Item Price vs BDA (Break Down Average)

[FizzyBubbly]

With the data that's going to be collected i would really love to see some charts and alerts regarding items.

For Items i would love to see a chart over time of its value on the GAH, RMAH, and its approx BDA (break down avg) on one chart. so with a quick look you can see where to get the most value out of that particular item. Also this is the chartist in me but if you see the GAH, and RMAH lines starting to trend below the BDA it may be signaling a buying opportunity to buy the item off the GAH or RMAH to break them down and sell the scraps. to make this even more simple if you had a small box dedicated to the top 20 items with the highest % above or below their BDA it could lend to some really effective trades.

I know this wont make people rich but info like this would be invaluable for the people that don't want to make diablo3 a job and i know atm there isn't a way to track the number of unique transactions (OMG imagine if we could see volume confirmation on trending items.. drool..) but i think you can track the amount of people logged on which obviously isn't exact but it could give you a sense of when GAH and RMAH activity could pick up which could be a general market volume indicator.

Also as i was thinking more about it i think the BDA would really act as a very nice market indicator almost like an index, Because it would be made up of Multiple commodities; it could show you an overall picture of the trending economy. And since there are different "commodities" for each difficulty those difficulties would act like Sectors in the market. So you can keep track of the Normal BDA, Nightmare BDA, Hell BDA, Inferno BDA.

An Example of the Chart:
http://i177.photobucket.com/albums/w218/Rico627/D3%20economy%20stuff/GAH_RMAH_BDA.jpg

And an example of the Item price vs. BDA: if the item is green percentage it means that it is better to sell the item. if the item is red percentage it means that its pieces will sell for more then the item.
http://i177.photobucket.com/albums/w218/Rico627/D3%20economy%20stuff/Item_price_vs_BDA.jpg


I do know the accuracy of any of this depends on the amount and constant flow of data collected. But i think simple tools like this would be really helpful to the community.

I would love to here what you guys think about some of these ideas.

[Azzure]

Funny you mention indexes, I have actually already built the formulas to track Index's such as Commodities, Legendary's (normal, Legendary's (nightmare), Legendarys (Hell) etc.

The problem with equipable items is that we would need Blizzard to release an API. However, we expect to have indexes for Commodotities, as well as sub-indexes (such as gems, Scraps, runes) etc.

We will have full price histories and graphs on all major commodities though, so this will help players know what is considered "cheap", as well as the changes in price for those items over time.

I like the idea of graphing the RMAH and GAH against each other for comparisons and bargain hunting. Problem is without an API we have to look up items manually, and at this stage we are only looking at the RMAH.

With that said however, the exchange rate between gold and real money will allow people to easily do it themselves for the item in question. It's just difficult for us to measure every item on both the RMAH and the GAH.

Huge profit in this type of trading, btw.

[FizzyBubbly]

Great minds think a like. :scratchchin:

I realize without an API release we really can't do this type of stuff. I really hope Blizz lets us have that ability.

Also regarding the GAH and RMAH graph the BDA of the item would be the most important part. I estimate that the divergence between the GAH and RMAH will stay within a small percentage of each other, maybe 0-15% at most. However say the're 10 Blades of crack up on the GAH and people were just underselling each other and there are 2 Blades on the RMAH for a 5% higher price you would think that you could maybe make a 3-4% profit buying from the GAH and selling on the RMAH. But suddenly if you have the BDA showing you that the sum of the items parts are 20% higher the trade becomes a no brainer. I truly believe that the greatest divergence will be between the BDA vs GAH/RMAH.

Anyway this is the type of stuff that goes through my mind when i get bored lol.

[Concupisco Quaestus]

Yeah, it's a great idea, I'm just curious about how supportive Blizzard is of a community like ours that is naturally going to be full of intelligent professional people, in game terms we're already decked out in "Epic" gear, while many amongst the gaming world are walking around with a brain dressed in greens (literally... puff puff pass)... We already have a distinct advantage naturally, once we start crunching numbers that advantage increases exponentially and I wonder what the official stance at Blizzard is on that... Any idea Azzure?

[FizzyBubbly]

Love the Purples and Greens reference... so true.:alright:

Honestly the first thought that comes to my mind is:

Blizz gets a cut at the end of the day, if they give me the ability to make more "money" then they in turn create a higher volume of transactions through my attempts, successful or not, either way they will get their cut in the end.

Also this type of trading in mass could actually add a balancing effect to the market.
For Example:

The BDA for an item is selling 20% higher then the item in both the GAH and RMAH. So i take these items that are valued too low and break them down; now by placing these materials into the commodity space i am increasing supply and bringing the price back down towards equilibrium between the Item and the BDA.

I think at the moment Blizz has a box and from out of the box you can hear this really loud barking and its scary, but once blizz opens the box and sees what it really is then they will know if they want to keep it on a choke chain, electrified fence, or let it run in an open field.

(thinking of the amount of data crunching we could do with an API gets me all giddy inside, isn't that sad?:jig:)

[Neinball]

This theory was one of the biggest profit generators for me in WoW. And so many years later people still aren't catching on, I bet it'll be rampant in the early months.

[Azzure]

Standard deviation based trades are going to be amongst the most profitable ways of playing the RMAH / GAH. As mentioned in this thread, price discrepancies between GAH and RMAH will definitely be common (there will be thousands every day). All you need to do is have a profit margin higher than the fees margin on each transaction. High-quantity buys and sells will go a long way to minimizing transaction fees (as they are static not % based), and hence increasing your profit margins.

It is very exciting. Competition will be the only thing standing in your way.

Something that makes this even more interesting: Consider the gold vs $$ exchange rate changing dynamically and regularly (which it will). This will toss the margins around and create inconsistencies in GAH prices vs RMAH prices where there previously wasn't.

Eg Player A wants to sell his Fallen Tooth rare scrap.
Player A goes in and checks the price on the RMAH of other Fallen Teeth and/or checks the price on Diablo3markets.com. Price is $1.
Player A goes to the GAH and checks the price. 1000g.
Player A checks Diablo3markets.com and checks the exchange rate. It is $1 = 1000g.
Player A lists his fallen tooth for 1000g.
Chinese farmer dumps a bucket of gold into the markets, driving the gold prices to $1 = 1100g.
Player B comes along, scans both auction houses for discrepancies. Finds 100x Fallen tooth listed @ 1000g, and notices that on the RMAH they are still $1 ea. Buys them out for 1000g each.
Player B relists and sells the 100x Fallen tooth for $1 on the RMAH.
Player B exchanges his $100 for 110,000g. Player B makes 11,000g, or $10.

[viledevil]

I think that the transaction fees will eliminate a lot of this sort of thing. Only the most egregious inconsistencies will be worth the time imo.

[Neinball]

It really depends, I mean there is a 10% fee in WoW and yet profits abound. I find constant deals in the AH where people are listing items for well under half what the items are worth in mats. These same people are going to be playing D3 and they are going to think they're making good money by listing some blue for double the vendor price. Laziness and apathy aren't going to change just because there is potentially real money at stack, especially when people list items in the gold AH.

[FizzyBubbly]

I think that the transaction fees will eliminate a lot of this sort of thing. Only the most egregious inconsistencies will be worth the time imo.

I Agree to a point. In the end when we are done playing DIII or want to cash out Blizz and paypal will take their cut, we yet do not know what the "nominal" fees will be. However once we do know this we will be able to establish a minimum amount of divergence that must occur for a trade to be truly profitable.

Lets use some real numbers:

Gold production currently equals 5000g/hr in beta lets average a value of 1.50/hr of play.

5000g = $1.50 then 1000g = $0.30

If we look at paypal we can see that their fee for receiving purchase payments is 2.9% + $0.30 based on looking at: PayPal Fees (https://www.paypal.com/cgi-bin/webscr?cmd=_display-fees-outside)

Lets say paypal doesn't change its fees. then the only variable we are looking for is the "nominal" posting and closing fee by Bliz.

When i see the word Nominal i think arbitrary, as a business if i'm charging a nominal fee it must be of arbitrary value to the customer so it does not effect their purchase. However to me, the business, an arbitrary fee on over 1 million transactions a day really isn't arbitrary.

SO THIS IS WHAT WE HAVE SO FAR

1000g = .30
Paypal fee = 2.9% + $0.30
Blizzard fee = ?

So what would be a fee that is nominal to us but substantial for
Blizzard, well Blizzard comprises 25% of (ATVI) net revenue which looking at 2010 was $344,880,00 which 25% would be $86,220,000. Now if there are about 15 million people playing Blizzard games and we expect 3-4 million to play and purchase Diablo3 that's $210,000,000 in gross sales and with a 35% profit margin that's $73,500,000 net profit from the sale of the game. Lets say blizz wants to make $15 dollars a month "per player" like they do in WoW. that would be an additional $52,000,000 a month. If we average 1 million transactions a day that's an average of 29.8 million transactions a month which comes to $1.74 per transaction This is not a "nominal" fee"

I believe blizz will look to make an additional 24% a year based on their total sales of the game which is 2% a month or $1,470,000/month and with an avg of 29.8 million transactions a month this comes to :

$0.05 Per Transaction

NOW THIS AMOUNT IS THE BALANCE OF NOMINAL FOR US AND STILL MAKES BLIZZARD 24% IN ADDITIONAL REVENUE BASED ON GAME SALES EVERY YEAR

So now this is what we have

1000g = .30
Paypal fee = 2.9% + $0.30
Blizzard fee = $0.05


If we look at the hard values that's $0.35 that must be made to make profit, the 2.9% is taken from the profit so it only lowers whatever profit you've made by that percentage, but its still profit.

From this analysis my estimate Minimum Break Even margin is $0.35 or 1166g
(this $0.05 transaction fee from Blizz translates to 166g fee in the AH)

Now Realize the major criteria to this margin is not blizzards fee but PayPals $0.30 charge which means our focus shouldn't be what Blizzard may charge but what PayPal is currently charging.

This is where it gets hairy (If the transaction is done from GAH/RMAH to RMAH) because if you look at the chart i made in my original post you can see at even the highest divergence of 20% of the item price at 4000g and the BDA at 5000g you would still be $0.05 short that trade.

Realize that if you buy the Item off the RMAH or GAH then sell it only on the GAH then you only have to worry about the $0.05 charged by blizzard until you decide to cash out then you want to try and do it all in 1 transaction to only get the $0.30 fee from paypal once.

Since Paypal charges the same fee's no-matter the type of account I wonder how they are going to address the funds coming from Diablo players.

Now this all leads to another dilemma. If it is in our best interests to make more transactions ending in gold then how do we protect ourselves from inflation?

Its actually simple, eventually the highest quality crafting items should find their general "value" and since demand will always be "constant" for these items Items it would be in your best interest to convert your gold into stacks of lets say "inferno lvl teeth" so in 3 yrs when the cost for these teeth go from 3000g to 30,000g you have preserved the value of your gold. If you had just kept your profits in gold you would still only have the 3000g you started with.(which would be real ****y)(this does hinge on the fact that no new materials from breaking items will be added to the game.)

I know this is a lot of numbers and info but hopefully it was a good read. Let me know what you guys think.:scratchchin: