The Artisan/Bag gold sink fallacy

[AngleWyrm]

Over the first year, Diablo 3 will probably sell about three million copies, with just a trickle after that. So that's the box sales income. But this game has a micro-transaction model built in that will continue to generate revenue for as long as people play the game. So continued popularity is in this case clearly a profitable enterprise.

So we have a player base measured in millions, who during their initial week of play will buy the Artisan upgrades and bag upgrades. And then they will be done buying upgrades, because they have them all. Then what? They are still generating billions of gold pieces every hour.

The artisan and bag upgrade processes consume a finite amount of gold from an infinite stream of gold.

The solution to an infinite outpouring is an infinite sink.

[Azzure]

Over the first year, Diablo 3 will probably sell about three million copies, with just a trickle after that. So that's the box sales income. But this game has a micro-transaction model built in that will continue to generate revenue for as long as people play the game. So continued popularity is in this case clearly a profitable enterprise.

So we have a player base measured in millions, who during their initial week of play will buy the Artisan upgrades and bag upgrades. And then they will be done buying upgrades, because they have them all. Then what? They are still generating billions of gold pieces every hour.

The artisan and bag upgrade processes consume a finite amount of gold from an infinite stream of gold.

The solution to an infinite outpouring is an infinite sink.

Few things, the game will sell probably closer to 5 million units in the first year.

Artisans are designed to consume gold and materials indefinitely, they cannot be "completed" by any means. I think you are probably referring to leveling them up to maximum level.
That's not the primary gold-sink for Artisans. Crafting endless combinations of items is the Gold-sink. Due to the affix system, it is nearly impossible to get the "perfect" item that would cause you to not need to continue using the Artisan for that slot. This is because the chance of getting "perfect stats and stat combinations" is one in billions.

The only gold-sink we know about that CAN be completed, is the Stash. Artisans offer near-infinite usage.

[AngleWyrm]

Your vote "closer to five million in a year" my vote "about three million in a year". Blizzard's business volume just got interesting.

On the topic of gamble crafting, is the output a net loss? How much material and gold goes into one attempt, and what does the average created item sell for on the auction houses?

[Frostlion]

An important thing to remember about things possibly selling on the AH is that it is in itself a gold sink. Namely, the transaction fee looks to be 15% on a successful sale, on top of some other nominal fees. Assuming people keep finding upgrades for a long time, an item can easily switch owners ten times, meaning by that time the fees have actually been higher than the value of the item.

A second thing to remember is that Blizzard doesn't need to keep the economy balanced infinitely, they only need to keep it balanced until the next expansion. At that point, there will be such an influx of new items, content, gold sinks etc. that it's almost an economy reset. Now I don't think buying stash slots will carry us over for the (at least) 2 years until the expansion comes out, but if it takes most people 3 months to get their stash maxed out, that's over 10% of the required time bridged. A non-permanent gold sink is not the only thing required, but it's a good start.

[smurphys]

An important thing to remember about things possibly selling on the AH is that it is in itself a gold sink. Namely, the transaction fee looks to be 15% on a successful sale, on top of some other nominal fees.

A percentage based GAH fee is all that is required to prevent infinite Gold inflation. There cannot be long term inflation. Gold prices will... eventually... stabilize.
tl:dr explanation...
As Gold Auction House prices rise the amount of gold destroyed also rises.
*********
Prices rising infinitely would cause GAH fees to rise infinitely.
Player income (the average gold earned per hour) will stabilize.
Player income won't allow players to afford an infinite fee.
At some point GAH fees cannot be afforded by players.
That point will be created when player income stagnates.
At that point GAH prices will no longer rise due to inflation.
*********

Assuming...
1) There is a percentage based fee on the Gold Auction House
2) The Gold Auction House is frequently used by players
3) At some point the average player income stagnates or falls

then...
There cannot be long term inflation. Gold prices will... eventually... stabilize.

I won't bother explain nor debate assumptions #1 and #2. Simply take those arguendo. The third assumption is simply referring to the point in time where the "average" player income stabilizes. At some point in time a portion of the playerbase will reach level 60, playstyles will no longer vastly increase in productivity, and game changes will not significantly increase gold income. I'm assuming this point will be reached and has been reached. When the game is first released player income will rise as player's characters level rise and their ability to kill stuff and find gold increases.

At the point in time when income stagnates and the percentage fee Gold Auction House is regularly used... Gold inflation will cease. This ceasing of inflation occurs because the auction house fee cannot rise above a point where players cannot afford.

Here's a very long-winded example with Economics jargon thrown in:
Legendary Crafting Materials.
I assume that buyers will want as many as possible and sellers can only find them so fast. Players want more Legendary Crafting Materials than is possible to exist. Legendary Crafting Materials are "scarce". If we all shared all of our Legendary Crafting Materials we all couldn't get as many as we wanted. I want a billion of them. There aren't that many. That's scarcity.

The supply of Legendary Crafting Materials is relatively inelastic. Inelastic Supply means that as price increases the amount willing and able to be sold does not increase nor decrease. In Diablo 3 terms "inelastic supply" means that players are only going to find so many junk Legendaries they are willing to turn into scrap and sell. Even if the price of Legendary craftables rises or falls the amount of Legendaries turned into scrap won't change that much (but it likely will change some).

Let's make up some simple numbers out of thin air to demonstrate the concept . These numbers are in no way intended to be accurate. Demonstration purposes only. Roll with my assumptions. If you need more assumptions add them in yourself.

100 Players in Diablo 3.
Average Income 5,000 Gold per hour
1 Legendary item willing to be scrapped every 10 hours.
Averager player plays 3 hours per week.

Week 1:
100 players * 5,000 gold * 3 hours = 1.5M Gold created per week
100 players * .1 Legendary * 3 hours = 30 Legendary craftables.

Some people won't use the Gold Auction House. Some people will use the item themselves. Lots of possibilities. But we'll pretend that...
10 Legendary craftables are sold on the Gold Auction House in week 1.
Average Price (totally made up): 10,000 gold.
at a 15% fee this means that 10 items* 10,000 gold * .15 fee = 15,000 gold destroyed.

15,000 gold destroyed.
1,500,000 gold created.

RAMPANT INFLATION. DOOM OMG LOL BLIZ YOU IDIOTS....

Some food for thought: Each person only made on average 15,000 Gold in total. A player can only bid what he has. That number isn't very high.

Week 2:
Starting World Gold suppy: 1,485,000 (1.5M - 15k)
+1.5M Gold Found
+30 Legendary craftables.

Let's say this week that 15 legendaries hit the market. Ten new ones found this week and 5 carried over from last week.

Market Price of Legendaries: 20,000. Players made, on average, 30,000 Gold. There's 100 players and 15 legendaries for sale. Some of the rich ones came out and bought.

So updating the money totals...
1,485,000 + 1,500,000 = 2,985,000 Gold
minus 20,000 price * 15 sold * .15 fee = 45,000
Total Gold = 2,940,000
ZOMG LOL INFLATION. Smurphy you so stupid. Peoples makin' millions of gold and only thousands getting destroyed.

Let's fast forward many many weeks of outrageous inflation. Totally made up huge numbers. Cause dude... we got rampant inflation. Money grows on trees baby. We all rich as Santa Clause.

Total Gold Supply: 152,521,321,519
Average per player: 152,521,321 -- We're all rich mofos!
Items sold per week: 20
Price per item: 13,231,310. Sure, I'll drop 13M yo. I got 152 million. What do I care? I want my legendary craftables.

Gold created: 1.5M still. Income is stagnant.
20 sold * 13,231,310 price * .15 fee = 39,693,930
39 Million Gold destroyed. Sweet baby jeebus. Only 1 and 1/2 million created. Deflation is a *****.

Infinite inflation cannot occur because, at some point, players income will not keep up with Auction house fees. This point is somewhere above a price of 15,000 and somewhere below a price of 13M in my totally made up scenario.

The moral of the story is that Gold Prices will stabilize somewhere. Also keep in mind that the more money flowing through the system that faster it is destroyed. You may find an item and sell it for gold. Then, you make take that gold and purchase another item. The person who sold that item will then take the gold and purchase something he wants. The same money may flow through the system very rapidly.

Gold Inflation won't exist forever with a fee based Gold Auction House. When the "average income" stagnates then Inflation stops.

Some side comments:
Individual item prices will rise and fall due to changing supply and demand. Due not mistake and individual items price rising for "Inflation".
Player income will change based on a ton of factors. These factors will include leveling up, getting gold find items, increased player skill, some awesome build that everyone uses that kills everything, or Blizzard changing the game and simply turning up the gold rate.
An individuals quest for personal wealth will lead at least some people to use the Gold Auction house. I want Gold. I have junk. Some people will give me Gold for junk. The auction house is where it will occur. As long as SOME people are using the Gold Auction house inflation will not be infinite.
I am NOT saying that the stabilization point won't be outrageously high. That could be the case. I think it unlikely.
Simply because there no longer is inflation doesn't mean that the amount of gold in the Diablo 3 eceonomy is not "too high". Who wants to figure out if they bid 2 billion or 2 trillion gold for a potion? If prices stabilize there I would consider that "bad".

[Dentata]

On the topic of gamble crafting, is the output a net loss? How much material and gold goes into one attempt, and what does the average created item sell for on the auction houses?

If the output is a net loss, people wouldn't do it. But the value of the output is what will help determine the value of gold. A person will decide between buying on AH or crafting based on this and the prices will move because of players' choices. An item's AH price will be influenced by the gold value of the items required to craft it on average.

This (and lots of economic theory) of course assumes players make rational, informed decisions. This is rarely the case and there is a whole field of econmics/psychology dealing with modifying theories based on the knowledge that most people don't act rationally in markets. A good example of this is that it would make sense to have a few artisan specialists that everyone uses. But nearly everyone is going to level their own artisans, this happens in every game that has crafting.

[Marloe]

People leveling their own artisans can be rationally explained - time is a resource, and collaboration carries a risk of loss. If the calculated cost of leveling your artisans on your own translates to less than the time cost involved in muling items over to a partnership artisan over a period plus the perceived risk of loss on whatever you would have to invest in a partnership "owned" artisan; you would rationally make the choice to do it yourself.

It does seem somewhat likely that at least while gold and market information is scarce that people will specialize. Focusing the investment of materials and resources into one specific artisan and trading the benefits of that focused investment in the marketplace (or even between complementarily invested friends). I'm interested to see if that approach will stay viable as the markets mature or not.

[Frostlion]

Smurphys, thanks for a great analysis and solid examples.

I think the main risk is in your assumption #2: "The Gold Auction House is frequently used by players". If inflation is rampant for a long period of time, people will stop wanting gold. Why? Because the gold they got this week will only be worth half as much next week. They'd rather have items that keep their value. So you'll see more people starting to trade in different ways, using the RMAH, doing direct trades or using any different kind of value system like in Diablo 2.

When people talk about infinite inflation, what they're really referring to is inflation that is so large and long lasting that it will destroy the current economic system and have people scrambling for an alternative. After that, prices may stabilize for the people left, but it will be a slow and painful process to get everyone back into the gold system at that point.

In that sense, the real question is: will prices stabilize before the market breaks down?

[Dentata]

People leveling their own artisans can be rationally explained - time is a resource, and collaboration carries a risk of loss. If the calculated cost of leveling your artisans on your own translates to less than the time cost involved in muling items over to a partnership artisan over a period plus the perceived risk of loss on whatever you would have to invest in a partnership "owned" artisan; you would rationally make the choice to do it yourself.

It does seem somewhat likely that at least while gold and market information is scarce that people will specialize. Focusing the investment of materials and resources into one specific artisan and trading the benefits of that focused investment in the marketplace (or even between complementarily invested friends). I'm interested to see if that approach will stay viable as the markets mature or not.

I was suggesting that a few folks with artisans could supply the market instead of collaboration. I totally agree with you about just about everything you said. There is room in the market for folks to advertise their services, plus I'd imagine the items that folks will be interested in will be a subset of what the artisans are capable of. They will just continually manufacture items and put them on the AH and it would be cheaper to shop than to level.

I think that folks will just find it fun to level their artisans and that is a fine reason to do it. I'll probably do that as well but I'll do it knowing that it isn't cost-effective.

[Concupisco Quaestus]

I have never seen any "gold sink" system that was done "right" and the only ones I've seen that worked "right" have been the ones with constant tweaking going on... I think something like a gold-sink mechanic needs to be dynamic, you can't go putting in so many gold sinks at the start that nobody can even function but on the other side of that same coin too few at the start and their effect becomes insignificant at later levels... They need a system that scales with not only the player base but with seasonal activity as well, a gold sink that works well for Xmas traffic might totally dry up the market over the summer months.

In any game I've seen with a well balanced gold system the basic gold sink for crafting and repairs is just the base line, it's like your resting breath, you need your breath to stay healthy but you don't need your lungs to process the same volume of oxygen when you are resting as you do when you are exerting yourself so your "passive" breath is much lighter and not really "good" for anything besides keeping you alive. When you turn up the heat and need more oxygen your lungs start working harder to get oxygen and that same basic principal should be applied to the markets to keep them healthy, you don't need passive gold sinks hemorrhaging gold, you just need them to maintain a steady flow... If a situation should arise where there is a need to "bleed" the market that needs to be handled via more proactive intervention, the passive system is just there for basic life support.

[Azzure]

Crafting is definitely a net loss. It's designed to be. In fact, it is impossible for it to ever be a net gain (in average terms of course). Why? Because if it was a net gain, than the prices on the AH for them would plummet and/or the price of materials for it would skyrocket, hence turn them into a net loss or break even.

Without writing 3 pages on how this works, basically if the act of buying materials to create an item that instantly makes you a profit (higher than you paid for the materials + gold cost) with one click, then everyone would do it, which would cause the price of materials to go up proportionally to crafted items and therefore would stabilize into a net loss or at best, break-even.

It is definitely a gold sink, and therefore a net loss. It's not an investment. While you may get lucky and your first roll is an awesome item, over time and over average it's a net loss.

[Concupisco Quaestus]

It depends on how you want to run the numbers that determine loss though, for example you could have a market that is so flooded with common items that regardless of your price you just can't sell all the materials you could farm, supply outpacing demand is very common with MMO craftables.

So let's say you have a market where you have more "loot" than you do customers, you may actually be taking a loss by not crafting as despite your immediate cost you are still getting sales with your crafted up "mats" that you wouldn't be getting otherwise.

In my own personal experience the "farming" is never the hard part in any market, juggling whatever "Auction House" system is in place to maximize your sales against thousands of other people trying to do the same is far more challenging, as people have already noticed making any "decent" money in RMT requires a large volume of sales and far more than any other challenge the D3 entrepreneur will face getting that volume will be what defines "success".

The "professional" looter will almost always have a "stock" level that far exceeds market demand for common items, especially when there is no fear of account banishment.

I'll spare the excessive detail but more often than not my "problem" when dealing virtual goods hasn't been whether I got 1$ for an item or 1.25$, my "problem" has been getting the piles of stuff I have that's "worth" something sold... A condition that most definitely changes how one might want to view something like "loss".

It's a pretty safe bet to assume that anything with any level of common usage is going to belong to a saturated market, selling those scraps regardless of what "form" you sell them in is going to require some effort and without that effort you will quickly start building up a backlog of inventory which regardless of how much you "think" that inventory is worth means lost revenue.

A virtual dollar is not a dollar, a virtual dollar is a dollar you still need to make... When it comes to the real money aspect of D3 people are going to need to keep that concept very close to their heart, 8 years down the line when the game has been replaced by something better in the eyes of most of its fans your accounts might still be worth a million dollars on paper but without anyone to sell a million dollars worth of game merchandise to it doesn't much matter what the paper says or how much each individual item sells for on the "market".

Virtual economies are necrotic, unlike the real world people are going to have to learn to cope with a financial system that is slowly dying for its entire existence, by the time the game is old enough for passive gold sink inadequacies to reveal themselves most of that excess gold will be the byproduct of currency inflation meeting face to face with population decline, something no gold sink can predict or manage.

[smurphys]

Crafting is definitely a net loss. It's designed to be. In fact, it is impossible for it to ever be a net gain (in average terms of course). Why? Because if it was a net gain, than the prices on the AH for them would plummet and/or the price of materials for it would skyrocket, hence turn them into a net loss or break even.

Without writing 3 pages on how this works, basically if the act of buying materials to create an item that instantly makes you a profit (higher than you paid for the materials + gold cost) with one click, then everyone would do it, which would cause the price of materials to go up proportionally to crafted items and therefore would stabilize into a net loss or at best, break-even.

It is definitely a gold sink, and therefore a net loss. It's not an investment. While you may get lucky and your first roll is an awesome item, over time and over average it's a net loss.

As a theoretical concept I agree with you that Supply and Demand should cause crafting materials prices to rise to such a point that crafting them into a resulting item would not create a profit for the crafter. However, a factor you did not consider is Time. The reason there will be a profit (a small one) on some items (not all) in purchasing materials, crafting items, and selling the resulting product for more is because this process can be tedious. Some players would prefer to spend the gold to pay someone else to do that and use that time saved stabbing things and earning more gold.

Allow me to show an example from City of Heroes. City of Heroes is an MMORPG with a "Gold" auction house with a 10% fee. It's slightly more complicated than that, but that's good enough. In City of Heroes there are Enhancements (Items) that are made via Salvage materials, a recipe, and some gold. Anyone with the required materials, gold, and recipe can craft the item.

Picture example... explained in text after.

http://www.chriffer.com/files/CoHCompare.JPG


Recipe: 2,000,000
Components:
1,500,000
10,000
1,000
1,000

Crafting cost: 490,400
Total cost: 4,002,400
Crafted Item Price: 8 to 10,000,000

+8,000,000 Sale
- 800,000 10% Market fee in CoH
- 4,002,400 Cost
=3,997,600 Profit

There are some things that I think could have been done better in the City of Heroes economy. Currently, there isn't any inflation. This is a decent, but not a large, sum of money. The key thing is that most players would rather spend their time blowing stuff up than going through the market interface. That time is what causes crafting for profit to become profitable.

1) Find the recipe
2) Bid on the recipe
3) Actually win the recipe
4) Find the salvage
5) Bid on salvage
6) Actually win the salvage
7) Open up crafting block
8) Push button

Instead...
1) Find item
2) Bid large amount
3) Play game

Diablo 3 adds more factors to the equation which can cause this to change.
1) Crafting generates a random item.
The long term return on crafting items might generate a profit. But that is difficult to calculate.
2) Real Money auction house creates a larger incentive to be more careful with one's money
3) Increased player base causes more competition
4) A larger market fee at 15% than City of Heroes 10%

Despite these factors, the potential to turn SOME profit from crafting does exist. Yes, supply and demand will cause crafting costs to rise towards resulting items generation. However, they might not rise to the point where all profits are erased

[smurphys]

Virtual economies are necrotic, unlike the real world people are going to have to learn to cope with a financial system that is slowly dying for its entire existence, by the time the game is old enough for passive gold sink inadequacies to reveal themselves most of that excess gold will be the byproduct of currency inflation meeting face to face with population decline, something no gold sink can predict or manage.

Virtual economies are not necessarily necrotic. Some do succeed. Some have minor flaws that were created in design and can no longer be changed. Currency inflation can be extremely well controlled via...

1) A percentage based gold auction house fee
2) proper incentives to utlize the gold market
3) reasonable levels of maximum income
4) multiple ways of spending gold that cause flat amounts to be destroyed that are used regularly by players

These can all be achieved... theoretically... Simply, will the Blizzard developers get them all right? That, literally, may be a million dollar question.

[Grayson Carlyle]

I think you guys are all talking out of your *** (in reference to Diablo III) because you haven't looked at what the materials and results are. Crafting a single rare item in Diablo III requires destroying several dozen rare items, magic items and common items. The input materials are the output materials, at a far higher rate. Crafting an item is a huge loss on average. But it's a gamble. You're destroying crappy rares in the hopes of getting an incredible one. This wouldn't work in a wider market, but it's incredibly narrow: There is nothing else to craft, and there are no other materials.

Do a little research before you get into this debate.

[smurphys]

I think you guys are all talking out of your *** (in reference to Diablo III) because you haven't looked at what the materials and results are. Crafting a single rare item in Diablo III requires destroying several dozen rare items, magic items and common items. The input materials are the output materials, at a far higher rate. Crafting an item is a huge loss on average. But it's a gamble. You're destroying crappy rares in the hopes of getting an incredible one. This wouldn't work in a wider market, but it's incredibly narrow: There is nothing else to craft, and there are no other materials.

Do a little research before you get into this debate.

In short, we are looking at the Gold Value of items when we say "Net Loss" and NOT referring total number of items.

When Azzure says "net loss" he is referring solely to a singular person's monetary situation and not the total number of items in the game. In other words, Azzure is stating that "on average, you cannot make money by purchasing crafting materials, crafting an item, and selling the resulting item." He is NOT stating that there are more items after crafting than there are before crafting.

I countered that due to the value of a player's time it is possible that crafting could generate a profit for some items.

[Grayson Carlyle]

I was supporting Azzure's position and pointing out that statements like this and your CoH example are ludicrous:


The reason there will be a profit (a small one) on some items (not all) in purchasing materials, crafting items, and selling the resulting product for more is because this process can be tedious.

The material costs of crafting anything in Diablo III will be at least an order of magnitude over the average result. Time will never be a substantial factor in the cost of an item in D3 because of this.

In a normal MMO economy, this would mean nothing would ever get crafted because you could destroy stuff for enchants or buffs, etc.... Cost of crafting in those economies is carefully balanced by the designers so that all the multiple crafting routes are viable. In Diablo though, there's nothing else to do with the items except destroy them. That's the only reason it will work.

[smurphys]

The material costs of crafting anything in Diablo III will be at least an order of magnitude over the average result. Time will never be a substantial factor in the cost of an item in D3 because of this.

In a normal MMO economy, this would mean nothing would ever get crafted because you could destroy stuff for enchants or buffs, etc.... Cost of crafting in those economies is carefully balanced by the designers so that all the multiple crafting routes are viable. In Diablo though, there's nothing else to do with the items except destroy them. That's the only reason it will work.

The market price of crafting materials cannot be an order of magnitude higher than the price of the average crafting result. If crafting materials cost more than the average result then the force of Supply and Demand would cause the price of crafting materials to fall and the price of the average result to rise.

There are multiple items to be crafted in Diablo 3. For most items in Diablo 3 the crafting materials will be larger than the average crafted item's price. For a few items the crafted item's average price will be greater than the crafted materials price. The pressures of supply and demand push at least one items crafted materials price and average crafted result price to converge. Azzure even states this in his post in his two statements that say "or break-even".

"with one click, then everyone would do it, which would cause the price of materials to go up proportionally to crafted items and therefore would stabilize into a net loss or at best, break-even."

My contention with his statement is solely on the first 3 words of the quoted section: "with one click". Crafting will not be one click. In games where the crafting process and the market interface are boring and tedious a profit can be generated for some items.

Both Azzure and I state that Supply and Demand cause the price of crafted materials and the average crafted result to converge for select items on the market. This convergence is the case because when crafted materials price is higher than the average result then players will simply sell the materials and purchase the item. Selling the materials and purchasing the item causes the materials' price to fall and the item's price to rise. When the materials' price falls and the item's price rises to a point where the item's price is higher than the materials' price the market works in reverse. In this scenario, more items will be sold and more materials would be purchased.

Applying numbers to this concept:
We'll pretend this is the only item able to be crafted. I ignore market fees for these examples.
Sword of Example
Flat craft cost: 500
Crafting Materials A,B,C
In order to craft, one needs 500 gold and materials A, B, C

Made up market costs:
Average Sword of Example: 5,000
A: 100
B: 1,000
C: 5,000
Total crafting costs = 100 + 1,000 + 5,000 + 500 = 6,600

The market price of materials is greater than the Average crafted item. There is no economic incentive to craft the item. If you had crafting materials A, B, and C it would be wiser to sell the materials and purchase the sword. The market is encouraging NOT crafting Swords. Thus, as players sell materials and purchase Swords the price of Swords rises and the price of materials falls.

Made up market costs:
Average Sword of Example: 10,000
A: 1,000
B: 1,000
C: 5,000
Total crafting costs = 1,000 + 1,000 + 5,000 + 500 = 7,500

The Average crafted item's price is greater than the crafted materials price. There is economic incentive to craft the item. If you had crafting materials A, B, and C then it would be wise to craft the materials and sell the sword instead of selling the materials. The market is encouraging the selling of Swords. Thus, as players craft materials into Swords and sell Swords the price of Swords will fall and the price of materials will rise.

Let's complicate it by adding two more craftable items.
Shield and Helmet. Both also require the crafting materials A, B and C.
Made up market costs:
Average Sword of Example: 10,000
Average Shield: 6,000
Average Helmet: 15,000
Flat crafting cost for all 3: 500
A: 3,000
B: 4,000
C: 5,000

Crafting costs for all items: 12,500

There is no economic incentive to craft Shields nor Swords. There is economic incentive to craft Helmets. Economic Theory suggests that the price of Helmets will fall as more are made and sold. Economics also suggests that the price of Shields and Swords will rise as fewer are made.

The sword and shields demand may be so low that no matter how few are made the demand simply does not exist for the price to rise. They might simply "be garbage". Nobody, or very few, want a Dirk with awesome stats. However, all items cannot "be garbage". At least one item must be at the point of convergence of the price of crafting materials and the average crafted item's price. If there wasn't one item at the point of convergence there would be no incentive to craft and it would be wiser to simply sell materials and purchase items OR there would be so much incentive that enough would be made to drive down the price to the point of convergence.

The concepts that cause deviation to the Supply and Demand model of "the price of materials converging with the average item's price for at least one item" are "Fun" and "Time."

Time example:
I'm Farmer McFarmerson. I can make 100,000 gold an hour (1,666 gold per minute) by playing the game and stabbing things. I want a crafted Sword. The materials cost 5,000 total. The Sword costs 7,000. Purchasing the materials from the market and crafting the sword takes two minutes. Purchasing just the sword takes one second.

Purchasing the sword:
Cost 7,000 gold + 1 second = 7,027 gold
Purchasing the materials:
Cost 5,000 gold + 120 seconds = 8,333 gold.

The players time is worth more than the money they would save by crafting the item. Thus, a profit might be generated via crafting the item.

"Fun" is a factor when the numbers look like this...
Farmer makes: 50,000 gold per hour
Materials and crafting cost: 5,000
Sword Cost: 7,000

Purchasing the sword:
Cost 7,000 gold + 1 second = 7,013 gold
Purchasing the materials:
Cost 5,000 gold + 120 seconds = 6,666 gold.

In this scenario the player has economic incentive to purchase the item. However, the economic incentive is rather small. The player may simply purchase the item because spending 2 minutes going through the interface is annoying. The point of convergence will be the economic point where the price of materials equals the average crafted result + a "fun factor" that determines how much people value NOT spending the time going through the market and crafting interface.

[Concupisco Quaestus]

Ignore this post. :whistling:

[Frostlion]

Grayson,

I believe you are using a different definition of 'profit' than most of us are. Specifically, there are basically two things you can do with items you find that you can't use:

1) sell them
2) disenchant them

The first option gives you a value based mainly on the quality of its stats. This could be insanely high, or it could be close to zero, because nobody in the game wants that item.

The second option gives you a value based mainly on the level and rarity of the item regardless of its stats. As far as we know, the game doesn't care what the item sells for on the AH, it simply gives you materials based on its level and rarity. You can then turn these materials into items with an expected sell value.

So let's say the expected value of either a dropped or a crafted item is on average 100K and you need 10 dropped items to get the materials to craft one new item.
Now say you find 5 random items and you check the AH to see their sales values, they are:

1) 5K
2) 10K
3) 50K
4) 100K
5) 350K

For an average of around 100K. Now if you would disenchant all of these, you would run a massive loss. You'd miss out on 515K in sales, to get 50K worth of crafting materials! This seems to be the loss you are referring to.

In practice though, that's not what will happen. People will decide for each item separately if they want to sell it or disenchant it. In this case, they'll certainly sell items 3, 4 and 5 for 500K, but then they have 2 really crappy items left, that they can break down for 20K worth of crafting materials. Now they've made an expected 520K, instead of 515K.

So my prediction is: people will use and sell the rare items that are actually valuable. They will break down the items that give valuable crafting materials but that are not worth much other than that because of crappy random stats. This way they will craft a lot slower than someone who breaks down everything, but they'll make a much bigger profit in the long run.

NOTES AND DISCLAIMERS:
1) I believe the expected value of top end crafted items will be higher than that of random drops of that level. Not only because Blizzard wants people to craft, but mainly because you can choose which items to craft. Comparing it to D2X, nobody gambled for caps, they gambled for Tiaras, because they knew those had a better chance at great stats. Similarly, people will craft Tiara-type items instead of cap-type items in D3.
2) I believe the value of crappy items that can be disenchanted for good materials will go up exactly because of that. In my example above, item #1 may sell for 8K instead of 5K. Because of the transaction fees, the required time and risk, it will never actually get up to the full 10K, but it will be close.
3) All of the above is based on very limited information about end-game crafting. We know very little so far about requirements, stats, gold prices etc. for the best crafted items. Depending on how those turn out, the numbers may be vastly different.

[Trump]

I'm going to take the argument that crafting will be just about ZERO expected value (which means no net loss or gain) given relatively efficient markets. At times, crafting will be negative expected value and at times it will be positive expected value depending on price of materials, desire of crafted item, etc. And in the scenario of zero expected value, crafting becomes a huge gold sink. Even if crafting was positive expected value, crafting would still be a huge gold sink. Even if crafting was negative expected value but it could come up with good items, it would still be a huge gold sink.

What is being ignored here is two things. One is that crafted materials vary GREATLY in quality. Some are so garbage that they will be disenchanted immediately to get the materials back (just like your random blue drops will be disenchanted). The higher quality ones are the ones you'll see on the auction house.

Lets say your sword of example takes 10,000 gold to make. 33% of the time, you get a "good" sword of example worth 25,000 gold, 33% of the time you get a "mediocre" sword of example worth 5,000 gold, and 33% of the time you get a "terrible" sword of example worth just about 0 gold.

You make your 3 swords, you disenchant "Terrible" sword of example.

You sell your Good Sword of Example for 25,000 gold and you sell your Mediocre Sword of Example for 5,000 gold.

The second thing that's being ignored is that the point of a gold sink is basically for gold to exit the economy by giving it to the crafter.

The gold sink has worked. 30,000 gold is out of the economy. You (the crafter) have made 0 gold. The players who bought your swords have lost 25,000 and 5,000 gold respectively, but now they have awesome swords. And all is good.

[Trump]

Furthermore, the goal for most players playing Diablo 3 is not to have oodles of gold but it is to have the best character.

The best strategy for that is to convert gold to equipment. The best strategy for that is to craft stuff (or buy stuff crafted by others.)

In sum, the artisan system is excellent. Where Diablo 2 failed is that the stuff you could Gamble (input money, get gear) was so tilted towards "Terrible" gear that gold became worthless. And also the gold cap was way too low.

Where Diablo 3 will succeed is that the crafted stuff is really good.

[Trump]

Week 1:
100 players * 5,000 gold * 3 hours = 1.5M Gold created per week
100 players * .1 Legendary * 3 hours = 30 Legendary craftables.

15,000 gold destroyed.
1,500,000 gold created.

RAMPANT INFLATION.

The flaw in this argument is that you ignored the non-legendary craftables. You also ignored that there is a significant price on crafting items. For reference, the "highest end rare" you can make in the beta (req level 26) you can make costs 15,000 gold.

Yes, you can make the argument that the gold you gained in that time goes up significantly too. Maybe even 10fold. (50,000 gold an hour)

http://img.photobucket.com/albums/v239/Luckay/mastersoldiercraft.jpg

So lets say every player crafts 1 of these.

INCOME: 100 players * 50,000 gold = 5M Gold
EXPENSE: 100 players * 15,000 gold = 1.5M Gold taken OUT of the economy

Oh noes, you say. There's still 3.5M gold out there.

That's where the MAGIC items get crafted as opposed to legendary/rare items. Lets say each magic item costs 5,000 gold to craft and that players craft on average 3 of them.


EXPENSE: 100 players * 15,000 gold = 1.5M Gold taken OUT of the economy


So now there's 2M Gold left. Auction House trading occurs. Perhaps the people who crafted less pay the people who crafted more for their goods. The 2M exchanges hands from the buyers to the crafters. The crafters put that into buying materials and crafting more stuff.

At the end of the day, a lot of the money has been gold sinked out of the economy.



By the way, set items are crafted. Good good items are crafted. So one can expect a lot of money to exit from crafting.

[Trump]

A problem with this thread is that a couple of people are posting whether or not crafting can be profitable.

To this I argue that crafting is on average break-even (assuming you craft the "right" things that are in demand). Given the wide variance of crafting quality, you could hit the jackpot and make a lot of money and you could also craft 10 useless things straight, but on average, I think break-even.


Another group is arguing whether or not artisans are a gold sink. The original poster argued that the cost to level up the artisans was pretty small (I agree. It is relatively small.)

I argue the artisans are a very effective gold sink. You want to craft stuff because crafted stuff is very good. It costs significant gold to craft this stuff. There, infinite gold sink.


Here are some scenarios:


1) Crafted gear is (sometimes) the best gear possible. Crafting takes a significant gold input.

Result: Crafters craft a lot. The artisan takes out a lot of money out of the economy. Crafters will have to sell their results for gold in order to afford the crafting input cost of the artisans and the economy will flow because crafters, looking for gold, sell their crafted items. Crafters will also spend their gold on materials. Even if crafters only break even on this action or even lose some money, this is a way to transfer MONEY to POWER. Everyone will do it.


2) Crafted gear is garbage. Crafting takes almost no gold input.

Result: Diablo 2's gambling system in which gold is worthless.



Blizzard has stated they'll be working on making scenario 1 a reality. So I am confident in the artisan as a gold sink.

[smurphys]

I'm going to take the argument that crafting will be just about ZERO expected value (which means no net loss or gain) given relatively efficient markets. At times, crafting will be negative expected value and at times it will be positive expected value depending on price of materials, desire of crafted item, etc. And in the scenario of zero expected value, crafting becomes a huge gold sink. Even if crafting was positive expected value, crafting would still be a huge gold sink. Even if crafting was negative expected value but it could come up with good items, it would still be a huge gold sink.

What is being ignored here is two things. One is that crafted materials vary GREATLY in quality. Some are so garbage that they will be disenchanted immediately to get the materials back (just like your random blue drops will be disenchanted). The higher quality ones are the ones you'll see on the auction house.

The variance of quality in crafting materials is not being ignored by your first paragraph and is not being ignored by several posters in this thread. The "zero expected value" is a balance between the cost of crafting materials and the average price of the crafted item. The "average price of the crafted item" incorporates the concept that items vary greatly in quality. This average is exceedingly difficult and nigh impossible to calculate exactly but it is taken into account.

As a side note: I personally consider that when the expected value is negative then crafting is "gambling". Crafting in this form will take place because gambling is fun and people are stupid. When the expected value is positive then crafting is "investing". Over the long term, crafting in this generates a profit. One can still lose money of course.



The second thing that's being ignored is that the point of a gold sink is basically for gold to exit the economy by giving it to the crafter.

The gold sink has worked. 30,000 gold is out of the economy. You (the crafter) have made 0 gold. The players who bought your swords have lost 25,000 and 5,000 gold respectively, but now they have awesome swords. And all is good.

That's not how gold sinks work. Gold sinks work by destroying gold. Your example is gold being redistributed. Redistribution is not destruction and thus not a gold sink. The gold sinks functions via crafting by having a flat gold cost in crafting and a gold fee in the auction house on each transaction. These two fees cause gold to be destroyed and not redistributed among players.

Example: You have 150,000 gold.
The world gold economy has 1 billion gold floating around.
The sword of example's average price is 10,000 but varies greatly.
The materials for the sword cost 1000, 3000 and 5000.
The market fee is 10%.

You purchase 10 sets of crafting materials. 10x 1000, 10x3000 and 10x5000. A total of 90,000 is spent by you. That gold is redistributed to other players. A 10% fee is taken.

So now your money is 150,000 - 90,000 = 60,000 Gold. But you have lots of crafting materials.
The world gold economy is now 1 billion - (90,000 * .1) = 9,000 less than 1 Billion. 9,000 Gold has been destroyed. 81,000 Gold has been distributed from you to others.

You craft your 10 swords. There's some gold crafting cost involved. Let's say it is 100 gold. You now have 59,000 gold because you destroyed 1,000 via crafting. The world gold economy now has 1 billion minus 10,000.

Let's pretend one sword is worth 100,000 and the other 9 are worth zero. You sell the valuable sword for 100,000. You gain 90,000 gold. 10,000 is destroyed via fees. Thus, you now have 149,000 gold and 9 scrappable swords. 20,000 Gold has been destroyed. The world economy is 1 billion minus 20,000.

The gold sink isn't the money going from you to others and others to you. The gold sink is the money destroyed.

**Trump** -- I think you are misunderstanding some of the points I was making. I've talked to you on Starcraft 2. This would be more easily done via direction conversation and not posts. Smurphy.359 I'll get on now.

[Trump]

Example: You have 150,000 gold.
The world gold economy has 1 billion gold floating around.
The sword of example's average price is 10,000 but varies greatly.
The materials for the sword cost 1000, 3000 and 5000.
The market fee is 10%.

You purchase 10 sets of crafting materials. 10x 1000, 10x3000 and 10x5000. A total of 90,000 is spent by you. That gold is redistributed to other players. A 10% fee is taken.

So now your money is 150,000 - 90,000 = 60,000 Gold. But you have lots of crafting materials.
The world gold economy is now 1 billion - (90,000 * .1) = 9,000 less than 1 Billion. 9,000 Gold has been destroyed. 81,000 Gold has been distributed from you to others.

You craft your 10 swords. There's some gold crafting cost involved. Let's say it is 100 gold. You now have 59,000 gold because you destroyed 1,000 via crafting. The world gold economy now has 1 billion minus 10,000.

Let's pretend one sword is worth 100,000 and the other 9 are worth zero. You sell the valuable sword for 100,000. You gain 90,000 gold. 10,000 is destroyed via fees. Thus, you now have 149,000 gold and 9 scrappable swords. 20,000 Gold has been destroyed. The world economy is 1 billion minus 20,000.

The gold sink isn't the money going from you to others and others to you. The gold sink is the money destroyed.

I see where we're not seeing eye to eye. Yes, gold sinks are when money is actually destroyed.

Imagine this scenario instead.

Crafting materials are the things that are relatively low cost compared to the cost to actually produce the sword. That is to say, The gold cost you must pay the artisan to actually produce a sword (gold DESTROYED) is large.

The materials for the sword instead of your numbers (1000,3000,5000) cost (100,300,600). For 1,000 gold in materials per sword.

The cost to craft the sword is 8,000 gold (instead of your example 100 gold)

The auction house eats say 1,000 gold each time something is crafted and sold for the average price of 10,000 gold.


Bam. Huge gold sink.

[Trump]

http://img.photobucket.com/albums/v239/Luckay/mastersoldiercraft.jpg

Here's an example.

The inputs here are 28 common scrap, 21 essence (Gained by scrapping magic items) and 5 rare tooth (gained by scrapping rare items)


28 Common Scrap = 600 Gold (Assumption: Scrap = 20 gold)
21 Magic Essence = 1000 Gold (Assumption: Essence = 50 gold)
5 Rare Tooth = 5,000 Gold (Assumption: Tooth = 1,000 gold)

In this case, you can see that the materials cost only 6,600 gold but the craft actually costs 15,400 gold. Therefore, the crafting cost is quite significant.

[smurphys]

Bam. Huge gold sink.

Yes, I agree. That is a gold sink. Yes, the crafting fees are larger than my example. Yes, those are big numbers, yes... yes. Good. I'm not overly concerned about the exact numbers of flat fees. Large but affordable is good. I have no idea of what is or what is not "large but affordable". If you say these numbers are "large but affordable" I can only nod to your opinion.

Paraphrased quotes...
"A problem with this thread is that a couple of people are posting whether or not crafting can be profitable. Another group is arguing whether or not artisans are a gold sink. "

These two topics are related. The original post can be essentially boiled down to "are these fees enough to stop rampant inflation"? My response to this is that a % based fee on auction house, alone, is sufficient to combat outrageous inflation. The % based fee requires the market to be frequently utilized. The frequent utilization likely needs some items frequently being exchanged. A great example of something that would be frequently exchanged is crafting. Thus, "is crafting profitable" is related to "rampant inflation" is related to "are these artisan fees enough".

You copied the first segment of one of my posts where I had an example of 1 Week and I put the large letters of "RAMPANT INFLATION" below it. This example that you copied was intentionally over simplistic and exaggerated. The purpose of that example is to show that even when Inflation starts out SUPER high due to huge income numbers that, eventually, a percentage based fee will reign it in. A percentage based fee is, alone, sufficient to combat infinite inflation.

The next step is determining if the Gold in circulation is "too high". The amount of gold in the system may not be rising but the amount may still be larger than desired. Going back to City of Heroes economy to demonstrate...

There is no longer inflation in City of Heroes. The total amount of Inf (Gold) is kept in check via a 10% market fee. However, the amount of Gold is too large. A singular character can only hold 2 billion Gold at a time in City of Heroes. There's ways to store more than that but they are annoying. Also, you can use multiple characters to hold all your money. Roughly 2 or 3 items have an equilibrium price above 2 Billion. These items are frustrating to exchange via the market place because they can only be sold for 2 billion. Thus, off market transactions take place where players hand over 2 billion then another sum of money. Then the item is handed over. This is an example of "too much money" existing yet there being no inflation.

The question in Diablo is will the artisan fees and other gold sinks be enough to keep the level of the Gold in the world at a "good level".

[Concupisco Quaestus]

I don't think any aspect of the crafting system is going to be a "click click profit" system... and if it is, it won't be for long, it just breaks the whole machine down too easily. Crafting will be a net loss on in game currency, no doubt about that, people will "want" to craft and it will be an easy way for them to spend their gold but it will not be an in-game "business".

Where my "angle" on profit comes into play is when the market is so saturated by common crafting materials that you simply can't sell all of the materials you're capable of farming on a daily basis and craft up the materials that are sitting there collecting dust anyways just to turn them into "some" form of liquid asset, you take a net loss in-game via crafting but it could still mean a bonus in the bank at the end of the month.

[Trump]

Oh, so you were just arguing on whether or not a 10% fee would be enough to curb rampant inflation.

It helps, but if you look at world of Warcraft (5% fee auction house) there is inflation (not sure if you'd call it "rampant"). Just with smaller numbers because there's silver and copper. Right now over there, black market prices are 1000 gold (10,000,000 copper) = $1.


Certainly, %fee auction house helps. I think the crafting gold sink will be even better than the %fee AH at curbing inflation though. (together though, they're pretty nice!)

[smurphys]

Where my "angle" on profit comes into play is when the market is so saturated by common crafting materials that you simply can't sell all of the materials you're capable of farming on a daily basis and craft up the materials that are sitting there collecting dust anyways just to turn them into "some" form of liquid asset, you take a net loss in-game via crafting but it could still mean a bonus in the bank at the end of the month.

The market will not be so saturated that one is unable to sell all of his items. What is likely the case is that you are trying to sell your items above Equilibrium Price. This sounds like a group-imposed Price Floor above equilibrium price. At Equilibrium Price supply equals demand. At any price above Equilibrium Price more items are willing to be sold than purchased. At any point below, more items are willing to be purchased than sold.

There is natural and expected variance in price over time. One moment's supply and demand will be slightly different from another moment's. A specific item may fluctuate in price may fluctuate regularly. An item may have an Equilibrium Price of 98. The item may vary in sales price from 96 to 100 over time. Sellers may become entrenched in the concept of "this item is worth 100 so I am only selling at 100." As this notion becomes more entrenched a "price floor" is created. This price floor above Equilibrium Price causes more items willing and able to be sold than purchased at this amount. These excess items willing to be sold cause this backlog and cause sales to slow down.

Simply, your selling price is too high. Lower your sale price.

[Concupisco Quaestus]

Simply, your selling price is too high. Lower your sale price.

It's not that simple, it's an issue with volume, not with price, there are only so many units that will be bought up on a daily basis for any given item and when dealing with the volume of trades it takes to generate any real income from "farming" you run into a whole other set of problems that are there no matter how low you set your price.

The problem isn't price, anyone can sit there all day re-listing their items for the lowest price on the market, the problem is managing sales volume, selling one or 2 scraps a day isn't going to make you anything so many people will feel the urge to craft as it will probably give them more instant gratification from their materials, in all likelihood people will need to move 100's of stacks a day to see any notable amount of cash from selling common "materials" and that is where we run into trouble, with even the slightest bit of competition that materials market can get out of hand quite easily. When you have multiple people manipulating hundreds of items in such a restricted market the challenge comes in maintaining the necessary sales volume you need to be making money, the price point at which those sales take place becomes almost irrelevant, you just need those sales.

Don't kid yourself, this market WILL be saturated... There's a million people all around the world that are all thinking the exact same things we are, whether they actively participate in the RMAH or not their presence alone guarantees that any item that could be considered "common" will be available in excess.

[smurphys]

Don't kid yourself, this market WILL be saturated... There's a million people all around the world that are all thinking the exact same things we are, whether they actively participate in the RMAH or not their presence alone guarantees that any item that could be considered "common" will be available in excess.

Supply and Demand don't apply because "saturation." Is that what you are saying?

[Azzure]

Supply and demand will most certainly apply to everything on the RMAH and D3 Economy, no matter the level of saturation or any other circumstance.

The thing about Supply and Demand though is that there is no easy visual indicator on exact values of demand and supply - it's based on social perceptions which are not precise at all. So supply and demand is by no means "always accurately measuring prices". In fact, it's somewhat rare that the market value of anything reflects it's "true" value completely accurately.

However S&D will always determine prices because it's real consumption, not a theoretic calculation. It is set by the people, for the people, through their actions of buying and selling. The RMAH is going to have millions of items, which means even when the market value of an item is X, there will be thousands of people who list things at wacky prices.

In a perfect world all items would be valued at V = D / S
Unfortunately we no way of accurately measuring D and S perfectly.

In regards to the discussion about crafting and gold-sinks - Concupisco worded it best when he mentioned the concept of: if there somehow comes a period where there is a positive return on a craftable item, it will be extremely short because the market will regulate them via S & D, if the game mechanics fail to do so themselves. Also, as Grayson mentioned, the price of crafting an item is huge, and if it spawns useless stats it's worth 1x a salvaging mat, vendor pays a tiny amount of gold, both in which equate to 30-100x less than the cost of making it.

There will be a sliding scale of "expected negative return on crafting" and the prices of materials will adjust that rate. Think of it like going to a casino (because crafting IS gambling fundamentally). You will always lose on average, sometimes you will win big in one roll, sometimes you will have a massive losing streak, but in the end you will always lose an average of xx% due to the odds in the game. For crafting, these odds will be set by the cost of materials vs the market value of good items.

It's almost impossible to measure this return % value accurately, but I fully expect it to be double digit losses.

[Concupisco Quaestus]

Supply and Demand don't apply because "saturation." Is that what you are saying?

Not what I'm saying at all, I'm just saying that a market with 10 people selling their wares operates quite a bit differently than a market with 1000 people selling their wares, it's easy to nitpick over things like price when it's just you and one or two other guys selling tomatoes but when its you and 487 other guys selling tomatoes the game changes.

If the "basic" crafting materials are cheap enough people aren't going to mind consuming them when crafting, if they are too valuable people won't craft so it makes sense to have the basic "materials" fairly common, it also follows the same basic pattern we've seen in crafting systems up to now... If the base crafting materials are common enough to be "worthless" enough to justify the crafting system then they will also be available to everyone to some extent or other as the entire game play design revolves around a loot system that provides a never ending stream of these "scraps"... For all we know the "scraps" and common stuff may be so near worthless that putting them through the crafting system becomes the only way to generate any kind of money with them... Who knows, I've seen worse... Either way crafting materials are going to behave more like gold in that everyone is constantly generating it on a daily basis through natural game play without much real effort, which is definitely going to have some kind of effect on the overall demand for materials within the market and crafting system.

[Grayson Carlyle]

I'll see if I can clarify my position and my understanding of crafting.

There are 2 ways to get rares: Crafting and drops. By necessity, most rares will come from drops. Based on materials for crafting, at least 32x more rares will come from drops. If you go for some 6 attribute items (and hell, why wouldn't you?), it'll be 48x. Market value of rares will be determined by the entire supply of rares, so you can't look at crafting values, input and output, in a microcosm.

You can buy all the cheapest rares off the AH to try get a crafted item that's worth more than 48x the cost of the crap you made it from, but in all likelihood, it won't be that good. Most good rares will come from drops. What you get out of crafting is choosing what type of item you make. You can aim for one with high market value or one that will personally benefit you. But either way, there aren't so many different high-end item slots that good drops won't outnumber good crafts by at least 6:1.

Since the supply of rares from drops will greatly outnumber those from crafting, by necessity, the drop supply will dictate the overall supply. Demand will remain constant for quality (to be used) or crappy (to be salvaged) rares regardless. The output value of a crafted item will be determined by the drop market, not by the craft market, which is what everyone has been doing their calculations on. The only catch is that, aside from vendoring crappy rares, there's nothing else to do with them except salvage and craft. Because S/D will be set by drops, not by crafts, the average value of a crafted item will be much less than the cost of making one. But people will do it anyway because they're tempted to have another chance at an awesome rare. This makes crafting inherently more rewarding (the gambling aspect) than simply producing a profitable item.

If you want to make money, you'll sell crafting mats and not craft a single item. Buying the best items will be cheaper than crafting them, because people will use the crafting materials just because they can, and the output will be competing against every other rare item ever found.

If the gambling subset of the population is small enough, then crafting materials will drop so low in value that they will level out to be an equivalent fraction of the average output value, but I highly doubt that will be the case.

Either way, rares will have a stratified price; "sub-par" (items which aren't bad, but are still worth more than the price of salvageable materials, at some X%) to "poor" items will be worth the price of their materials, then there will be an empty gap between that price and the price of a decent rare. That gap will start out small, as people will still have a use for a "mediocre" rare. The longer the game goes on though, the less demand there will be for anything less than "good". Anything less valuable than "good", even if it's just barely less valuable, will instantly drop to salvage fodder. A lot of deposits will be lost trying to sell these items, but they will in turn rise the price of crafting materials slightly, making crafting even more of a gamble, but the salvaging of mediocre items even more of a loss.

The very narrow economy (in terms of variety of commodities and usefulness of goods) means there's just not anything else to do, and it will be a gambler's paradise. A lot of people will lose a lot of money, and happily lose it, to those watching the prices.

[Frostlion]

If the gambling subset of the population is small enough, then crafting materials will drop so low in value that they will level out to be an equivalent fraction of the average output value, but I highly doubt that will be the case.

Ah, now I get it! This seems to be the core of your argument, and it's actually a pretty good one: demand could actually be higher than the value of the items justifies. Because people haven't done the math, don't care too much about money, like to gamble or can't wait for something to show up on the AH.
In other words: the price could stabilize well above what we think would be a fair price.

This might be the case and we won't know until release.

That said, this has not been my experience in other games. In practice, it is almost always possible to make a profit buying materials and selling the results, exactly because crafting is such a gamble in small quantities. Sure, some people like to gamble, but if they are disappointed the first ten times, many of them will leave it at that.
On top of that, many people simply believe crafting to be boring. They'd rather be out playing the game than scouring the AH for items, breaking them down and gambling them into random stuff. (the "Fun" factor smurphys was talking about). The same goes for mediocre crafting results that are worth a fair bit of money but that you can't use yourself. Most people won't bother selling those because it's such a bother, actually decreasing their image of the value they get out of crafting.

But first and foremost: there is a better way to gamble. One that costs no money, in fact, it makes you money by default. One that is more fun and feels more challenging. One that is a lot less reliant on what other people are offering. One that actually has a (tiny) chance of hitting the jackpot and finding something better than you could possibly craft. One that makes your character progression feel meaningful. One that gives you free crafting materials as an added bonus.

And that is playing the game.

My prediction is many more people will be playing the game and having crap to sell, than there will be sitting at their anvil all day, buying up that crap. Especially because if you actually are grossly overpaying for scraps, you'll run out of money pretty soon.

[AngleWyrm]

That said, this has not been my experience in other games. In practice, it is almost always possible to make a profit buying materials and selling the results, exactly because crafting is such a gamble in small quantities.

You're just making that up. In what game do you own a toon that made their fortune crafting?

[Concupisco Quaestus]

Star Wars Galaxies is about the best example I could think of for a "click click profit" type crafting system, granted you still had to know what to do and what items to craft but you could easily take resources worth 1-5 credits per unit and turn them into simple things like armor dye kits and such and sell 100 units worth of cheap resources for 50-100k credits... Crafting made plenty of people "rich" in SWG".

However; with that being said, one could also try and setup a crafting "business" and lose money on every single sale if they didn't run their numbers properly or overpaid for resources so Star Wars Galaxies crafting could easily go both ways... It was about as close to a real world free market economy as I've ever seen in a game, the "trading" side of SWG was so comprehensive and complete that it was an MMOG in its own right.

It's a night and day comparison to the D3 crafting system though as SWG had one of the most robust and comprehensive crafting systems of any game in existence so while it stands as a shining example of a system where crafting can be profitable for the participant the example doesn't have any way to apply itself to the more primitive D3 crafting system... but crafting in Star Wars Galaxies does still stand as testament to what can be done with a crafting system when it is taken a few steps farther.

[Spens]

You're just making that up. In what game do you own a toon that made their fortune crafting?

WoW allowed for quite a bit of money to be made with crafting.

[Concupisco Quaestus]

Yeah, I remember back in vanilla WoW that I used to make a decent ROI off things like armor kits and potions, I don't know what it's like now but I could still see potions and "enhancement" buffs/items/enchants being pretty lucrative if done right... Used to make a killing with my enchanting too but I dunno if you would call that "crafting"... The big money maker in WoW for me wasn't crafting and selling items, it was crafting items for people with their own materials and charging them for 30 seconds of my time, you needed to have the rarer recipes for that to work well though.

WoW was kind of funny, everything "end-game", including the crafting, was tied into an instance end-game most players aren't likely to see during the time period where items and recipes from those instances are in demand. Blizzard's staged "ladder reset" type expansion packs meant that most of the old world stuff got outclassed by the new world stuff so even when the "average" player finally outleveled the raid instances enough to complete them the schematics obtained would be obsolete and the "power-gamers" who are now all in the "new" end-game that the average player has minimal exposure to again get access to all the "money maker" schematics while the average player is for the most part totally cut off from ever being any real competition... It was a little unfair TBH, definitely rewarded you based on your effort though... With Inferno mode I can't help but wonder if the same thing isn't going to happen in D3.

[Grayson Carlyle]

Now, in WoW, by far the best profit is from crafting. Jewelcrafting, enchant scrolls, armor enhancements, etc... Basically, any consumable. There is a large margin, small volume profit to be made off of items, but that's not a consistent income. I made a few million gold over the period of April-August this year just doing JC and enchanting. It required a lot of co-operation with other sellers on my realm and only worked because of the relatively small market size. Crafting can be extremely profitable in some games.

Controlling supply and demand was a huge part of getting 80-200% margins though (I didn't even bother with something if the margin was below 40%), something that just won't happy in D3 because of the size of the market and very narrow variety in what you can sell. There won't be any specialization in D3, the market (in terms of volume) will be massive. You won't be able to corner any recipes, you won't be able to offer any special value that someone else can.

[Concupisco Quaestus]

There won't be any specialization in D3, the market (in terms of volume) will be massive. You won't be able to corner any recipes, you won't be able to offer any special value that someone else can.

Yeah, I'm thinking that is what is going to throw people coming from the WoW auction house the most, or from any MMO that has used a similar commerce model, this is very much going to be about gambling, elitism and collecting more than any other motivator, everyone will have something to sell and he with the lowest price or better stats wins, without the dupes it is the same basic model the D2 RMT market would have evolved into but... well... mass duping was its own issue, one we hopefully won't have with D3. :thumbup:

[raveharu]

Regards to the topic of goldsink, the internal testers from Blizzard who tried Hell mode mentioned they had to continuously repair their items with tons of gold due to constant deaths and spamming of skills (which takes a huge toll on durability).

Can pretty much forsee a situation where the first wave of players will struggle to survive past Hell and constantly burning and using up their gold. The cycle will keep repeating as more and more players move on to Hell mode. Then the cycle restarts again in Inferno mode.

I get why Blizzard decides to introduce Inferno mode, it's somewhat like a gamble, and a really good source of goldsink, because everyone wants to have the chance of getting the best loot in the game.

[Karnegal]

This is a fascinating discussion, though I think there is one element that people aren't considering when discussing crafting. From what I understand the artisans will gain some recipes from you leveling them up, while others (the most desirable ones) will be random drops from mobs in the world.

The availability of specific high end recipes will have an impact on your ability to make more than the material cost of the item. Early on, there will certainly be a period of time where only a handful of people on each realm have access to certain desirable recipes and will be able to make a premium off of them.

To draw a parallel to my experience in other MMO's, in vanilla WoW my guild was the first horde guild on the server to start endgame content. There was a pretty decent period of time where I was one of 2-3 horde enchanters on the server who could do the Crusader enchantment, which was very desirable at the time. I could make significant profit by buying the components to perform the enchantment from the auction house then selling the enchantment because there just weren't many people who could make it. Similarly, there was a small window where I could make good money off opening lockboxes as one of the few rogues on the server with maxed lockpicking (a service that became worthless as soon as there was a significant population of rogues with this ability).

Initially, I could see a similar issue in D3 where there will be a few specific crafting recipes that will make consistent profit over the cost of crafting because they are quite rare. As time goes on, this will obviously decrease as it's fairly easy to fix prices when 3 people can make something, but much harder when 30 or 300 (to say nothing of 3,000) can make the same item.

[Elfik]

So if there are recipes for sets or legendaries that are guarantees (not gambling), and the value of the item is more than the cost of crafting, then wouldn't the market be flooded with those items fairly quickly, and the demand would decrease, and the profit would become nothing or even a loss?

I initially loved the idea when Blizzard announced it, but is it a bad thing for those items to be able to be crafted? Now if you get that item as a drop, it's kind of a waste of a drop?

Possible saves are the rarity of these recipes, and perhaps limited use? Also the cost of crafting may be prohibitive.

Thoughts?

[Azzure]

So if there are recipes for sets or legendaries that are guarantees (not gambling), and the value of the item is more than the cost of crafting, then wouldn't the market be flooded with those items fairly quickly, and the demand would decrease, and the profit would become nothing or even a loss?

I initially loved the idea when Blizzard announced it, but is it a bad thing for those items to be able to be crafted? Now if you get that item as a drop, it's kind of a waste of a drop?

Possible saves are the rarity of these recipes, and perhaps limited use? Also the cost of crafting may be prohibitive.

Thoughts?

I think every single crafted item has SOME element of randomness to it, even the Legendary and Sets. Whether it's a random stat, or at least random stat range.

[BohemianStalker]

A percentage based GAH fee is all that is required to prevent infinite Gold inflation. There cannot be long term inflation. Gold prices will... eventually... stabilize.



shortened the wall of text

Big assumption. I myself will try to use trade forums to evade any fees possible. There is still option to trade, without fees. If enough people would do that, inflation would occur. Not propable but possible. 15% fee is 15% cut from my money, I know I will look for alternate solutions.

[Concupisco Quaestus]

Big assumption. I myself will try to use trade forums to evade any fees possible. There is still option to trade, without fees. If enough people would do that, inflation would occur. Not propable but possible. 15% fee is 15% cut from my money, I know I will look for alternate solutions.

Yeah, that's a good point, if the fee's are too high then people will look elsewhere, perfect queue for the "illegitimate" website with the 5% listing fee or the RMT industry selling gold, bypassing the listing fee and thus being able to provide gold 15% cheaper than the RMAH... Hmmmmmmmm... :scratchchin:

[FizzyBubbly]

I will gladly pay the fee's associated with the GAH and RMAH to pay for the piece of mind when buying and selling items, knowing that my transactions and information are "secure".

[BohemianStalker]

I will gladly pay the fee's associated with the GAH and RMAH to pay for the piece of mind when buying and selling items, knowing that my transactions and information are "secure".

I get your logic. 15% for no problem transaction is not so much. I agree.
But do not imagine trade forums like a house full of scammers. There will be feedback on these forums and there is normally one perfect rule. Who has less positive feedback goes first(sends money /item first). Which eliminates almost any insecurity. After you get over first few trades(which you can do with people who have about 50-100 feedbacks so you feel secure) then you will be always the one who recieves first when trading with "potentionally dangerous people" with 0 or few feedbacks.

15% for secure transaction is ok. But i can also get secure transaction for 0%, now how about that?

Maybe Azure could tell us, why dont we make such a forum ourselves? With feedbacks and so on..The way I see it any trading with items now is ok since its actually supported. Or Am I missing the point and its only ok via blizz game engine?

[Elfik]

I think every single crafted item has SOME element of randomness to it, even the Legendary and Sets. Whether it's a random stat, or at least random stat range.


Yeah, I forgot about that. But still, when a good legendary of set item recipe starts getting used more often than drops are occurring, wouldn't that inflate the economy with that particular item much faster than others? So legendaries/sets with well known recipes would be comparatively cheap, and such "bargain" items would be more common than equivalent rare items, or legendaries whose recipes aren't as well known.

I just hope the cost is high enough so there isn't a HUGE influx of certain items.

Not to mention that really rich people might be able to capitalize heavily on rare recipes.

[Concupisco Quaestus]

15% for secure transaction is ok. But i can also get secure transaction for 0%, now how about that?

But you can't, you can only tell yourself you can... Security isn't just about getting your item or getting the gold, it's also about separation, one of the biggest threats in the RMT industry is the fact that your paypal address is floating around in a world full of criminals, even if your trade went through fine and you got paid your money the security threat isn't in making the trade successfully, the threat comes in your exposure, who did you just do business with? What's to say that person didn't just spend a dollar buying something from you in private just so he could harvest personal information out of you... What's worse? paying a 15% fee or giving Iranian hackers your Paypal address along with verification that you are using it? Thinking of being smart and not keeping a balance in your Paypal account? Good, that still doesn't change the fact that your name, address and bank information could be in the hands of people who know how to use it... Your Paypal email address is like a credit card, while you may not think there is a threat if someone knows your number without knowing your security number or having your signature but there are criminal elements who specialize in ways to make "use" of such things... At least with a credit card you can see who is looking at it though, with your Paypal address you have absolutely no way of knowing who you are giving it out to.

Think of that 15% as tax, sure you could avoid paying but is the hassle really worth it? You're not really saving much (15% really isn't much for an RMT fee, if you wanted to sell your gold to the "reseller" RMT market you would be looking at more like 40-50% off the top) and in all honesty people dodging the fees are just going out of their way to harm Blizzard's overall revenue stream and that revenue stream directly dictates what kind of support and future development we get... It's all one big circle.

People are free to do as they wish but Blizzard is "allowing" you to make some extra cash on the side through playing their video game, why be one of the "type" that need to nickle and dime everyone? If you really do feel that giving 15% of your revenue to the company that is letting you generate that revenue in the first place is so horrible, to each his own... You're not doing yourself any favors by trying to "cheat" the system though.

If you want to trade the old-school way I have no doubt there will be tons of other people there with you, that old school trade game was kind of fun so I can definitely see people wanting to continue on with that experience to some degree or other but as far as going out of your way to avoid paying a 1.50$ on that 10$ item you sold... I dunno 'bout that one, I'd be inclined to suggest a re-evaluation of the terms under which you do "business" though.

I have no doubt there will be illegitimate RMT in D3, especially in Hardcore mode but like everything else that side will be chock full of scammers and the likes. When it comes down to it if you get scammed at "D3jsp" there is nothing you, or the website can do about it, while getting scammed in the RMAH is nearly impossible. (buying low, selling high and getting someone to overpay for an item isn't scamming, that's business)

The no-fraud aspect alone will keep the vast majority participating in the RMAH... There is no system in the world that allows you to make a profit while not taking a cut, if 15% is an issue for people they need to wake themselves up, this isn't a 15% surcharge for playing the game every hour, they are charging you based on money you made, money you made out of thin air for the most part... You play their "game", you loot something awesome, you sell that item to another player who could use it for 10$, Blizzard takes 1.50$ for facilitating the secure trade transaction, everyone goes home happy... Well, everyone except the people who don't understand that there is a "cost" in doing business I guess. :scratchchin:

[BohemianStalker]

deleted, dumb reply

[FizzyBubbly]

OK Mr. Trader..

1) Read around the forums before you attack someone for not knowing something. CQ is one of the most knowledgeable people on the forum about Online business, and he has been doing it longer then you.

2) I'm a fully licensed and registered stock broker, I'll link my Series 7 and 63 if need be. That $150 is what i used to charge clients on 1 trade not including commission. 15% overhead for a business is a joke. If i showed my clients a business that had a true margin of 85% i would've had all their money.

I am telling you that you don't understand trade in its simplest form, or your just a greedy ****, your not trying to "Maximize" profits, you are trying to gain profit without any operating cost and you are reaching out of the perimeters of the business model. It is against the TOS to sell or buy items without blizzard handling the transaction.

Trade is done between 2 parties and facilitated by some medium, this medium usually entails some form of cost.

COST = Blizzard allows you to make money from items "they own" <- read the TOS and don't ****ing argue.

COST = Blizzard creating a medium to facilitate your transaction

COST = Blizzard taking security precautions to give you a Safe and Secure transaction

COST = Running the Servers you are using to do your business, that would normally be your rent and utilities buddy.

So your sense of entitlement to "your profits" is completely off.

3) I don't know if you where thinking of coming on these forums and being the grand puma of all things trade but you're not. There are many individuals with many more years of experience and knowledge here so please stop with the arrogance.

4)Sure you disputed your claims and got your money back, I don't want to go through that.

5) Blizzard is not taking from "your" profit. You never own the item therefore you are making a return only on time spent procuring the item and blizzard has determined that your time is worth 85% of the market value. Which is much more then any company pays you.

6) The GAH has a 15% fee, the RMAH will have a small nominal flat fee.

7) Also you're mistaken about selling your items for 15% less making more profits compared to someone that is using the AH because you are not taking into account the time it takes you to find, establish, and complete the trade. While this time may be small it adds up. It may take you a few days to sell your inventory while the person using the AH can post his inventory and instead of now searching of forums he is out in the world building new inventory. So for every 1 Item you trade he has the ability to trade 2-3 or much more simultaneously. Say you are both selling the same item worth $10, you sell the 1 item for the full $10, YAY!!! congrats! the AH guy in the same time sells 3 items for a total of $30 oh but boo hoo 15% fees oh darn he only gets $25.50 but he is still making more for his time the the guy trading on the forums. Also there is a long post anticipating the nominal fee for the RMAH with some simple math it looks like it'll be around $0.05 so from the RMAH seller would pay 0.15 and keep $29.85 which is 198.5% more then what the trader made while trying to "maximize" profits.

8)I think you could add something to this forum, because i do think you have some knowledge and experience, but you need to chill the **** out. Many of us are professionals, this is not your OMFG you are wrong your mom type of forum.

[BohemianStalker]

also deleted

[viledevil]

go go chain deletion!

[Concupisco Quaestus]

I hope you didn't take anything I said too personally Bohemian, I missed your replies so have no idea what was said but if you took offense to my post or thought I was trying to make you look "dumb" in some way I do apologize as that was not my intent, your perception of business just seems to be lacking in certain areas... It's not meant to be an insult, I just think some of those perceptions will ultimately hurt your business endeavors, I don't want you feeling insulted, I want you (and everyone else) making money playing video games.

My personal objective on these forums is not to prove anything except that each and every person who could use the extra money can get that extra money with a little time and effort... It's not a selfless act of charity though, my motivation to help others succeed is completely self-serving, I am doing what I can (personally) to bring about a new era in legitimized RMT because the legitimization of the RMT industry also means the legitimization of years worth of my own self study, experience and work... Which at this point in time are for the most part worthless in the main stream... They don't give out diplomas for playing video games... Yet.

In anything I post I am just trying to help, that's my only intent. I'm sorry if you interpreted things differently and took offense to anything I said. :thumbup:

[BohemianStalker]

I hope you didn't take anything I said too personally Bohemian, I missed your replies so have no idea what was said but if you took offense to my post or thought I was trying to make you look "dumb" in some way I do apologize as that was not my intent, your perception of business just seems to be lacking in certain areas... It's not meant to be an insult, I just think some of those perceptions will ultimately hurt your business endeavors, I don't want you feeling insulted, I want you (and everyone else) making money playing video games.

My personal objective on these forums is not to prove anything except that each and every person who could use the extra money can get that extra money with a little time and effort... It's not a selfless act of charity though, my motivation to help others succeed is completely self-serving, I am doing what I can (personally) to bring about a new era in legitimized RMT because the legitimization of the RMT industry also means the legitimization of years worth of my own self study, experience and work... Which at this point in time are for the most part worthless in the main stream... They don't give out diplomas for playing video games... Yet.

In anything I post I am just trying to help, that's my only intent. I'm sorry if you interpreted things differently and took offense to anything I said. :thumbup:

I am hot-blooded and took some of your words personally. Yet still it should be I apologizing to you. I replied in a harsh way. I am sorry for that. Thank you for your advices, I will try to use them accordingly. Live long and prosper :)

[AngleWyrm]

COST = Blizzard allows you to make money from items "they own" <- read the TOS and don't ****ing argue.
Oh I'm totally gonna argue with this point. First, see SouthPark 15x1, humancentipad (http://www.southparkstudios.com/full-episodes/s15e01-humancentipad).

And second, what's being sold is my time and effort. It's a fine line saying "I own the money you are holding in your wallet, because I printed it." It's just something that me and someone else are trading. The problem with virtual goods is that someone can pull the plug, and it costs to keep the virtual world running. The claim to ownership protects the company from swarms of people claiming their property was destroyed when the company shut down that virtual world.

Rather than claiming ownership, there should simply be a Buyer Beware type of notice, that says any virtual merchandise may suddenly become worthless or vanish if they go offline permanently. That seems a bit more sane than dancing around who's property it is.

[Concupisco Quaestus]

For posterity here is the excerpt from the WoW EULA in regards to "ownership" as found here (http://us.blizzard.com/en-us/company/legal/wow_eula.html). Obviously we don't have a D3 EULA but these documents are basic catch-all's and are pretty much interchangeable.


Ownership.

A. All title, ownership rights and intellectual property rights in and to the Game and all copies thereof (including without limitation any titles, computer code, themes, objects, characters, character names, stories, dialog, catch phrases, locations, concepts, artwork, character inventories, structural or landscape designs, animations, sounds, musical compositions and recordings, audio-visual effects, storylines, character likenesses, methods of operation, moral rights, and any related documentation) are owned or licensed by Blizzard. The Game is protected by the copyright laws of the United States, international treaties and conventions, and other laws. The Game may contain materials licensed by third parties, and the licensors of those materials may enforce their rights in the event of any violation of this License Agreement.

B. You may permanently transfer all of your rights and obligations under the License Agreement to another only by physically transferring the original media (e.g., the CD-ROM or DVD you purchased), all original packaging, and all Manuals or other documentation distributed with the Game; provided, however, that you permanently delete all copies and installations of the Game in your possession or control, and that the recipient agrees to the terms of this License Agreement. The transferor (i.e., you), and not Blizzard, agrees to be solely responsible for any taxes, fees, charges, duties, withholdings, assessments, and the like, together with any interest, penalties, and additions imposed in connection with such transfer.





Personal perceptions aside the EULA states pretty clearly that Blizzard "owns" everything and that they are licensing the material to you, even the very first line of the EULA states "THIS SOFTWARE IS LICENSED, NOT SOLD." in big bold letters, you technically don't even own the disc you bought from the store, you are merely licensing its use from Blizzard for the purchase price. This isn't just some arbitrary document either, when they drop the ban hammer they enforce the rules as they are written with absolutely no regard or concern for the personal interpretations of the player, they really don't care how you "read" it or what you saw at so and so's website or that your friend said everything was "legit".


I'm not saying anyone is right or wrong, I just know from experience having gone toe to toe with numerous companies over EULA breaching that when it comes to "creative" interpretation they have absolutely no patience.


As an example I've tried on numerous occasions to defend myself against an account ban by arguing that I was not selling intellectual property but merely selling my time as a service and that there was absolutely nothing in the EULA preventing someone from selling their time as a service to another player (at the time, dunno about now) ... It's a perfectly reasonable stance, it's even been brought up in this very thread (which gave me a good chuckle BTW) but did it ever pan out? No, of course not, I was clearly breaking the rules... Same applies to ownership, it doesn't really matter what you want to tell yourself, at the end of the day the only thing you can claim any genuine ownership of is the money that's gone into your Paypal account... and even that is debatable as Paypal isn't FDIC insured and they can freeze your account on a whim leaving you with no way to ever access that money.

[Frostlion]

You're just making that up. In what game do you own a toon that made their fortune crafting?

Hey Angle,

Sorry for the late reply, just came back from a vacation.

I first made a lot of money crafting in DAoC. A big part of that was because leveling up crafting was a massive time sink. You had to spend so many boring hours leveling up crafting, that there were few people who did it.

I made a fair bit of money crafting in vanilla WoW too, mainly from reputation recipes that (once again) involved a fair bit of a grind.

The game where I really became filthy rich through crafting though, was RIFT. I literally made enough money with my outfitter/runecrafter - while never leaving the city - to fund epic mounts for all 20 active players in our guild about a month after release.

[AngleWyrm]

Well hiya and welcome back from your vacation. Happy post-halloween. Best costume I saw this year was a grocery store clerk: She was dressed as a Star Trek red shirt zombie.

Nice to hear that crafting is not designed to be a money sink in all games.

I tried crafting in Age of Conan, and also in World of Warcraft (14-day trial), but it seemed in those two games crafting was designed to be a money sink rather than a money source, with the plan being a net loss over the long haul.

Diablo 3 is also treating crafting as a money sink, but they are up front about it, making it a gambling game. I like that a lot. I tried crafting in Perfect World as well, and they have a similar high-risk system that's fun: You can try to upgrade an item using a bunch of hard won resources, but if you fail you lose all the previously built up modifiers. So people usually only do it two or three times to any given item.

I spent a fortune in resources making an awesome slingshot for level-10 characters. Then I gave it to someone when I got to level 20 and had better, saying "pass it on, don't sell it to an NPC." The thing is I wasn't trying to make money on that system, I was entranced by the idea of making a really great item. And I think Diablo 3's crafting system might have that same appeal.