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View Full Version : Supply and Demand in the first week.

Azzure
20-09-2011, 05:48
Myself and Neinball were having a chat recently about what we anticipate the dollar value of certain items will be. There are certain items that are slightly easier to predict, such as Gems (3gems = 1x next level gem therefore next level gem = the value of 3xlower gem), and a few things we can correlate to World of Warcraft values, such as common materials and consumables etc.

In the first week of the game, things are going to sell for highly inconsistent amounts. The first thing people will buy is Gold, which will be used to buy scraps and stash slots. There may be small instances where people buy good rare items for real money but that is not going to be common, as items are constantly increasing in power every hour of play.

So here is how supply and demand will look at the early stage of the game.

Gold is going to be the backbone of how things are priced. If you can vendor 1 common scrap for 5 gold, than the AH price of a common scrap is going to be higher than 5. Think of 5 as the bottom price a common scrap can be. Now apply the super-basic supply and demand formula to this:

Value = base vendor value x (demand / supply)
For every common scrap that is put on sale there needs to be someone who is willing to pay the lowest amount for it (aka more than 5g). This will ALWAYS happen because demand is higher than supply, as the use for common scrap is used to level up your artisan. And everyone will be doing this.

Lets pretend that in a single play-through up to the end of act 1 you get 20% of the required Common Scrap you need to get your blacksmith to the next level. Lets assume you don't want to farm low-end content and want to continue on to act 2 in which common scrap no longer drops, but you want to have your blacksmith at the next level so he's ready for act 2.

Now lets pretend this is an average for everyone playing. So one play-through up to the end of act 1 gets you 20% of the common scrap required to level your blacksmith to act2 level.

So for the formula: demand = 5 (100%/20%) . The supply is 1.
Value = 5 x (5/1) = 25g

In a perfect world, the price of 1x Common scrap in the AH should be 25g.

Of course, we don't live in a perfect world and scraps are going to be listed at all kinds of prices, but you get the point.

TruePredator
21-09-2011, 10:17
This reminds me alot of what happened to the WoW AH after a major patch or right after an expansion, just chaos. That is how I am imagining the D3 AH will be the first 1-2 weeks perhaps longer, like you said "highly" inconsistent amounts.

What I'm curious about since even anyone new to D3 will know of the RMAH, will probably think like we all do "I could make money O.O" and as expected they will more then likely be pointed to this site ( of course, I mean where else would you go?). Do you think that having this kind of resource with statistics, item pricing, worth and all that juicy information will effect the early AH(both RMAH and Gold)? Maybe help it "fairly" stabilize quicker? Or is the player base that big / not interested it probably won't? keep in mind though its real money and everyone likes how-to's and guides and this site will kinda provide that.

WoW had addons and such to keep track of that information, players will have to actively either keep track themselves or come here for information then rely on a script in game to scan the AH if they expect to accomplish much.

Just a random thought.

MilkmanAl
21-09-2011, 13:42
Honestly, I think that everything will be so new that you're going to have insanity in the prices for quite awhile. If Blizzard decides to release an Arreat Summit-esque site where you can see all the items, the ones that are obviously way better than most are going to be ludicrously popular and expensive until supply catches up with demand (a few weeks, I'm guessing).

As for this site stabilizing things, I think it'll have an effect but not for awhile. The more immediate regulator will likely be d2jsp since they already have an established currency in place and a much larger audience. It'll give people who are unwilling to directly drop cash on D3 a way to mass purxhase supplies and/or pull in that really valuable item right off the bat. I hate that site, but there's no denying that it'll be a big factor in the early market.

Neinball
21-09-2011, 15:48
Honestly, I think that everything will be so new that you're going to have insanity in the prices for quite awhile. If Blizzard decides to release an Arreat Summit-esque site where you can see all the items, the ones that are obviously way better than most are going to be ludicrously popular and expensive until supply catches up with demand (a few weeks, I'm guessing).

As for this site stabilizing things, I think it'll have an effect but not for awhile. The more immediate regulator will likely be d2jsp since they already have an established currency in place and a much larger audience. It'll give people who are unwilling to directly drop cash on D3 a way to mass purxhase supplies and/or pull in that really valuable item right off the bat. I hate that site, but there's no denying that it'll be a big factor in the early market.

Very, very good points. One of the biggest factors that will contribute to the pure chaos the first few weeks (and potentially months) is going to be the fact that we just won't know what it is that we have.

An axe has a +50 attack mod? Only \$3?! SWEET DEAL! A day later the same axe appears with a +151 attack mod and is \$4. Ah crap...

Unless Blizz setups the D3 armory, a la Arreat Summit, before the game launches we won't know the differences between crap, good and GRRRRRREAT items.

Your second point, I think, is going to be a huge factor for the early markets but it's effects will be temporary. Forum Gold (FG) will have little value after the economy adjusts itself and people have the funds (both gold and \$\$) to start spending on the AH, so what are these people with Scrooge McDuck size stashes of FG going to do? Dump it of course! I can see d2jsp going through a phase of massive fire sales with people willing to dump large amounts of FG on D3 items and gold just so they can rid themselves of FG while it still has some value, but as people dump their FG and move to solely using the ingame economy the impact of it will dwindle. I'm sure d2jsp will still be around for long after D3 releases but it won't have the impact on trading that it did for D2, well... At least it won't for SC characters, HC is another story...

And speaking of Arreat Summit, Nebu if you ever read this... Thank you.

Peter
21-09-2011, 16:01
What is forum gold?

Neinball
21-09-2011, 16:40
Forum gold is a currency for trade used at d2jsp.

You can buy it from that website and then use it trade with other members from there, but you can never cash out FG, so selling of FG for \$\$ is forbidden there. It was primarily used in D2 but has since spread out to many other games, but there are literally millions of \$\$\$ that have been poured into that site for FG.

MilkmanAl
21-09-2011, 18:52
Ah, interesting. I hadn't really considered the AHs making FG obsolete after awhile. Since the AH taxes are so high, I doubt out-of-game trading will disappear completely, but it won't be anywhere near what it was with D2, as you say. I'm also not certain that they'll have a mass dumping of FG just for the sake of dumping it. As I implied, I fully expect people to almost indiscriminately shell out absurd amounts of FG for the best items, but my sense is that it'll take long enough for FG to fall out of favor that most people won't jump ship immediately. Quite frankly, I seriously doubt most people there will realize the long-term implications for FG of having another money-based system within the game, anyway.

Bigfish
22-09-2011, 01:24
Myself and Neinball were having a chat recently about what we anticipate the dollar value of certain items will be. There are certain items that are slightly easier to predict, such as Gems (3gems = 1x next level gem therefore next level gem = the value of 3xlower gem), and a few things we can correlate to World of Warcraft values, such as common materials and consumables etc.

A note on gems, I'm thinking the prices don't equate between levels. There is generally less utility in a gem of the higher level than socketing all the gems of the level before it. What this means is that the only consumers of gems are going to be people upgrading their tiers of gems because they have nothing else to work towards. When it comes time for them to cash out, they have to compete with all previous tiers of gem.

For example, someone with a full tier of level 10 gems is looking to upgrade their gem set. (assume 10\$ per level 10 gem) They can spend 20\$ to upgrade their next gem, or 30\$ to just buy the next tier (according to the 3x formula). Buying the next tier of gem return also allows you to desocket one of the level 10s, so you end up with a 10\$ gem floating in your stash, unless you spend another 10\$ on another gem to complete a second tier 11.

Looking at a tier 12 gem though, it should be 3x the price of a tier 11, but the player can keep upgrading their tier 10 gems for more benefit at a lower price. Its REALLY going to depend on the demand for high tier gems. The thing is, leaving gems unconverted means you may be able to get a better price since there is always higher demand for lower tier gems (gems can be converted up, but not down).

Gems are also going to devalue as time goes on. Unlike gold, these things aren't going to be destroyed as time goes on. They'll be upgraded, but the price is always going to be pushed down because supply is always steadily increasing.

Its sort of a time delay built in to higher tiers. At launch, Tier 5 gems will probably be the highest demand gems. Some enterprising person buying up a ton of them to convert to tier 6, 7 or 8 may find themselves without a buyer. Maybe they can't sell for a week or two. In that time, Tier 5 gems, and formulaically every tier above that, should decrease as well. Say at the time of purchase, T5s are going 1\$. T8s should be 27\$. Assuming the T8 doesn't sell, for every cent the T5s drop, that's a theoretical 27 cent decrease in price. Following expectations of devaluing as time goes on, a rational player may decide 27\$ is too much to pay. Maybe they expect to need T8s for themselves in 4 weeks, and they expect T5s to be down to 90 cents by then. For that person to buy the gem NOW, they would only be willing to pay 24.3\$.

That assumes people to make sense though. It is also entirely possible there is a possibility of conspicuos consumption, and some people with a lot of cash want super awesome gems even if it makes no sense from a value perspective. Just my 2 cents on the issue.

Azzure
22-09-2011, 01:52
Looking at a tier 12 gem though, it should be 3x the price of a tier 11, but the player can keep upgrading their tier 10 gems for more benefit at a lower price. Its REALLY going to depend on the demand for high tier gems. The thing is, leaving gems unconverted means you may be able to get a better price since there is always higher demand for lower tier gems (gems can be converted up, but not down).

Good points. Though a lot of it assumes that gems cannot be downgraded. I'd bet that you could break gems back down to 3 of the lower level gem's for a gold fee via the Jewel. If the material fee of doing that is very high however, than your point still stands that the higher level gems won't scale 3:1 like we would expect.

Gems are very interesting.
Their value is somewhat easier to predict than other items because they are non-expiring, non-consuming permanent items. You can always rip a gem out of a socket, so the supply never falters. Theoretically, this means that Gem prices shouldn't ever increase in value, and should always depreciate as supply increases.

However, the demand for gems is absolutely huge, and the supply is extraordinarily slow at the start, so you would need to think of gems as a Pyramid. Each level of the pyramid represents time. The initial level of the Pymamid is extremely wide, (ie extremely valuable). As time goes on (and new levels are built) the pyramid base gets narrower with every level. This is how gem values should move in a perfect world. So the first Perfect Gem (Runed Star Ruby/Saph etc) should be the most valuable ever seen and subsequent top tier gems should all get cheaper and cheaper.

Not a perfect world though :)

Bigfish
22-09-2011, 02:10
Good points. Though a lot of it assumes that gems cannot be downgraded. I'd bet that you could break gems back down to 3 of the lower level gem's for a gold fee via the Jewel. If the material fee of doing that is very high however, than your point still stands that the higher level gems won't scale 3:1 like we would expect.

Gems are very interesting.
Their value is somewhat easier to predict than other items because they are non-expiring, non-consuming permanent items. You can always rip a gem out of a socket, so the supply never falters. Theoretically, this means that Gem prices shouldn't ever increase in value, and should always depreciate as supply increases.

However, the demand for gems is absolutely huge, and the supply is extraordinarily slow at the start, so you would need to think of gems as a Pyramid. Each level of the pyramid represents time. The initial level of the Pymamid is extremely wide, (ie extremely valuable). As time goes on (and new levels are built) the pyramid base gets narrower with every level. This is how gem values should move in a perfect world. So the first Perfect Gem (Runed Star Ruby/Saph etc) should be the most valuable ever seen and subsequent top tier gems should all get cheaper and cheaper.

Not a perfect world though :)

Absolutely agree.

To head off in a different direction, I am moderately curious about the gold base myself. I mean, I'm expecting inflation, and I'm sure many many others are as well, but its entirely possible its easier for gold to flow out of the economy than it flows in. If that's the case, gold could face a rising value against the dollar, and we would see gold behave more like a commodity than a currency.

I know some people are already equating it to a commodity, but it still serves the basic functions of money, assuming there is a degree of inflationary pressure.

Kind of makes me curious if Blizzard actually has an economist in house monitoring the state of the economy. I doubt it, since they seem to just wing it historically aiming for where they THINK things ought to be, but it would be interesting to know.

TheOatman
22-09-2011, 02:20
I'm not sure item inflation is the best frame of reference with which to talk about the D3 economy. It might be best to refer to the resulting price deflation since its the only part we can actually monitor (i.e. we don't know how many Swords of Pwnage exist in the world at any given time).

Naviaras
22-09-2011, 04:06
Absolutely agree.

Kind of makes me curious if Blizzard actually has an economist in house monitoring the state of the economy. I doubt it, since they seem to just wing it historically aiming for where they THINK things ought to be, but it would be interesting to know.

I remember reading awhile back that Blizzard did higher an Economist to help them create the system. Whether or not they kept them on board or on a retainer to adjust the market at a later date is up to debate. The "Tin Foil Hat" club would say NO as that would cut into Bobbie's profits. But I think they will bring one in from time to time (Major Patch Events) to adjust things. It is in their interest to keep the economy working since they are charging a tax on RMAH and a Azzure stated so eloquently gold = \$\$\$ and visa versa.

Edit: Spelling Azzure name.

The bottom line... a working stable economy is good for Blizzards bottom line.