Business And Economy Archive

Having seen how many people are interested in the state of the SWG economy as a whole from the other threads on loot increases and their effects, I wanted to start a discussion on the economy in a more general sense, taking into account as many contributing factors as possible. The purpose of this is not to rant against anything in particular, or indeed to complain much at all (though I might inadvertently slip a few gripes in); rather, the point is simply to discuss things. I also want to stay away from 'devs should do this, or fix this', since in reality none of them will ever read anything on these boards, much less act upon them. The GCW board is full of posts plaintively pleading for new systems to be added or changed - most of them are poorly thought out, some are quite brilliant, but none of them will ever be implemented. Rather, I would hope that we can discuss the economy as it is, make some intelligent predictions on how it will be, and toss around suggestions on how we can make it healthier and more agreeable to the players as a whole.

I should also add that I am no economics expert. I suspect none of us are - if we were, we would be using our knowledge to make lots of real money and enjoy our stock options instead of wasting our time on a message board. Everything I know about economics I learned from Dilbert. However, that makes me exactly as qualified to comment, or more so, than everyone else here, so let's try to avoid flames and keep discussion positive.

Real World Concepts that do not apply to SWG economics

Fiscal Responsibility. As someone said, nobody here owes anything to shareholders or investors. Nobody here has to work for a living, or feed their kids with the profits of their piket missions. If you go bankrupt in the real world, you live in a dumpster. Here,there are no ramifications. You can quit this world any time with none of the associated problems of quitting the real world, such as leaving an unattractive corpse. What this means is that you cannot expect people to behave in a real-world fashion with their money. People can be as retarded as they like with it, and that is no more wrong or right than someone who tries to behave as if it were real money. This is as it should be - this is a game, and in a game, taking on responsibilities you don't want should not be required. However, this is fundamental to understanding SWG spending patterns - instead of looking at necessities and luxuries, you have to consider that the entirety of the market segment consists of teenagers with vast amounts of disposable income. And if they are not teenagers, they are adults acting like teenagers, like me. What this also means is that SWG businesses are created solely for the personal satisfaction of the owner, not for any other reason. And to say to someone that they are doing something wrong based on that is a difficult call to make indeed.

Regulatory Bodies. There are no laws to obey or circumvent here. Overt price-fixing is illegal in the real world, even though it goes on all the time. Antitrust laws also exist to prevent undercutting and monopoly, but no such regulations exist here. We are the creators of this economy, and we do it without any oversight whatsoever. We are at liberty to do whatever we wish - credit dupes, price-fixing, monopoly. These have significant effects on the economy - SOE can ban some dupers, but it still goes on, and surely no one is naive enough to believe that the untold billions of creds in the economy right now all came from baz nitch missions. When they say this is a player-created economy, it is just that - we and we alone create most of the conditions involved here. (There are a few developer-created conditions, such as the basic framework and the influx of loot, but they do not set prices or have any say in that - we do.) Many people say the economy is borked, and many people say also that the economy is to blame for struggling junior crafters. But nobody made this economy but us - while it is correct to say that no one person can alter the whole economy, it is also important not to underestimate the impact two or three people have on their whole field. This economy exists in the state we made it - no one person, but as a whole, and the impact that big players in the economy can have is quite considerable.

Research and Development. Unlike the real world, crafters in SWG are constrained by what they have to work with - they cannot innovate and develop new products. This then limits the playing field considerably - product differentiation is very small, and usually exists in hard numbers. There are some exceptions - armouring is reasonably complex, and so is BioEngineering, and food too to a lesser degree. Even weaponsmithing has a small amount of room to play, but by and large, we are severely limited in what we can make compared to the room for invention and innovation that exists in reality. This is not a fault of the game - no game could hope to encompass all of human creativity. However, it is an important factor to consider in any economic debate. Certainly innovation, whereby smaller companies can gain a technological edge over established ones, is not going to be an option for a junior crafter here.

Market Sustainability and Depreciation. In SWG, depreciation and decay is limited. Houses, harvesters, and so on do not wear out, or decay, nor do they lose intrinsic value over time. (They may lose extrinsic value, where the market values that product less, but that is not because the house got shoddy or its pipes leak.) This means that many products require no replacement, or require replacement solely at the whim of the owner. Real world companies are able to rely on sustained production and sustainability of a market. Crafters in SWG are not able to guarantee production - their production is limited by resources that no longer exist, a liability real world companies simply do not have, barring major disasters. Furthermore, there is no guarantee of a continued market - in the real world, more consumers are born every minute, but in SWG, the growth rate is dependent on the game's popularity, not how many people have a free moment and a willing member of the opposite sex. All of these apparently small factors add up to the fact that market growth and market sustainability are very different in an SWG economy - replacing broken things, getting new consumers, and so on are much more difficult for the SWG business than they are in a real
business.

Real World concepts that do apply to SWG economics

Supply and Demand. No economic treatise that is trying to sound really important is complete without mentioning supply and demand. Now that I've convinced you all that I'm a genius, let's move on.

Costs. All things have a cost, whether opportunity cost or real cost, and SWG businesses are no different. The costs of making something versus the costs of selling it must be weighed, even if that cost is just that you waste an hour or two better spent on homework or your girlfriend. All successful SWG businessmen are able to identify their costs, that's not in question. However, what those costs really mean is the next step, and that gets much closer to the core of the issues.

Marketing and product availability. While it's harder to market here than in the real world, where you have TV and radio and other mass media, the principles remain the same in SWG. Greater product visibility translates into more sales. The concepts of niche markets and product loyalty also exist, and are just as important as anything else in determining the success of a SWG business.

Inflation. Inflation should apply, but it does not at the moment. There was a time, around the time of some of the more noticeable dupes and around the time solo groups really started to become a factor, that inflation did exist, at least in some market segments. Prices of food, armour, and other healthy parts of the SWG economy went up. However, those prices came down again, and indeed they came down well before solo groups were fixed. Inflation in the current state of the economy does not exist, even though there are factors that indicate that it should. There are some valid reasons as to why this is, which I will go into in the next section.

The SWG economy is an internet-based economy, a phenomenon which has arisen in the past decade or so with the proliferation of dot-coms and eBay and similar auction sites. Internet-based economies have substantial differences from conventional economies, and it is these that really make the difference when trying to understand the dynamics of the SWG economy.

Perfect Knowledge. Perfect knowledge is an economic concept that serves to illustrate why many strata of goods can simultaneously succeed. Basically, what it means is that no consumer can have perfect knowledge of the goods he is trying to buy - he is not going to make a totally informed decision based on all the facts. As an example, I went and bought a TV this week. I didn't shop around, really - I might have noted some prices in passing over the previous weeks from catalogues and shop windows, but I didn't look real hard. Instead, I went to a place I knew would have a good selection, I looked over their selection, and I picked the best one that was within the price range I wanted to pay for a TV. For all I know, just around the corner there might have been a shop selling the exact same TV on a sale for a third of the price I paid. Or there might have been another TV two blocks away for the same price I paid but that had way more perks. I don't know any of this - I don't have perfect knowledge of the TV market. It doesn't matter - I paid what I was prepared to pay for a TV, and I got one that does what I wanted a TV to do. From the point of view of the shop I bought from, that means that they may have just got away with selling me a TV at a certain price while their competitors either sell better TVs at the same price or sell the same TV for way less. They can do this because a) their TVs are within the price range most people are prepared to pay, and b) it is impossible for consumers to have perfect knowledge. If their TVs had been outside what I was prepared to pay, I would have shopped around. But because they know what most consumers are prepared to pay, they can continue to do business.

Perfect knowledge may be impossible in a conventional economy, but in an internet economy, and in the SWG economy, it is easier to get close to perfect knowledge. The ease of searching, browsing and comparing means that discrepancies in price and quality are more readily shown up. Absolute perfect knowledge is still impossible, since there might be goods and deals that slip through the cracks, but it's much easier to find where the best deal is for the lowest price, or where the best goods are. SWG works like this - we can find where the best weapons/armour/whatever are, for the lowest price, fairly easily. Not as easily as if we had Google, but much more easily than if we had to troll store after store, read through pages of ads, etc. This increased consumer knowledge then ties into the next point, which is one of the most important factors in the SWG economy.

Only the best. Studies have shown that when we buy something, the anxiety we feel at wondering if we in fact got the 'best' - the best deal, best value for money, or the best goods - outweighs the satisfaction we get from buying. That's the nature of how competitive we humans are - it's not enough that we got something we wanted, it also has to be the best, so other people can't have something better. In the real world, we cannot always afford the best quality - we don't all own Porsches, we don't all fly First Class. But we continue to compete, by looking for the best deal, the best value for money, the best we can afford. In the SWG economy, and in most internet economies where supply exceeds demand, only the best quality matters, because we have no fiscal responsibility, as outlined earlier, and we can spend freely on luxuries to get whatever our ego demands.

Consider professional sports, which is a very close analogy to how the SWG economy works. Professional sports, like SWG goods, is a field where the numerical values of the commodities are easily measured, tracked and compared. We can see that this T21 does 410 damage whereas this one does 409. We can see that this running back ran for 750 yards last year whereas this one ran for 650. We can see that this batter averaged .450 whereas this guy averaged .550. In professional sports, just like SWG, there is the perception that even the tiniest difference in stats can make that crucial difference between winning and losing - this is why 1% better is worth many times more. Put another way, you might be able to buy a whole team of guys who are 95% as good as Shaq for the same price that you can buy Shaq, but you won't have Shaq, and in the clutch, he might make the difference between winning and losing. The demand for highly skilled professionals in business is much the same - qualifications are easily compared, and if 1% difference might make the difference between success and failure, then that 1% is disproportionately valuable. Yes, it is true that hard numbers do not tell the whole story, and that there are countless factors that might determine success and failure outside of hard numbers, so overspending to get that 1% extra numbers might be foolish. But that's not as relevant to the state of the economy as the fact of perception - it is perceived that the 1% is critically important, so that's what people will spend on.

Why don't we have this 'only the best' attitude in our day-to-day spending in real life? Well, the truth is that we do, but we are also tempered by some realities. Most of us cannot realistically have the very best car, the very best house, the very best everything. So we define our bests differently - we seek the best value for money, we seek the best deal, the best bargain. We try to stand out in different ways than spending more money than the other guy, even though generally if we can afford to spend more money, we will. However, in an economy where the money we spend is virtual, where we have no fiscal responsibilities, and where we are buying solely for our own gratification, there's nothing to stop us indulging our desire to only have the best.

***

The next question is, what does all this mean? It's one thing to say the economy is like this, but what does it mean, and what can be done to fix what we're unhappy about?

To that I say, there are problems with this economy, but they are not the ones that are commonly complained about. A lot of this is merely personal opinion, but I feel the primary challenges facing the economy are more to do with discouraging buying and selling and an overall lack of interaction.

To whit, I don't think that the issues that many people bemoan, such as complaining about things having high prices, are actually problems. It's very hard to overcharge in an economy as diverse and free as the SWG economy - if you charge more than people are prepared to pay, then you don't sell anything. If people are prepared to pay what you ask, then you're not really overcharging. Total monopolies are almost impossible, even for very rare loot, and even when certain markets are almost monopolised, just about nothing is so essential that people are forced to pay extortionate prices. It's almost always a complaint that 'I can't afford the very best in that field, therefore it must be too much', rather than being made to pay too much.

Rather, I think that the real problems facing the economy are that players are finding that there are less and less reasons to buy and sell. JTL is a prime example - a shipwright doesn't need to interact with any other crafter, and pilots only rarely need to interact with a shipwright. Their ships aren't disposables, and most of their ship components are better looted than crafted, so there isn't really very much of a JTL economy. Similarly, the jedi grind - jedi are more or less noncontributors. They don't really buy anything except food and buffs, and those only where their alts cannot provide, yet they are the most desired and effective profession in the game. I don't blame jedi for problems with the economy, but I do think that the economy does not benefit from their position in the game. These aren't the only examples of a lessened economy - overall, we are finding that there's less and less reason to buy and sell things, and I think that the economy would benefit from more reasons to and more transactions in general.

How to go about that? Well, there are many ways to still make a lot of money in the economy as is. Mostly, these involve around understanding the faddish nature of SWG buying and selling, as well as the more basic elements of business, such as providing good product and marketing. But as for how exactly to improve and foster economic interactions in the game, I want to throw that open for discussion. Is this the best way to improve the economy? Is it even a problem that people are buying and selling less? If there are other problems, what are there?

Now this should be required reading for anyone who posts in Business/Economy forum. This thread needs to be stickied, imo. Good job, Relic.

Slim Vargo, Corbantis

Great Read. As for some of your questions:

Daboora

º°º°º Rodan Dakkmir º°º°º

º Master of Procrastination º
"Dedicated to Putting Off Grinding Jedi since 12/21/03"

Excellent post!!

I do take exception with the level of perfect knowledge. I think it is equal to, if not less than the real world. For one thing, we have LESS advertising mediums. We have no yellow pages. We have no Sunday newspaper. No cable TV. In short we don't have the mediums that a MAJORITY of vendors can be found on. The mediums we DO have are: 1) the global map and 2) the Trade forums 3) Starport spamming (either droid or AFK macro).

1) The global map is a highly ineffective and boring advertising medium. I have NO idea what percentage of the crafting population exists on it, but I'm fairly certain that while the average player may go there, they only visit one or two stores until they, like you and your TV, find the item that is closest to your parameters. They have no idea if the next place has a better deal. They probably don't hit every store on the map, much less on every planet, to do their shopping. Customers are just inherently lazy. So I'd say they will hit the ones closest to them, move out until their parameters are met.

2) The Trade Forums have an inherrent flaw. They're here, not in game. SOE has told us time and again that the amount of subscribers who even COME here is nowhere near a majority, and ones that stay and read things and visit here habitualy, much less contribute is even smaller still (like less than 20%). So you're only seeing a fraction of the market of vendors, though you might get an idea of mean price, and you're only reaching the same amount of customers. Worse, you're reaching a far more "hard-core" market that in all likelihood has their needs filled. This website is a difficult place to reach new customers.

3) Starport spamming is annoying. Many people ignore whatever is spamming with the /addignore funciton. Many others just don't listen. Others take a personal offense to it.

But that aside I highly agree with your analysis.

My response to your question is, I think there needs to be a higher level of interdependancy between all professions, and a higher level of interaction between customer and vendor. I think the latter can be reached through higher levels of options and customizations of all manner of goods, and also by broadening the scope and abilities of merchants so that they are more desireable and effective to crafters as people who sell things, as opposed to their current status of people with NPCs. In fact, most merchants don't exist. It is only their vendors anyone truly cares about or interacts with, to the point where there are few people who sell goods that they did not make themselves. I think that if merchants were better at advertising and more secure to enter a business relationship with, then more crafters will be less inclined to take the lowest end of the profession possible because it would be more beneficial to let a "professional" handle the matter.

Dayasi Vo'Boda CEO of SCUM PA.
Founders of Agrilatia in the Agrilat Swamps Of Corellia (Intrepid).
Taking Scum and Villainy to a new Level to Serve YOU.
Remember: SCUM does it dirtyAnother Horseman of the Smuggling Apocolypse

Excellent article!

_______________________________________________________________________________
Callyndra, Elder Medic (Formerly Master Doctor (7/12/03), Master Combat Medic (7/25/03)
Guildmistress of Transcendence and proud citizen of the City of East Lianorm, Naboo
Co-administrator of the Corbantis.org Message Boards
Former owner/operator of Callyndra's Meds (7/15/03 to 11/15/05)
Co-founder of the late Corbantis Medical Dealers Association (Pub 9 to CU)

Visit the Transcendence Mall & East Lianorm Shops: 3150, 2750 Naboo
Proudly serving the community of Corbantis since September 2003

Your response and analysis are good, but unfortunately they're about to become moot.

Ledao Bohi, Master Doctor
Now with 3 locations: Ledao's Meds in beautiful downtown Galatorbria, Rori (327 -1770), Ledao's Fine Pharmaceuticals @ UAT City, near Coronet (970, -5590), and Ledao's Premium Meds and Resources on Tatooine @ (-1922, -4041) just 750m SW of Bestine.
Comprehensive Stock and Price Listing Here

Have to agree, this new global vendor search is the worst thing to happen to SWG ever...even worse than holo-grinding. I hope the Devs come to their senses and either a) drop it entirely or b) make significant modifications to it.

Slim Vargo, Corbantis