[MUD-Dev] Economic model..

Michael Sellers mike at onlinealchemy.com
Thu Feb 26 19:13:27 New Zealand Daylight Time 2004

Daniel Harman wrote
> Michael Sellers Wrote on 25 February 2004 04:06

>> This model also helps remove the incentive for easy arbitrage,
>> where

>> an item is bought for one price in one place and sold at a much
>> greater price someplace close by, without adding any value to the
>> resource.  This effect along with hyper-inflation has been the
>> bane of in-game economies going all the way back to Habitat.

> What is the issue with arb? Real markets have plenty of it, and
> its one of the mechanisms that keeps the markets efficient. The
> only possible problem I could see is if people can buy enough of a
> resource to control the prices on it.

Notice I said "easy arbitrage."  Arbitrage is at the heart of any
viable market: you buy something for $ and sell it for $$.  But
along the way (at least outside of modern currency and similar
markets), some form of value is typically added: the form of the
resource is changed, convenience or utility is increased, or in the
most basic sense, the resource is made more local.  For example, if
you mine some ore and then bring it to town to sell it, you've
increased the ore's utility and convenience for others, and they are
willing to pay some amount for that.

However, in many games (and the Habitat cupie-doll incident is
probably still the canonical version of this) what happens is that
players are able to obtain some resource for no real cost and then
sell it for an artificially inflated cost -- they've added no value
or utility, increased no convenience, etc.  This quickly turns into
a gameplay-killing treadmill (of the more literal sort, not the
leveling treadmill) where you get money but feel no real reward --
this IMO is a large part of what's wrong with the quasi-crafting
skill games in The Sims Online.  Further, if this injection of money
is made from a limitless supply -- there's always someone to buy
your goods at some inflated price -- then hyper-inflation is the
inevitable result.

> In Everquest, players moan about traders who buy up items
> immediately from impatient sellers at a discount and then put them
> back on the market for more. Is this more what you are referring
> to? If so I don't even see that as proper arb, its simply taking a
> position on the market.

I really don't have a problem with that sort of thing; as you say
it's just taking a position on the market.  Now imagine if you had a
fluctuating import/export market as I described earlier, and could
take future positions on a resource -- some very interesting market
dynamics become available that could actually provide strong
gameplay for players inclined this way.

> Personally I'd love games to setup markets that took a few lessons
> from the real world markets, and facilitated more complex trading
> strategies. Its would add an interesting axis of entertainment to
> the game. The first things to add would be player leasing of
> ships/vehicles (required for goods transport), insurance markets,
> contracts (should be limited so that humans are not required to
> arbitrate), multiple exchanges with limited memberships (creates
> arb opportunities), commodities markets (with seasonal variations
> etc). Maybe I'm biased though because I work in investment banking
> ;)

I think you're right (and I'm not an investment banker).  The
economic simulations in games thus far have been incredibly
simplistic caricatures -- and more, I think, because the developers
don't understand the gameplay dynamics that can be extracted from
markets than because the players aren't interested in them.

I'm not sure I'd want to unleash the full force of things like
factoring or shorting in markets, as these can become quickly
bewildering.  But having an actual basis for trade with localized
goods, time/risk/cost to transport, costs and various forms of loss
and "friction" in manufacturing -- these could all add an amazing
component that gets beyond the eternal search for more phat l00t.

Mike Sellers
Online Alchemy
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