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Can anyone show me how to figure out this 4.5$ line?

Discussion in 'Diablo 3 Market & Economy Discussion Forum' started by Leonhart, Apr 26, 2012. | Replies: 19 | Views: 1648

  1. Leonhart

    Leonhart IncGamers Member

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    Can anyone show me how to figure out this 4.5$ line?

    quoted from: http://diablo.incgamers.com/forums/showthread.php?826367-Gold-Only-on-RMAH

    Can anyone show me how to figure out this 4.5$ line? I knew the 15% fee for gold on RMAH and 15% overall fee on GAH, as well as the flat 1.25$ fee for items on RMAH. But I did a terrible work in maths during school time. :p

  2. Eeryck

    Eeryck IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    The equation is this

    Item price * 15% GAH blizzard cut = Gold return

    Gold return * 15% RMAH Blizzard cut = Seller return

    You then solve the following two equations for when the two 15% cuts are = to $1.25.

    $4.5 is the price point of an item where selling straight away on the RMAH becomes more cost effective for the seller. It is the point where their two cuts taken by selling on the GAH then converting gold to RM is offset by the flat $1.25 fee set by Blizzard in the RMAH for more expensive goods.


  3. VNTom

    VNTom IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    Still not quite understanding where the 4.5$ figure comes out, i mean to figure out the lowest working price we need to make a proportion:

    15% - 1.25
    100%- x

    and x =125/15; x=8.3$

    so as far as i understand only items above 8.3$ in price, will it be worth to put on RMAH. Please explain where calculations went wrong.


  4. galzohar

    galzohar IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    Eeryck has it right. I'll try explaining it more clearly:

    When you sell an item on the GAH and then sell the gold on the RMAH, you lose 15% twice, meaning you get 0.85*0.85=0.7225 of what the original buyer was willing to pay. In other words selling in this way induces a 27.75% fee instead of 1.25$.

    When you sell something for 4.5$, the 1.25$ fee is 27.77%, which is almost the same as what you would lose if you sold on GAH and then sell the gold.

    If you sell something for more than 4.5$, you end up with more money in your pocket if you sell on the RMAH, and if you sell for less than 4.5$, you're better off selling on GAH and then selling the gold.

    Note there is a hidden (but very reasonable) assumption here: I'm assuming the buyer doesn't need to convert gold<->$ in order to buy your item, or at the very least that for every buyer that needs to convert gold to $ there's another that would need to convert $ to gold, so they even out. Since the amount of gold sold on the RMAH is equal the amount of gold bought on the RMAH, this isn't an unreasonable assumption to make. Or at the very least, there is nothing more reasonable that you can assume, or at least I don't think there is :)
  5. Eeryck

    Eeryck IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    $1.25 = Mathematical Break point for maximum break even seller fee when you have double fee.

    Selling an item on the gold AH for the gold equivalent of $4.5 would give the seller $4.5 * .85% = $3.83 worth of gold

    Selling $3.83 worth of gold on the RMAH would give the seller $3.83 * .85 = $3.25 (rounding error ignored)

    Selling an item for $4.5 or greater on the RMAH would give the seller $4.5 - 1.25 = $3.25 the break even point.

    So items over the $4.5 RM value threshold become more directly profitable to the seller by posting directly on the RMAH.
  6. Eeryck

    Eeryck IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    It is the nuisances of this assumption that I guess are at the heart of the other thread that I started.

    I don't believe that a dedicated player that is looking for a BiS item is going to be willing to convert gold to real money to purchase the item. Especially if they are adverse to RMAH in general. This conversion would bring the B-Net Balance cap back into the equation also.


  7. galzohar

    galzohar IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    I don't really see any obvious reasons for why people would be more likely to buy gold on the RMAH in order to purchase an item on the GAH than they will be likely to sell gold on the RMAH in order to buy an item on the RMAH. There really are many arguments that can go both ways for why one might be more common than the other, and in the end we don't really know.

    If people end up never using real money to buy/sell stuff for personal reasons, then RMAH will lose a bit of value and that will need to be factored in, yes. But if that actually happens there are a boatload of other issues, like how the hell is the real money market going to get going - Nothing will be worth more than 4.5$ if people aren't willing to spend $!!
  8. Eeryck

    Eeryck IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    It is not the actions of the same individual but the actions of many different types of people:
    *The dedicated player looking for a BiS item, he would farm items and gold to buy something on GAH but probably not buy gold outright and very rarely if ever buy a BiS directly from the RMAH
    *The get over the hump guy - already has some gold, can see something they want but don't want to grind that out. Buy some gold get it now. Still cheaper than buying outright on RMAH
    *The instant gratification/twinker - again he will be motivated to supplement but not buy outright
    *The rich kid - He is the one that everyone is banking on being in surplus. But no one is willing to admit being.

    The time it takes for items to sell on the RMAH with comparison to the GAH may also further compound this behavior. Everyone has in game gold. If I have to make a decision and take a risk to sell my gold and wait for it to sell to get something I want on RMAH I am not going to do it. However, if I need 10k more gold to get the same/similar item on RMAH I will buy the gold instantly and get my item instantly, even if I have to pay slightly more than what the current exchange rate says the RM version of the item is worth.

    Getting two markets going at the same time is just too complex. People won't want to manage it. The only reason an item would not go over $4.5 is if you insist on cost efficiency. I would argue that the market forces would ignore this inefficiency for one solid trading platform. With the oft repeated requirements that gold is viable and there is item rarity.


  9. jwfcp

    jwfcp IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    easy, someone has something, they want money for it, they list it for how much money they think its worth, they have ten rmah slots and there is no fee to list anything, they just leave their very best ten items up there till someone bites.
  10. galzohar

    galzohar IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    You are also assuming everyone will have some gold and wish to use it to buy items and only use real money to buy additional gold to bridge any gaps. But since items worth more than 4.5$ will likely be worth a lot more gold than one can easily farm, the amount of current gold you own may be negligible compared to the actual cost of the item you're trying to buy, in which case you would prefer to just buy it on the RMAH for cheaper (and yes it'll be cheaper on RMAH than on GAH if it's worth more than 4.5$, as the buyer gets to keep a bigger portion of the profit and thus wiling to sell for a bit less).

    Maybe people will just prefer to use a single simple gold platform and only buy gold on the RMAH. But there is really no indication that that will actually happen. People are both lazy and cheap, and that combination can cause any number of unexpected things, and not necessarily what you are assuming...
  11. FizzyBubbly

    FizzyBubbly IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    Remember that real world economics is very different from what is known as general economic theory. In practice we view economics as a system that is always attempting to reach equilibrium between Price,Supply,and Demand. However as a species we are full of imperfections and being the driving force of this system it is very hard for it to reach parity.

    The last statement isn't always true in regards to sellers willing to sell for less just because they are getting a better deal on fees. This is called the profit margin, arguably on of the single most important statistics of a company. This is always trying to be increased by lowering costs(fees) and increasing price of goods or services sold.

    View attachment 1498 View attachment 1499
  12. Eeryck

    Eeryck IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    That is the interesting thing about the markets being linked, if people don't have much gold, the cost of gold per 1000 will be high on RMAH. It is a self solving system.

    I agree that the speculation on this topic is at an impass till launch and we see what really happens. It was still interesting to have and thank you for all your comments. I was just thinking yesterday that I was going to let this topic die down because it was starting to get a bit circular due to its speculative nature.


  13. galzohar

    galzohar IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    When there is competition, lower fees means lower prices. Not saying that if fees were 1$ less then prices would be 1$ less as well, but if fees were 1$ less prices would drop (by an amount most likely smaller than 1$) due to competition.
  14. riptide

    riptide IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    There are way more people willing to directly buy items with $ than you can imagine. It's not something that people have any reason to publicly admit it because there always people that are against "ruining the essence of the game". I honestly can't remember without going back and checking each listing how many TCG mounts I've sold on ebay and playerauctions. Sure they could buy gold.. but they generally get more gold buying the rare item and selling it in-game for gold than they do for buying the item.


  15. wrugoin

    wrugoin IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    Based on the mathematics laid out in this discussion, is it safe to say that eventually all best end game items will only be placed on the RMAH instead of the GAH?
  16. AKUder

    AKUder IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    Aside from people who need the gold, in which case it's probably more efficient to sell for gold than sell for money and subsequently buy gold, and aside from people who can't access RMAH or have some moral opposition to it, most high level items will sell on RMAH. Long enough sentence?


  17. DoxieVon

    DoxieVon IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    I think its safe to say that all the best end game items will be placed exclusively on the RMAH. Many people will recognize the rarity and value intrinsic to the best items, and will post them on the RMAH hoping to get RM for them. For those that are posted on the GAH it is likely that the item will be immediately bought and re-posted on the RMAH by someone looking to convert gold->RM as there is a high probability that gold production for sale will outpace the purchase of gold, and this will be the only other way to get through the bottle neck of gold->rm conversion... not to mention it will provide for a better conversion rate.
  18. Eeryck

    Eeryck IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    By this analysis, wouldn't you be suggesting that over time gold is not viable?


  19. galzohar

    galzohar IncGamers Member

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    Re: Can anyone show me how to figure out this 4.5$ line?

    I think so, yes. Gold needs to lose its viability for what DoxieVon says to become true.
  20. jwfcp

    jwfcp IncGamers Member

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