AO economics for n00bs & fr00bs alike

[Alienchild]

Before I go on to explain a couple of things, let me just say what my background is; I work with economics and marketing. I put up budgets every day, and I work with hundreds of different firms. I know VERY WELL how the supply and demand system works, and the real world standard model that we all relate to cannot really be compared to AO. More on that in a sec.

I have also - as many on RK2 know, been farming credits since I started playing this game right after launch - so soon 4 years. I have seen the change in the AO economy, and I have been a part of raising and lowering the prizes. I've been able to make 1b+ a week when the most expensive items out there was RBP's for 350m. I was also the one that started the insane RBP prices on RK2 by selling one for 900m when it was going for 400'ish, and everyone and their dog tried to sell theirs for even more afterwards.

Anyways, enough "bragging" if you want to call it that. First of all, there is a MAJOR difference between real world economics and AO. First of all, in AO you are never dependant of money. You don't have credits, who cares? No one is gonna kick you out of your home, cut your elecricity... you wont go to bed hungry. In AO, everything you buy is luxury. You might say that "but I need X weapon and it costs hell of a lot!"... well, if that "X" weapon is in the hundreds of mills, then you don't need it. Period. Almost everything you need, you can blitz. The rest is luxury. You don't NEED to be über, and you most definately cannot claim that being über is a right you have. It is like with respect. You cannot get it, you have to earn it.

If you agree with this, then you cannot disagree with me when I say that the supply and demand in AO is based on totally different values than most of us live our lives in the real life. In real life, we always weigh our luxury needs (new car) against our basic needs (food, shelter). In AO, we think luxury.

If you complain about the AO economics, then remember that you are complaining about that the distribution of luxury items isn't "fair". Well, fair and luxury have never gone hand in hand. Smart, hard-working, knowing the market... those are the words that describe a winner in this game of über-loot. If you complain, then you most likely do not fit any of these descriptions.

Work hard, but still don't have any cash?
Then you don't know your market.

You farm all the right items but you still don't get enough cash?
Work harder.

And there you have the wole formula of success in the race for AO-item überness. Simple as that.

So what determines what an item cost? Well, that's where the "Supply and Demand is not the same in AO as in RL"-thing come in. Not only is AO all about luxury, but the whole economics are based upon decisions made by a lot of different people from different cultures, at different ages and with different backgrounds. Yup, just like normal economics except that when it comes to for example stocks, knowing what a well-educated executive of a big company will do is based on what is most profitable for a company... and it has nothing to do with luxury. It is to feed the basic needs of that company and allow it enough economic growth so they can either expand or strengthen their position in their market.

When I recently bought a RBP for 2.3bill it wasn't because I thought it was a move that was smart to do. It would not strengthen my character much, mostly since it was for a crat. It was stupid, and I did it for fun. It was the same reason I bought a dbody and ql222 MBC for the same crat. Stupid. But fun. Totally unpredictable, and it gives a signal to the market that there is a demand for these items and that people are willing to pay high sums of credits for them... which brings me to the next "piece" of this ramble;

This determines what an item cost
*How fast an item sells on the forum. 7 bumps over a period of 3 days before it got sold when there was a flat price? The next seller might either set a lower price as min, and perhaps the same as the last one went for as BO, or sometimes a bit higher if the seller is optimistic.

*How many items there are out there of the same item. Look at RK2 MBC's. On RK2 a couple of months ago, one was sold for 1.3b. Much for an MBC, so right after that another seller tries it for 1.2b since the last seller had to make a few bumps before it got sold. Prophets (a friend of mine) immediately bought it for BO. 2 days after, a QL222 MBC is for sale. I buy it. All these sellers sold their MBCs for prices higher than had been normal for a MBC this QL range (220-228). Result? Lots of MBCs for sale. Even to this day.

*Item-nerfing or change of game mechanics. What would you say if your newly bought Ferrari suddenly got half the horsepowers? You'd get mad, and demand your money back. Doesn't happen in AO. Instead, most people that have an item that gets nerfed either directly or in-directly sells it right away. Everyone want to sell it faster than the next guy, so they dump the prizes accordingly.

*Other items introduced that are better/look cooler/etc. This is pretty self-explanatory.

These 4 important elements (there are probarbly lots more) are among the elements - together with supply and demand, that make up what items cost. Some of them are in ways connected to supply and demand, just like availability, which is a topic I haven't touched. Or even how much credits there are in circulation.

Summary
As you can see, it is ALOT harder to explain how the market works instead of actually explain how you can make it work for you - in your favor. Too many people are too stuck up with how the market actually works and start blaiming it for now working for them. The answer is that the market is too unpredictable and too advanced, so the person(s) who blame the market can never - read: NEVER - totally justify why the market is "wrong", "bad" or any other word that is synonymous. The best way to summarize it, is simply; STFU and get to work.

[Anorah]

Actually, electricity, heat, warm bed at night, air conditioning, decent food, and all the such you listed as 'needs' are all luxaries too. Take a look off your computer screen for once, and you will see that millions of ads run every month for poor children in 3rd world contries that have nothing that we have. You should know that, if you ''work in economics.''

Then again, aparently everyone on the forums ''works in economics.'' Funny thing is, each and every single person that claims to ''work in economics'' has tried to claim that the AO community is far more advanced than what it is... supply and demand.

[Homeostasis]

Very well said.

[Alienchild]

Actually, electricity, heat, warm bed at night, air conditioning, decent food, and all the such you listed as 'needs' are all luxaries too. Take a look off your computer screen for once, and you will see that millions of ads run every month for poor children in 3rd world contries that have nothing that we have. You should know that, if you ''work in economics.''

If I should follow your logic; a hammer is luxury for a contractor that builds a house, since there are people out there who do it with a stone since they cannot afford a hammer. I happen to live in a society that has evolved to a point where a power shortage would severaly decrease the living standard. I happen to live in a society where decent food - that is, food that isn't dropped from planes in white bags, has become a norm. A standard. The same with heat. A warm bed... and so on. Most people that live in industrialized countries have it that way. When I address an audience (which everyone who post on this forum do), then I tailor what I say to that audience. In this case, I am willing to bet that most of that audience live in industrialized countries where they can relate to what I mean with "real world economics". I think about household economics. I would alienate most of my audience if I started to compare AO economics to what most of the people in the world actually live in - poverty. It does not take an Einstein to realize that.

[Dextar]

If I should follow your logic; a hammer is luxury for a contractor that builds a house, since there are people out there who do it with a stone since they cannot afford a hammer.

You are confusing basic needs with luxuries. Basic needs are food/water, shelter against the elements and some would say clothing although in some climates you could easily live without clothes.

A hammer is indeed a luxury because is is beyond a basic need.

Even in our modern society one can exist without a hammer.

[Obtena]

Actually, electricity, heat, warm bed at night, air conditioning, decent food, and all the such you listed as 'needs' are all luxaries too. Take a look off your computer screen for once, and you will see that millions of ads run every month for poor children in 3rd world contries that have nothing that we have. You should know that, if you ''work in economics.''

Then again, aparently everyone on the forums ''works in economics.'' Funny thing is, each and every single person that claims to ''work in economics'' has tried to claim that the AO community is far more advanced than what it is... supply and demand.

Actually, I think Alienchild sums it up nicely. his points make sense and are easily comprehendible by anyone with a bit of mental ability to interpret ideas. Your post is simply .... too rediculous to consider. Go Troll elsewhere.

[Obtena]

If I should follow your logic; a hammer is luxury for a contractor that builds a house, since there are people out there who do it with a stone since they cannot afford a hammer.

You are confusing basic needs with luxuries. Basic needs are food/water, shelter against the elements and some would say clothing although in some climates you could easily live without clothes.

A hammer is indeed a luxury because is is beyond a basic need.

Even in our modern society one can exist without a hammer.

Again Rediculous. The point of Alienchild's post is to explain how in simple terms what drives economy in AO. It's not to debate the RL luxury of a hammer or electricity. Quit being so beyond nonsensical.

[Dextar]

The point of Alienchild's post is to explain how in simple terms what drives economy in AO.

Exactly but when one uses unclear or wrong terms he complicates or confuses the issue. A dialogue can not reach a truthful conclusion based on ill-defined or unclear terms.

AOs economy as its most basic level is like any other economy. Supply and demand drives prices.

Luxuries are part of an economy, always have been, always will be.

[Obtena]

I dont think anyone that owns a computer and plays AO would consider a hammer or electricity a luxury, therefore his perception (an also the majority of people reading this post) would not be at all confused about his examples. It is neither illogical or ill defined to use the examples he did when considering the audience that the material is presented to. Nice try though.

[Dextar]

It is neither illogical or ill defined to use the examples he did when considering the audience that the material is presented to. Nice try though.

It is illogical to use terms that are eroneous as it confuses the issue.

There is a simple way to determine whether a hammer is a luxury.

Can a human live without a hammer?

You can add all kinds of qualifiers to make it seem like it is necessary to have a hammer to live but in fact the simple truth is humans can indeed live without a hammer. Therefor hammers are a luxury.

Also if you do a bit of investigating a very large majority of goods and services in our modern economy are luxuries. Probably way more than most people would ever realize.

AO's economy and the RL economy boil down to one very simple rule nothing will sell unless there is a willing buyer and a willing seller.

[Anorah]

I dont think anyone that owns a computer and plays AO would consider a hammer or electricity a luxury, therefore his perception (an also the majority of people reading this post) would not be at all confused about his examples. It is neither illogical or ill defined to use the examples he did when considering the audience that the material is presented to. Nice try though.

Did you completely miss my point about 3rd world countries? EVERYTHING we have in America/England/Canada/wherever you live, since you are posting on the forums, is a luxary. Your first sentance,

I dont think anyone that owns a computer and plays AO would consider a hammer or electricity a luxury

shows how ignorant you are to things outside of your perfect little world. Grow some balls and go on your local church's next mission trip to Haiti, or another 3rd world country. You will see that most people in today's society take things forgranted. It is a luxary to have the JOB of being a contractor, as one can survive without that job. In fact, it's a luxary to have a job period. One does not NEED money to survive, and television's hit show Survivor proves that. Granted, Survivor does not portray a 100% accurate luxary-less life, but Survivor shows what one NEEDS to survive, and I see no hammers on that show. Humans *COULD* live in hey-hut 'houses', thus the contractor, who would build actual brick/stone houses is a luxary. Quit fooling yourself, you don't NEED electricity to survive, or heat, or that hammer. Earliest of the early caveman found a way to survive without all those luxaries served to them on a silver platter, and the least you could do is figure out what a luxary is as compared to a need.

Nice try though.

edit: And Obtena, before you try to resort to personal attacks, claiming that I don't have the mental ability to interpret ideas, you should second check your own spelling, grammer, and capitalization for errors. My sentances are written correctly, your's look like my dog took a dump on them. One should not be putting down one other's mental ability without checking their own first. Hypocrite.

[attackbeta]

Settle down

Alien makes some good points and they are valid in the world of AO

[sapphyra]

I think the original post is actually quite well thought out. *shrugs* Life on Rubi-Ka...gotta love it!

[Slyyk]

edit: And Obtena, before you try to resort to personal attacks, claiming that I don't have the mental ability to interpret ideas, you should second check your own spelling, grammer, and capitalization for errors. My sentances are written correctly, your's look like my dog took a dump on them. One should not be putting down one other's mental ability without checking their own first. Hypocrite.

Perhaps you should double check your own first. You misspelled 'luxury' 7 times. You misspelled 'sentence' 2 times. I don't believe 'forgranted' is one word. You put apostrophies on a couple of words that don't need one (church's instead of churches for example). That's just some basic stuff I see wrong, don't get me started on the grammar and sentence structure...



Edit: There are at least 7 errors in this one paragraph I quoted, including spelling, non-needed apostrophies, starting a sentence with the word 'And', run-on sentences, etc.

[Heliev]

One does not NEED to split hairs to the point of absurdity on trivial parts of a post to take the focus off the subject ether. The first post was well thought out and well formulated.

[Talan]

I congratulate you on a well thought out derail of a thread Anorah, bog down an argument in a trivial point with no real impact on subject at hand, a masters hand.

On the subject at hand, I think its a wellthought out post, and I agree with almost everything there.

[mawu]

I tend to be on the side that an economy is an economy. luxury or not - it is supply and demand what drives prizes. No economist claims all buyers desicions have to make sense. You want a MBC/DChest whatnot for your crat - you shall have it. provided you bring the money to outbid the competition. If AO would need food for your toon then this would be a need (in contrast to the dchest). The bidding on food items would however run on the same line as the bidding on dchests. I cant see a difference here.

[Jajangmyun]

what Heliev and Talan said. Interestinig post, don't need to argue what is luxury and what isn't in RL when we are talking about AO...

[Katrien]

No economist claims all buyers desicions have to make sense.

Yeah, they do. Purchases like that make sense because the utility of a dchest outweighs the utility of having 800 million credits in the bank.

The reason that the dchest gives that utility - whether it's for the chest's functionality or just for bragging rights - doesn't have to make sense. But it doesn't necessarily even matter. By saying "I will pay 800 million credits for a dchest", you are clearly saying that you will achieve 800 million credits worth of utility from a dchest, and therefore the purchasing decision makes sense. (Worth noting: a good deal of that utility could come from the value of a future resale; this is the same reason that certain works of art possess millions of dollars worth of utility.)

Anyway, interesting article, Alienchild. I can't say I fully agree, but I love to see well-written articles about economics on the boards.

[ThePartisan]

AO economy is of course not exactly the same as RL economy, but some simple processes are easy to identify. Think I've mentioned this before somewhere, but here goes...

People complain about items being overpriced. This is not possible. If somebody charges 400 million for an item and somebody is willing to pay it, it's not overpriced. If 'going price' for an item is 400 million, it's not overpriced. The fact that YOU don't have the credits to buy an item doesn't make it overpriced. The 'going price' or market price for an item will always be correct, never underpriced or overpriced, that's the definition of the market price. However, if market price for an item is 10 million and somebody charges 30 million, that individual item would be overpriced because it's way higher than market price.

Also, it's not possible to say 'Item X is not worth price Y'. If somebody is willing to pay price Y, then that's the value. If nobody is willing to pay price Y, the price wouldn't be Y in the first place or it will be lowered to a price somebody is willing to pay. It's not something anybody needs to complain about, it adjusts itself.

People say there's too much money in AO, making items overpriced.
Let's say we removed most of the money by dividing everybody's bank accounts by 10. A person with 800 million now has 80 million credits. RBP would only cost 80 million. Would you then be able to buy it? Would everybody suddenly be able to buy an RBP? No. The item would still be rare as hell and the number of people wanting it would still be high. The item would still only be available to the 'elite' in the game. I don't know why this is so hard to understand, but there's no point in blaming your inability to purchase goods on the amount of credits in the game. The amount of credits doesn't matter. Even with less credits in the game, you'd STILL not be able to buy the top goods! You have to realize that with less money in the game and 'lower' prices, YOU would have less money too.

The only way to influence the real prices is to adjust supply (item rarity, remember when VTE became easier to get?) or demand (item becoming less attractive, for example because of new items).


There will always be the poor and the rich, guys.