
The most disruptive factor in the SWG economy is the price and availability of resources.
Why are resource prices so high? Every single player can place as many as 10 harvesters and sell the resources as a source of income, so why hasn’t the market been flooded and prices forced down? There are several reasons.
First, most players who dedicate their lots to harvesting are crafters themselves. This is because many players would rather use their lots for houses, ships etc. However, the crafters usually don’t sell their resources, but use them for their own crafting, or keep the resources in their inventory.
Second, selling the resources is not that easy. Unless a player spends the skill points necessary to become a merchant, it is very difficult to sell anything. As a result, most non-crafting players who do use harvesters, sell their resources exclusively to a friend or to their guild. Not that this a bad thing, but it means the resources are not available on the open market.
Third, simply harvesting and selling resources is not that much fun. If you actually dedicate the skill points to being a merchant, yet do not become a crafter. (If you were a crafter, you would use the resources yourself, not sell them.) All you wind up doing is monitoring your harvesters and stocking your vendor. It’s not very engaging when you think about it.
Lack of supply pushes prices up in another way. Assembling all the resource a crafter needs takes a lot of time if you harvest them yourself. Even if you have help, or extra lots, the crafting system encourages you to dedicate all your lots to one good resource at a time. It is the extra effort of harvesting each resource, one at a time, which pushes up the value of the finished goods. Ironically, if a crafter could buy all the resources they needed in one shot, then craft their goods, that crafter would probably charge less for these goods, even though they paid more for the resources, because the act of crafting was much less time consuming.
[con't in next post]
Competition
Prices fluctuate wildly in SWG. This causes a lot of harsh feelings between buyers and vendors. If someone pays 100,000 for an item, then finds another who sells the same for 50,000, he will invariably feel ripped off. It also makes it difficult for crafters to know what to craft as they do no know sort of profits to expect.
The solution to this problem is greater competition. Not only does competition push prices down, it also makes prices very similar. Competition is increased with exposure to the market. If we increase the exposure of both the sellers and the buyers, we increase competition. Prices go down, and stabilize.
Buyer exposure.
This means making it easier for players to find what they need. For that we need two things: Location and, that pariah of the modern world, advertising.
Location. There is an old saying, the three most important things in real estate are: location, location, and location. Merchants need to be able to set up their shops anywhere, that means in the NPC cities. Remember that cities are supposed to be built around merchants. Luke’s big excuse for going to Anchorhead was to pick up some power converters.
One of the problems with this is monopolies. Players could monopolize key locations. A couple of things could be done to minimize this. First, players would be allowed rent only one space per city. Second, high maintenance fees in the cities would force merchants to run an active business or move on. Third, limit the rental contracts. IE: Auction NPC city spaces off for only four weeks at a time. At the end of that period, players can bid to keep their space, but everyone gets a shot at it on a regular basis.
It should also be bourn in mind that no one plays this game forever. Even the most established player gets bored and neglects his character. Finally, allowing players to rent out a central location in cities like Theed would create a pinnacle achievement in an economic strategy game.
Advertising. Though I mention this second, it is actually the most important element. In fact it is critical to a consumer economy which we are trying to create. Merchants need the ability to tell the Galaxy what they have for sale, what it costs, and where they are. The bazaar terminals need to be given an advertising section, which only merchants can use, but all can see. The number of adds they can run, and the exposure those adds receive (IE: wether they can be seen from terminals on other cities or other planets) will depend on the level of the merchant.
I would also suggest banner ads in the bottom of the map screen (Possibly the players could disable those ads if they wanted.) in the mission terminals, in the bazaar terminals and anywhere else we can think of. Again the nature and exposure of these ads would depend on the merchant’s skill. In order to guarantee that the banner ads are tasteful and in keeping with the Star Wars theme, there would need to be strict limits on content. To control this, the ads would have several different pre-set formats from which a player could choose. The formats would only allow the merchant to enter his name, the name of the store, and the name or class of the items.
[con't.. one more post to go...]
Seller Exposure
As much as buyers need to see the market, sellers need to see it even more. While consumers read advertising flyers and consumer reports, sellers read trade journals and attend trade conventions. No one knows the market better than the sellers. This means Merchants need more advanced tools to view the market. They need the ability to view all private vendors at once.
I have suggested this as a droid module in the DE forums, but it does not matter how the skill is conveyed. This skill would do several things. First, it would make merchant’s more competitive. Everyone can see everyone’s sales. More than anything else, this would force prices down, and force prices to be more in line.
Second, it would push resources prices down. In part this would be a result of the increased competitiveness. However, it would also solve one of the biggest hindrances to recourse sales. Any player could plant harvesters and sell the resources from an un-advertised robot vendor in their basement and make a sale. Selling resources would be easy, so supply would go up and prices would go down. This would also increase resource availability, which in turn would make crafting easier, and again... wait for it... push prices down.
By the same token, it would make it possible for a new business to emerge, sale of parts. Players could sell parts (IE: from the Artisan tree) and the parts would be purchased by Players who were master merchants and could find the items. Obviously the reverse is true as well, crafters could buy parts rather than craft every single sub-component themselves.
Finally, all these elements, increased competition, increase opportunities to buy and sell goods, all make for a more interesting and engaging game for the crafters. And that, more than anything will boost the SWG economy.
Conclusion
I believe these proposals are in keeping with the proposals I set out. They would make the experience of buying items more enjoyable for players. And it would allow a real competitive game for the merchant/crafters.
The reforms I am proposing here are sweeping. They would change the game, some would be popular others would not. There are many fine details which I have left out. Partially to keep this under 20,000 words, but also because I simply do not have the information to provide the answers.
Implementing these changes would require a great deal of courage, not just because of the size of the task, but because of the broad implications. I believe that they should happen, and that the reforms should be brought in together as each reform is tied to another. All the elements must be in place for this to function.
Finally I would like to restate the importance of these reforms. A stable viable economy is necessary for all players. It would provide the non-economic players with easy access to the goods they need, and it would provide economic players with a game to play.
cl0kwerq wrote:
I like you're ideas here for the most part, except about resources.
I'm assuming that when you talk about your economic model you're trying to get something that would actually work in the real world, as opposed to just a theortical model. As such I respectfully disagree with you on the resources section.
Some resources are better than others. Gold, for example is considered more valuable than Coal. There's a lot more coal than there is gold. In SWG the resources reflect that. Generally your flora will sell for less than your minerals (high grade). Flora is very easy to get, and you don't need much space to put down a heavy flora, whereas you need a much wider, more open area to lay down mineral harvestors, and it is not always available. Therefore minerals should cost more than flora, in general.
Now factor in the quality of the resource. There are high quality diamonds, which are rare and used in jewelery and for decoration, and there are low quality (industrial) diamonds, used for the manufacturing of drill bits and such. What you're proposing seems to be to not takequality into account because one resource is as easy to get as any other, but that doesn't seem fair to the miners, as they work very hard to keep on top of what resources are where, at what time, and what quality. I look at miner's as the resource middlemen. They make the resources available to the rest of the galaxy throught the mines.
That leads us into the inevitable cpu discussion. It's well known to all miners that it costs far less than 1CPU to mine a resource. It's also well known to miners what certain professions make off of the resources they buy, and I believe this is the discrepency you're seeing. These numbers are a market range I've worked out of what people are willing to pay, based less off of what people are willing to sell for.
Weaponsmith - 40-60 CPU
Droid Engineer - 10-20CPU
Architect - (Heavy Min)5 CPU - 15 CPU
Artisan - 3-5 CPU
Chef - 20-30 CPU
Bio Engineer - 15-25 CPU
Shipwright - 2-5 CPU
From what I've seen the professions that have the largest resource requirements tend to have to sell their items for less on the credit, but do not require as high of quality resources as the others. Converesly, Weaponsmiths and Chefs in particular take very few resources to make their items, but quality is a large factor, and they have a much higher requirements to get named resources. This means that if resources were to be sold for a 100% profit, Weaponsmiths and Chefs would have a profit margin far above 1000% for the highest quality items. But that's the key word here, quality. Miners can no more sell grind quality resources for quality resource prices than a chef can sell 100 power brandy for 400 power prices.
Your main point that I would say that I agree with is the availability on the open market of resources. There are a few people who have everything they need. They rest have to run around collecting the pieces 1 by 1. Some resource vendors will try to counteract this by haveing the WS-resources, Chef-resources in their vendor titles, but that's only on a planetary system, and I personally have no desire to go planet hopping for 4 hours checking every vendor out there. If there was a way to list items on a galactic scale (a stock market like interface) not only would it be easier for people to buy what they want, but it would be easier for people to get a more realistic view of what any particular item is worth. Obviously keep the ability to set your own price, but giving the buyer the option to go highest to lowest on a galactic trade market would be a great idea, and I think that also goes well with your ideas of advertising and and availability of vendors, while not having to stomp all over the devs hard work in creating those nice NPC cities.
Well I am certainly not advocating that resource price should be dictated simply by the cost of harvesting. In fact I have tried many times to convince players that that formula does not work. I cited the cost of harvesting only to illustrate how high the profit margin for resource harvesting is at present.
The value of each item is determined by the utility and availability of the resources. Nothing will change that fact. I am arguing that atm, all resources have low availability, hence they have high value, well above the cost of obtaining the resource.
I would also like to add that if we increase resource availability, and decrease resource prices, lot trading would diminish. The massive profit margin on harvesting makes lot trading very lucrative, reduce the profit margin and you will reduce lot trading.
Phaelyn wrote:
Your points are well made, however both of you missed one important factor - Rarity. Currently a resource on Radiant,an extremely good copper that everyone was wild for, has become quite rare due to usage. As such, those that still have this resource are asking (and getting) 285cpu.
One of the goals is to make resources more readily available. So it is impossible for anything to be really rare. Resources with good stats will not particularly increase in value because they will not become rare as resourses with good stats will always be available.
It sounds like you are talking about a once-in-a-lifetime spawn of copper. There will always be exceptions like that. However, the increase competition would price that copper out of the market. This is because in order to recover the cost of manufacturing an item with that copper, the crafter would have to charge well above the established market price. True, the items would be superior, and would be worth more, possibly even enough to justify 285cpu manufacturing cost. But I doubt it, increased competition would make the pricing of goods much more rational, the item would be worth more, but not that much.
Ackew wrote:
So you want resource sellers to lose thier profit margin but all the other crafters to keep thiers.Well what a very bad idea. Casue if you do that instead of haveing resources drop in price you will have excalty the oppersite happen. With no profit to be made there will be LESS AND LESS people selling resources and so the price WILL RISE and more and more people just harvest for them selfs or thier guild mates. BTW most lots trades are used to get grind resourxes which sell for at most 2cpu. the onwly way lot tradeing will stop or go downis if SOE makes it "illegal". For a shipright like me there is NO way i can run my business with only6 harvs its IMPOSSABLE. I have about 19 different resources i need to get. so thats about 1 harv per 3 resources. iwill be able to get about enough resources to make a few components about once a month and have no sales since my vendors are all ways empty. FYI if you want to complain about massive profit margins check the profit a doc makes on buffs at 15k each its into the HUNDREDS of MILLIONS.
While not exactly true on the doc buff margins 
your points are very valid.
Why should the resource miner get any less than the market will pay? Obviously price fixing has completely bombed throughout the scope of human history. It's never once grown an economy. It's never once made a component of an economy secure.
Lessons not learned from history are sure to be repeated. Socialism doesn't work.
Fivo Asia
Ackew wrote:
So you want resource sellers to lose thier profit margin but all the other crafters to keep thiers.Well what a very bad idea. Casue if you do that instead of haveing resources drop in price you will have excalty the oppersite happen. With no profit to be made there will be LESS AND LESS people selling resources and so the price WILL RISE and more and more people just harvest for them selfs or thier guild mates. BTW most lots trades are used to get grind resourxes which sell for at most 2cpu. the onwly way lot tradeing will stop or go downis if SOE makes it "illegal". For a shipright like me there is NO way i can run my business with only6 harvs its IMPOSSABLE. I have about 19 different resources i need to get. so thats about 1 harv per 3 resources. iwill be able to get about enough resources to make a few components about once a month and have no sales since my vendors are all ways empty. FYI if you want to complain about massive profit margins check the profit a doc makes on buffs at 15k each its into the HUNDREDS of MILLIONS.
I am saying increase the contact between seller and buyer, and massively increase the contact between sellers and you will make it easier to sell resources. As a result, more players will harvest and sell, supply will go up and prices will go down. Are you saying that if we make it easier to sell resources and the price drops, then everyone will quit, and the price will go up?
Well to a certain degree yes, the price will bounce around a little, but it will eventually settle down at a much lower level, and hopefully, resources will be more widely available.
Finally, it doesn’t really matter why people lot trade, if resources are widely available on the market, and less expensive, then there will be a strong dis-incentive to lot trade. You won’t be forced to stop lot trading. However as a SW, you would be able to buy all the resources you needed to run your business, at a reasonable price, on the market.
IntoTheGarbage wrote:
Ackew wrote:
So you want resource sellers to lose thier profit margin but all the other crafters to keep thiers.Well what a very bad idea. Casue if you do that instead of haveing resources drop in price you will have excalty the oppersite happen. With no profit to be made there will be LESS AND LESS people selling resources and so the price WILL RISE and more and more people just harvest for them selfs or thier guild mates. BTW most lots trades are used to get grind resourxes which sell for at most 2cpu. the onwly way lot tradeing will stop or go downis if SOE makes it "illegal". For a shipright like me there is NO way i can run my business with only6 harvs its IMPOSSABLE. I have about 19 different resources i need to get. so thats about 1 harv per 3 resources. iwill be able to get about enough resources to make a few components about once a month and have no sales since my vendors are all ways empty. FYI if you want to complain about massive profit margins check the profit a doc makes on buffs at 15k each its into the HUNDREDS of MILLIONS.
I am saying increase the contact between seller and buyer, and massively increase the contact between sellers and you will make it easier to sell resources. As a result, more players will harvest and sell, supply will go up and prices will go down. Are you saying that if we make it easier to sell resources and the price drops, then everyone will quit, and the price will go up?
Sorry but what do you mean increase contact btween seller and buyer ?? Thats excatly what i mean. If there is no or very little profit in selling resources then very few if any people will do it. Its like in the bike market you can sell the raw resources for more than you can get for them in a bike so there are now very few bike sellers, since there is very little profit in it.
Well to a certain degree yes, the price will bounce around a little, but it will eventually settle down at a much lower level, and hopefully, resources will be more widely available.
The only way the resources prices will down and STAY down is for either people to have more lots per server or to drasticly increase the amount a harvest can get a day. With shipwrights now useing millions of steel per week resources harvest can't keep up so now even grind steel is 2 or 3 times what it use to be.
Finally, it doesn’t really matter why people lot trade, if resources are widely available on the market, and less expensive, then there will be a strong dis-incentive to lot trade. You won’t be forced to stop lot trading. However as a SW, you would be able to buy all the resources you needed to run your business, at a reasonable price, on the market.
Yes it does matter WHY people lot trade. If we had enough storage that would get rid of probley half the lot trades. What do you mean less expensive? high stat resouces are ALLWAYS going to be in high demand and there for expensive. I can all ready buy all the resources i need. But this is cause i have a high turnover. Flooding the market with resources will bring the prices down but if everyone and thier brother has all the best resources. very few people will bother to craft any more since there will be no challange. Even if the base resource price fell by 50% do you think all the crafters will suddenly drop thier prices by 50% unlikely. VERY unlikely.