Business And Economy Archive
Thread: Artisans vs. Peddlers (Part III)
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Deregen
Thu Feb 17, 2005 12:27 pm
#1
Artisans vs. Peddlers, Part III - barriers to entry, market saturation, demand pooling, and outside forces
A very long time ago, back before the game went to initial Beta, I posted two essays on the official SWG forums in response to discussions about the crafting system and the economy.
In those two essays (which unfortunately I don't have anymore), I put forward that there are two types of crafters out there - those who craft because they find the crafting itself fun, and who enjoy making new and unique things....and those who craft because they want to participate in the game economy and make a profit.
I called these two types of crafters "artisans" (the ones who enjoy the crafting more) and "peddlers" (the ones who enjoy the economy more). This was before the profession names had been announced, and I should make it clear again that I didn't mean anything derogatory by peddler - it was just the best descriptive word I could think of at the time, since we were using the term "merchant" to describe anyone that sells anything.
The gist of those two essays was that SWG's, or indeed any game's crafting system should reward both styles of play. The artisans should be able to make unique and desirable items, things that are special. The peddlers should be able to provide goods to a market in bulk quantities in order to satisfy demands and make a profit. There's nothing wrong with being one or the other, most crafters are a little bit of both.
Well, the SWG economy has been in full swing for quite some time now, and while it's very likely one of the best crafting games ever produced, its obvious that there are some flaws. This is normal, no game design is ever perfect, and there's a lot of things that can't be predicted. The live team that maintains the game, to their credit, has made a commitment to try and address some of these problems. However, as with most things, the problems are much more complicated than they appear on the surface, and it's easy for the developers to introduce a clever "fix" that actually does more damage to the game in the long term if they're not careful.
Rather than hit on the specific problems that afflict SWG's economy, or any other game's economy, I'm going to instead present four areas that anyone trying to manage any game economy needs to pay attention to, and, where appropriate, explain how the two types of crafters interact with those areas. It's my hope that this will be helpful for anyone, whether they're a developer or a player, attempting to analyze a game's economic balance and present ideas to make the game, and the economy, more fun for crafters and consumers alike. After all, the point of the game IS to have fun.
The Triangle of Competition
To explain everything else I need to first talk about competition. Competition arises when consumers have choices about where they buy their goods. If I'm the only person on the planet who makes widgets, everyone has to buy their widgets from me. But if there are ten people making widgets, then consumers have a choice about who they buy their widgets from.
Normally, widget makers will compete by leveraging one of three places - quality, price, or convenience. If my widgets are better than Bob's widgets, people will tend to buy more of mine than Bob's, and I'll get more sales. If my widgets cost less than Bob's widgets, people will also tend to buy more of mine than his. And finally, if my widgets are easier for people to buy than Bob's widgets, people are going to buy more of mine. You can visualize these as three sides of a triangle - all else being equal, a change in any one of these sides means a change (up or down) in at least one of the other two as well.
Generally speaking, these three sides of competition have roughly equal weight in the minds of consumers, which means that crafters have a lot of leeway in terms of how they succeed at what they do. They can compete against other crafters by raising their quality, by lowering their price, or by making it more convenient to purchase their wares. Other crafters can respond to this by competing directly on price, quality, or convenience, or by emphasizing one of the other areas instead. This is healthy for the economy, as overall it allows more crafters to operate at a profit.
The problem in game economies is that most players, whether they'll admit it or not, want things to be as easy, good, and cheap as possible. And because it's a game, and not the real world, it is possible for things to become too easy, too good, or too cheap. Just as weapons and armor have to be balanced so that they're not too powerful, thus making the encounters in the game trivial for players, so also do the other areas need to be balanced as well. If things are too cheap for consumers to buy, money pools in their pockets, the currency starts to devalue, and prices eventually start to go up. If an overall minimum level of convenience is raised for consumers (for example, adding offline selling to a game that traditionally used online selling), crafters are forced to compete more stringently in other areas, meaning that the economy now supports fewer crafters because there's less room to compete.
Artisan-type crafters generally tend to focus on quality more, striving to create the best (and unique if possible) items out there. Faced with competition, an artisan will usually try to ratchet up the quality first before dropping price, or considering becoming more convenient. Artisans are good for an economy in that they provide high quality and are usually only concerned with covering their costs and making a small profit, not seeing their bank account grow in double digit percentages each month. They're bad for an economy in the sense that they don't usually produce very fast, and it takes a lot more of them to meet market demand for whatever they're producing.
Peddlers, on the other hand, tend to focus more on convenience and price. Faced with competition, they'll engage in a price war, or they'll do things like increase production, or add a new venue, to make things more convenient for customers. Most peddlers see quality as a relatively fixed thing, and difficult to compete in once they're established. Peddlers are good for the economy in the sense that they're willing to make the things that aren't as "cool", as long as they see a profit in it. They also tend to produce in large quantities, and their focus on bringing in customers means more convenience and more competitive prices in general. However, peddlers are bad for the economy in the sense that they are pretty much are in it solely for their bank account, and will just as soon gouge consumers on prices as they will undercut their competition - it all depends on what they can get away with.
Both types of crafters are needed to make any game economy truly work, and there's a constant tug of war between them. If either side wins, consumers suffer in one or more of the three areas - price, convenience, or quality.
Barriers to Entry
The first problem area I want to address is barriers to entry. Barriers to entry happen when crafters have to reach a certain level in terms of quality, production, or presence before they can begin to make sales and actually be a part of the economy. While there's always going to be some amount of a barrier to entry into any market that can't be avoided, having high barriers to entry, or lots of them, is unhealthy for an economy and for a game. It prevents new crafters from getting started, and promotes monopolies and oligopolies. By the same token, having too small, or too few barriers to entry, you make the market so easy that it's open to exploitation. Unscrupulous consumer players will use mules to make money, instead of getting it through the other means provided in the game. This forces out the true crafters, the ones who really aren't all that interested in going out and blowing things up so much.
In general, artisans tend to be the most susceptible to a barrier to entry, because of their focus. They're not really in a position to go head to head with the big sellers in an economy, nor do they really want to. They just want to make whatever their chosen item is and have someone to sell it to. Because of this mindset, they have less money to spend when getting started (they're not necessarily going to sell the things that are in the highest demand), and it takes them longer to get going even without a barrier. The more they have to do to be able to enter the economy, the more they will be discouraged by it.
Peddlers, on the other hand, tend to be more resilient to a barrier to entry - they view it as a necessary evil, or sometimes even as a challenge to overcome. Since peddler-type crafters tend to be more focused on economic conditions than on the act of crafting itself, they're more likely to find some way to get their foot in the door - even if it means marketing a different product than they'd initially intended.
The big thing to remember about barriers to entry is that while there will always be some, the more there are, the fewer crafters, especially artisan-type crafters, that will be playing the game. If there are too few, then your crafters will be unhappy with the amount of competition they have to endure.
Market Saturation
The second area I want to talk about is saturation. Saturation happens when there are more goods available on the market at any given point in time than there are consumers looking to buy those goods. Saturation is one of those things that's both good and bad. It's good in the sense that in a saturated market, prices will tend to be lower, and consumers will be able to find what they're looking for easier. It's bad in the sense that the market is oversupplied, and it will be harder for new crafters to get started in that market.
Where saturation becomes an issue in game economies (where the purpose is to have fun and keep people playing) is when it's more appealing for crafters to make sprockets than it is for them to make cogs. Assuming that the need for sprockets and cogs on the part of consumers is about the same, there will be less crafters making cogs, and more making sprockets. The crafters making sprockets will be frustrated because they have to compete more, and the consumers buying cogs will be frustrated because they have to pay more than they do for sprockets, or because good cogs are harder to find.
Artisans, unfortunately, tend to exaggerate saturations in game economies. Since artisans craft mainly to be crafting, usually they're going to craft whatever they feel is the neatest type of item to make, or whatever they like crafting the most. Most of the time, this is the same thing that a lot of other people are crafting, so competition increases, and crafters become more frustrated. In the meantime, the artisans are neglecting other potential markets, and consumers there are frustrated because they're having to pay high prices, accept poor quality, or go to a lot of trouble to find what they're looking for.
Peddlers are less prone to saturate a market because their focus on profit means that they'll usually look for the best place to be before they start crafting. If a market becomes saturated to the point where a peddler begins to feel he can't compete, he'll change to a different market as quickly as he can. This is a good thing and in a lot of game economies, peddlers help provide the goods that aren't nearly as "cool" to make. The downside to this is that the peddler, being senstive to market conditions, is going to charge as much as he possibly can while still remaining competitive, because the market for his goods is underserved.
As I said above, every market everywhere functions at some level of saturation. Supply will almost always outstrip demand. If it doesn't, then prices will rise until it does. This insures competition. The trick is to maintain the saturation of a market at a level where competition does occur, but not so much competition as to start frustrating crafters en masse. As I said above, it's a game and they play to have fun. Not being able to do what you enjoy because all the other players are doing it too is not fun.
Demand pooling
The third area is what I call demand pooling. It's a generally accepted fact in most games and game economies that crafters produce many different levels of goods that essentially fulfill the same purpose, and that some of those goods will be more advanced than the others. For example, a swordsmith might start out constructing blunt practice swords, then over time, begin constructing hardened combat swords, and finally when he reaches the pinnacle of his career he can craft ornate masterwork swords.
When looked at by itself this seems like a great thing for any crafter. After all, crafters are no different from other players - they want to advance and do bigger and better things - in their case, making bigger and better items. Likewise, from the standpoint of a consumer, a bigger better sword is always a good thing too.
Most games use a progression system not just for their crafting, but also for the items that consumers can use as well. So a starting swordsmith provides a sword that a starting swordsman can use, and the master swordsmith provides a sword that a master swordsman can use. It's generally accepted that the master swordsman isn't going to be running around with the blunt practice sword, and the starter swordsman probably wouldn't get much benefit out of the ornate masterwork sword.
The problem arises in one of two ways - first when the consumer's progression isn't limited - if everyone gets the same benefit out of masterwork swords regardless of whether they've been using swords for a day or for 2 years, they're all going to want masterwork swords. Second, even when item progression is limited, players will naturally progress from the low end, through the middle, to the high, and then stay there. Once that swordsman becomes a master, he's going to want a masterwork sword, and he's never really going to want a lesser sword.
I call this demand pooling, and while it's a natural occurrence because of the way games are created, over time it causes problems for crafters.
Up above I mentioned that every market functions at some level of saturation. This means that when the master swordsman obtains his rank and goes out looking for a sword, odds are there's already a bunch out there that he can buy. So the economy doesn't necessarily need another swordsmith to make that sword - there's already plenty of master swordsmiths. This is fine assuming that new players are entering the game (both on the crafting and consumer sides) at a steady rate. However, when that influx slows down, demand actually begins to decrease. It gets harder for crafters to make sales, not only at the high levels of item quality (because there are more crafters pooled there) but also at the low levels (because there are fewer consumers).
Demand pooling is a problem because left unchecked, it can turn into a big fat barrier to entry for new crafters. In the real world this doesn't happen because there are always new consumers joining the economy, but in a game eventually your new players are going to slow down (they're playing other, newer games). And the last thing any game wants is for the few new players it gets to be frustrated and/or unable to do what they want to do in the game. Without some ongoing method to enforce a need for lower-level crafters even if the products they used to produce are no longer in as much demand, the effect will always be the same. Since most crafting systems utilize a mechanism of skill gain through production (whether it's based on experience earned through crafting the lesser items, or just a chance of a skill up on each crafting attempt), this eventually turns low-level crafting into a grind, where crafters have to make items that they can not sell, simply to advance to where they can start to sell.
At the same time, there has to be some kind of progression in the game - both for crafters and consumers - otherwise they simply get bored with what they're doing, and worse still, they have no real reason to come back to the economy and spend more. If the only sword I'll ever need is a basic one, then there's far less opportunity for me to spend my money than there would be if I could upgrade my sword every so often to the latest model commensurate with my skills.
Artisans are more apt to get discouraged by demand pooling than peddlers are. While the amount of tolerance for grinding varies from player to player, artisans generally want to make things and see them used - not make things just to throw away. A peddler may not like it any more than an artisan, but they're more willing to put up with it to get to the end. Overall though, grinds are not fun, for any player, and demand pooling will eventually cause it to become an issue.
Outside Forces
The last area is what I call outside forces. By outside forces, I'm referring to changes to crafting and economic systems, or changes that affect the economy even though those changes aren't necessarily made directly to the crafting or economic systems. In addition, the economic systems available in a game itself are forms of regulation, and serve to not only define but also limit the highs and lows of the economy. The systems for buying, selling, and making goods directly determine how many crafters an economy can support, and care needs to be taken in exactly how much is provided to players in the name of convenience and efficiency and how much they have to invent or do on their own. Any change to any area of the game, even a seemingly unrelated one, can affect the game's econonmy, often adversly. The more freedom the game allows players in whatever it is that they do, the greater the potential effect.
It's important for the developers to evaluate these changes not only in light of how they affect consumers or crafters, but also how they affect different types of consumers and crafters as well. A lot of times we players see only one side of it, and then only the immediate frustration or symptom rather than the root problem, and were the developers to do everything we asked it would just make things worse for everyone later.
Here are some examples:
- Make crafting easier to do and you get more mules in the economy, and by virtue of that, fewer consumers, higher saturation, more competition, and the economy supports fewer crafters.
- Make buying more convenient and you increase competition in price and quality, lower the market's tolerance for saturation, and the economy now supports fewer crafters as well.
- Make crafting costs higher and supply falls, prices rise, and consumers will complain about how things cost more.
- Increase the amount of money in the game, and the currency becomes less valuable. Prices rise, and you potentially also increase the gap between the rich and the poor depending on how you added that money.
- Add nifty new loot to creatures and you create alternate markets, but if that loot is the same type of item as current crafted goods, or is used to make better crafted goods than the standard ones, demand for those standard goods is lowered, and now the market supports fewer crafters (in the case of direct competition with loot drops) or you have added a barrier to entry (in the case of crafting done with loot drops).
These are just a few examples. When considering the impact of any change on the game, make sure that it's considered from the perspective of every type of player, with every motivation. This applies to consumers as well as crafters, to artisans as well as peddlers. How will they react to the change, given their mindsets? Will it cause the crafting and economic game to be potentially less fun for them?
Conclusion
Ultimately, in order to work, the game's economy needs to be both useful and fun for players. If the economy isn't useful, no one will use it, and players who would have played the game for the economy will simply not play. If the economy is not fun for players, they will become discouraged and frustrated, and if they are the type of player who is looking for an economic game, they will stop playing as well. A balance has to be struck. The best way to find this balance is to put yourself in the shoes of the other types of players - what is the game like for them? What makes it fun? What ruins the fun? Where do they get their money from and what do they spend it on? There's always going to be a tradeoff involved in any change introduced to a game, and in almost all situations where problems or unhappiness are reported by players, changes do need to occur, but understanding the bigger picture gives a better chance to recognize when that tradeoff will be too much - or too little.
It's very easy to get caught up in what we personally like and value about the game, or in what we personally find frustrating about it, and to make a lot of noise about these things without ever really considering where others are coming from. It's also very easy to take a cold, clinical look at the economy and recommend solutions to current issues, without ever considering the human cost of those solutions. Sure, the change might "fix" whatever seems wrong with the economy, but at the cost of how many disappointed players and even cancelled accounts? As much as we'd like it to be sometimes - it's not black and white. The best solution will always be a compromise, and some of us will always have to give a little - but it makes a better game for everyone.
I hope that this essay has helped to illustrate why that is, at least in part.
mpdivo
Thu Feb 17, 2005 2:45 pm
#2
Good post - read it and not sure I could figure your stance or point except a warning to developers that the SWG economy is dynamic and change can have a profound effect on it.
Definitely a five star post.
Definitely a five star post.
Not sure where I fall in though. I think I'm an artisan and a peddler. I'm competative and I enjoy making credits, but I do spend time making my very best quality goods. Sometimes these go unsold but I always do seem to find a buyer for it.
I am also a consumer which is where I find the economy is most broken as far as play mechanics. As a crafter, I definitely don't mind spending time surverying, taking care of harvesters, crafting, etc. But as a consumer, I hate spending 4 hours of game play going from vendor to vendor, looking for hard to get items. Especially loot and resources. It is the part of this game I hate the most.
I am also a consumer which is where I find the economy is most broken as far as play mechanics. As a crafter, I definitely don't mind spending time surverying, taking care of harvesters, crafting, etc. But as a consumer, I hate spending 4 hours of game play going from vendor to vendor, looking for hard to get items. Especially loot and resources. It is the part of this game I hate the most.
Deregen
Thu Feb 17, 2005 5:13 pm
#3
Hehe, really my point was exactly what you said - although not just aimed at developers 
I'm glad it'sunderstandable to you guysthough, I ended up pulling it apart and rewriting it about four times before I put it up. I really had a lot that I wanted to say, but it didn't all fit together neatly. In the end I decided to narrow it a little bit and focus just on showing how economic issues can be really complex and how everything ties into it, instead of alsotalking about specific problems I see in SWG and how I personally think those should be dealt with.
And thank you for the five stars!
Back in Beta (and before) I considered myself an artisan more than a peddler. And I still lean in that direction, in that I'm much more excited about making, say, a krayted dxr-6b than I am about making a regular old scout blaster or a crate of grenades(and not because of the money (grenades are actually more profitable right now with the jedi grinding going on) - but darn it if I don't have too much business sense in me, which makes me do things like set up shops in different cities, come up with a simple pricing methodology, and stockpile resources, and so I guess I'm closer to the middle (or maybe past it) than I thought. It's like any other classification - it's two different extremes that i'm describing and no one will ever fully fall into one or the other (at least not most).
But it helps to illustrate the different sides of things. At least I think so.
I have a whole list of things I think could be better about the crafting and economic game itself (both from a consumer and from a crafter standpoint) - some of them are simple and ones we've all heard before, others are more radical and maybe new. But I'd rather put those in their own post where I can give it some structure I will say that on the subject of finding things on vendors, I'm in favor of some sort of vendor search - with the caveat being that it should either be planetary only in scope, or that there should be a nice hefty fee to list vendors on there, so that only serious merchants are going to do it. Likewise, I don't mind someone wanting something delivered - but they should pay a surcharge to the system (not to the merchant) for that service. The idea is that there should be enough of a tradeoff so that people still are encouraged to actually visit shops and malls and the system doesn't turn everyone's vendors into an extension of the bazaar, where the lowest price for a similar item is usually all that matters.
I will say that on the subject of finding things on vendors, I'm in favor of some sort of vendor search - with the caveat being that it should either be planetary only in scope, or that there should be a nice hefty fee to list vendors on there, so that only serious merchants are going to do it. Likewise, I don't mind someone wanting something delivered - but they should pay a surcharge to the system (not to the merchant) for that service. The idea is that there should be enough of a tradeoff so that people still are encouraged to actually visit shops and malls and the system doesn't turn everyone's vendors into an extension of the bazaar, where the lowest price for a similar item is usually all that matters.
IntoTheGarbage
Thu Feb 17, 2005 5:55 pm
#4
Deregen wrote:
...but darn it if I don't have too much business sense in me, which makes me do things like set up shops in different cities, come up with a simple pricing methodology, and stockpile resources...
Yup, those are bad business practices allright. 
You are not alone, most gamers aren't good business people I'm afraid. Then again, most people aren't good business people, period. Come to think of it, most business people aren't good business people...
I agree with your principles, though I did find your descriptions of some of theeffects of economic change to be a little over-simplified. (Though that was probably on purpose.)
Poldano
Thu Feb 17, 2005 6:43 pm
#5
Dang, I didn't mean to 1-star this, I meant to 5-star it! I'm sorry! 
This is a great framework for most current comments about the game economy and related matters, including the merchant profession and to some extent both player cities and NPC cities.
Saego Kennar & Ambrus Kennar, Wanderhome
LordCharly
Fri Feb 18, 2005 1:55 am
#6
Another great post in this forum, this is good reading.
Thanks
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