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Old 07-03-2007, 10:30 PM   #1
aegora
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Supply and Demand

I am currently designing a shop system where the price of an item can fluctuate depending on the supply and demand of that specific item... so if players craft a lot of spoons for example, and few people buy spoons, they are going to be rather cheap, both to sell to the shops, and to purchase from the shops.

Keeping this in mind, Ive got two questions to pose:
The first is whether a centralized tracking system would be preferential to keeping each shop independant? Central systems would standardise the prices across the board, but perhaps keeping each shoppe independant might stimulate trade abroad when people would travel to other shops to try and get a better deal.

The second question is more mathematical, but I am sure there are some economics-oriented folks out there who can help on this one... What kind of algorithm would be most effective for modelling the supply and demand curves of randomly introduced player produced and harvested items?

Any help or comments on this one would be greatly appreciated!
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Old 07-03-2007, 10:50 PM   #2
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Re: Supply and Demand

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Originally Posted by aegora View Post
Keeping this in mind, Ive got two questions to pose:
The first is whether a centralized tracking system would be preferential to keeping each shop independant? Central systems would standardise the prices across the board, but perhaps keeping each shoppe independant might stimulate trade abroad when people would travel to other shops to try and get a better deal.
I say leave them independent for the reason you gave: to encourage people to go to other shops for a better deal.
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Old 07-03-2007, 10:53 PM   #3
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Re: Supply and Demand

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I say leave them independent for the reason you gave: to encourage people to go to other shops for a better deal.
Good point, encourages exploration. Depending on the geography of your MUD it also makes sense, items would presumably be in greater demand closer to the places they're needed so if someone doesn't mind spending time running to the other side of a continent they might get a better deal.
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Old 07-04-2007, 07:15 AM   #4
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Re: Supply and Demand

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Originally Posted by aegora View Post
The first is whether a centralized tracking system would be preferential to keeping each shop independant? Central systems would standardise the prices across the board, but perhaps keeping each shoppe independant might stimulate trade abroad when people would travel to other shops to try and get a better deal.
What are you going to do about rapid price inflation in the main/busiest cities due to high demand - and the effect on the newbies who are stationed there by necessity and who can't travel half-way across the continent to find a better price?

Quote:
The second question is more mathematical, but I am sure there are some economics-oriented folks out there who can help on this one... What kind of algorithm would be most effective for modelling the supply and demand curves of randomly introduced player produced and harvested items?
I don't see the point of attempting this to be honest. Supply and demand are entirely arbitrary and depend on the context-dependent needs of the consumer and producer. Those needs are weighed against the worth of available resources. So you need to understand a player's needs (how important is a healing potion to the 'average' player? ) and their resources (how much gold do they have? or tradeable assets? or time?) I don't think you have anywhere near enough quantifiable data to generate any worthwhile predictions from it. Usually this works the other way around; you set up the system to increase prices for items in demand and vice versa, and then you can measure the curve by observing buyer behaviour.
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Old 07-05-2007, 12:06 AM   #5
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Re: Supply and Demand

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Originally Posted by Kylotan View Post
What are you going to do about rapid price inflation in the main/busiest cities due to high demand - and the effect on the newbies who are stationed there by necessity and who can't travel half-way across the continent to find a better price?
Great question! Inflation will work both ways in a system where the items for sale are produced by the players themselves. A higher price of sale will mean the shopkeepers will offer a higher payout when they recieve their new shipment of wares! Meaning: we are making it profitable for players to sell their items to the shop with the high inflation, which should then lower the price again as they increase the supply.

As for the newbies, well, they are newbies, and will likely have no need for rare and desireable potions of rabbit translocation or fashionable platinum embroidered cloaks. The items most appealing to newbies would also be the easiest to craft, and should therefore be in very high supply, keeping their prices low. If this turns out to not be the case, well, legislation by the council of that city should be effected to keep prices low. One would hope.


As for the point of the excercise, well, I was kind of hoping to stimulate some sort of craft-driven economy. Too often I see carefully designed excel spreadsheets calculating the exact cost of every little material component and the profitability index of product Q. This ends up with a bunch of powergamers producing a thousand broadheaded, oaken shafted arrows that nobody uses, and none of the other items.

Keeping track of buyer behaviours is nothing short of easy. just log whatever is bought or sold over time. We have static guideline prices, obviously, because this system is not in place yet, and people have to sell their items! Determining exactly how badly a player might want a healing potion is the purpose of the algorithm. How much is someone willing to pay? at what point does the cost outweigh the demand?
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Old 07-05-2007, 04:33 AM   #6
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Re: Supply and Demand

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Originally Posted by aegora View Post
Great question! Inflation will work both ways in a system where the items for sale are produced by the players themselves. [..] As for the newbies, well, they are newbies, and will likely have no need for rare and desireable potions of rabbit translocation or fashionable platinum embroidered cloaks. The items most appealing to newbies would also be the easiest to craft, and should therefore be in very high supply, keeping their prices low. If this turns out to not be the case, well, legislation by the council of that city should be effected to keep prices low. One would hope.
People who live in prosperous Western countries, like yours and mine, often follow the thinking that markets are self-correcting and everything finds its natural level. What they miss out on is that it's actually easy for these systems to spiral out of control and for the population to be unable to afford anything. Ask people in rural Russia or Zimbabwe, for example. Hyper-inflation is a big problem in the real world, and it could be in your world. Depending on the cash available to newbies, the price for the items they'd want to buy might have to be so low that no player with the relevant crafting skill finds it worth their time making them. Eventually scarcity will drive the price up, players will start to craft them, and a few newbies will be able to afford to buy them. The market has found its balance, but the market cares little for whether you've lost 90% of your new players who can't afford to buy what they need.

Quote:
Keeping track of buyer behaviours is nothing short of easy. just log whatever is bought or sold over time. We have static guideline prices, obviously, because this system is not in place yet, and people have to sell their items! Determining exactly how badly a player might want a healing potion is the purpose of the algorithm. How much is someone willing to pay? at what point does the cost outweigh the demand?
But you can't model that at all with the existing system. The prices are artificial, supply may well be infinite, so demand is likely to be fairly meaningless. Even if you could determine an average price for a potion that balances utility against cost, that's not necessarily the price that suits your game. Utility and cost of an item both change as the player gets more powerful, so that's 2 more dimensions to balance. The average good price might still be far, far out of the range for 98% of players, ok for the 1% with gold levels around the mean average, and actually be so cheap to the last 1% that they could easily buy the lot and trigger further price rises.

Free markets reach a point of equilibrium, but that equilibrium is not guaranteed or likely to be something that most people enjoy. In the real world, you can just say "that's life", if that's your political leaning. In a game, you're merely shooting yourself in the foot in the name of realism.

Last edited by Kylotan : 08-07-2007 at 01:51 PM.
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Old 07-05-2007, 01:21 PM   #7
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Re: Supply and Demand

As with many new or complex features, this one is such that would require you to invest a lot of time tweaking and honing if you want it to be useful. The main thing to remember is that compared to real life, getting your hands on the materials to craft with is usually easy in a game environment. This being the case the other problem is that if you want a craft economy you need to have many times more users of the crafts than craftsmen, otherwise you will be left having to model the supply - demand scenario via NPCs. For this to work, you need an economy that allows you to gain income through other means, effectively making craftsmanship just another job you can perform and not a must-have.

I think the challenges in setting a system like this lie mostly in balancing it out with other ways to play the game. A game's economy is very different from a real life's economy mostly because of the limited number of people most games have playing, so RL economic models might not even apply to your game or maybe they will just produce different results. Bigger games like Second Life and such on the other hand, can use RL economic models easier due to the large player base they have.
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Old 08-07-2007, 12:28 AM   #8
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Re: Supply and Demand

I'm very interested in this system, since we're trying to work out something similar for the next version of the game. I hope you'll keep posting your design thoughts!

One thing that we use, which might add another dimension, is to have city taxes that are on specific materials and item types, which are set at the city level, and which affect shop costs. This allows us to reflect things getting scarcer or more plentiful, albeit in a fairly crude way.
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Old 08-07-2007, 01:46 PM   #9
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Re: Supply and Demand

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Bigger games like Second Life and such on the other hand, can use RL economic models easier due to the large player base they have.
Don't munge together Second Life and something like WoW though. Most of the big games definitely do -not- use "rl economic models" for the reasons Kylotan talked about. They're not fun for most people and are almost always an example of designers designing for themselves rather than players, even if they don't realize it.

Second Life uses a 'real life economic model' because it officially allows cash-out of Linden dollars to real-dollars and because there is no overarching game within the world except trying to make real money. When there's no game to ruin, real-life economic models are fine. When there's a game to ruin, they pretty much suck for most players.

Remember: In real-life, most people are frustrated about their economic situation.

--matt
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Old 08-07-2007, 02:53 PM   #10
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Re: Supply and Demand

Yeah. I don't think its real practical to try to model a real system. On the other hand. No **player** needs 500 spoons, in the first place. A city *might* need spoons all the time. Trying to sell 500 of them to a village, where the *presumed* size is 20-30 people, is going to saturate it so fast no one can sell spoons to them for years. 500 spoons, in a city of 2,000-3,000 people on the other hand... But if everyone is making 500 spoons, its still going to saturate the market. Real merchants are not going to specialize, are going to sit on their stock till needed, while selling something else, etc. A real blacksmith, jeweler, etc., is going to do *the same thing*, tracking what is needed on the market, and only providing what the merchants/brokers need at the time. Big items, like magic cloaks, are going to **rare** production items. They will take time, be hard to produce, and more to the point, not produce a constant income, even if they do make you more in general in one use.

As I see it, the only way to "successfully" set up anything close to a real economy is to consider how big your city/town/village is supposed to be, figure how much they are actually going to need, put the players in competition *with* the locals to get the items, and maybe set up some sort of seasonal shifts, and fads. For 1-2 RL months the entire city might be making you huge amounts of cash from ear muffs, even in summer, then the fad goes away and someone else discovers that their entire stock of purple socks are selling out. Fact is, trade systems usually *don't* bother even trying to do this, so someone can craft 5,000 Gnomish Parachutes, sell them all off to the local merchant, and the merchant won't even refuse them. In a *real* economy, if some merchant buys that many in 2-3 days, you better start considering **why** and maybe set up your own stand in the market for them. lol

I don't think its necesarrily impossible to manage a good system, but it would need to work in a way that takes into account what *should be* possible, not just how far away the merchant is compared to the rest. Some players might just have to get a real job.
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Old 08-07-2007, 03:09 PM   #11
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Re: Supply and Demand

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Originally Posted by aegora View Post
As for the newbies, well, they are newbies, and will likely have no need for rare and desireable potions of rabbit translocation or fashionable platinum embroidered cloaks. The items most appealing to newbies would also be the easiest to craft, and should therefore be in very high supply, keeping their prices low. If this turns out to not be the case, well, legislation by the council of that city should be effected to keep prices low. One would hope.
I honestly would hesitate to make things that could heavily affect newbies (and I am not sure that this will in your game) be in control of the playerbase. (Again, I'm assuming that the playerbase would control the council.) You could always fix this by having a "newbie" shop, I suppose. You would only be able to shop there when you first arrived (by time played or by levels), and prices would stay "fixed". Thus, your shops should probably be independent of each other.

With that having been said, are you planning for multiple shops? Are they game-runned shops or player-runned shops? If it is a game-runned shop, I assume the game will place a base value on everything, or will players be allowed to set the value?
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Old 08-24-2007, 11:48 AM   #12
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Re: Supply and Demand

It depends on the type of game you're implementing this into. I've heard similar thoughts about doing stuff like this on RPIs and I've always pointed out that it's flawed to let PCs alone control an economy when theoretically there are usually far more NPCs and vNPCs which would be affecting the economy. The assumption that NPCs and vNPCs would simply follow the pattern of PCs is also flawed given that PCs tend to operate in a generally unrealistic manner ignoring necessities of life like shelter/dwellings or eating (unless they're starving and/or their hunger is affecting their performance) while buying weapons and armor (but never thinking twice about a new pair of boots unless it has an armor bonus, etc). That's why players will try to "sell" to shops but won't think twice about drinking from a puddle to save having to buy a drink at the local pub (unless they're RPing there). Their activities typically run contrary to any realistic reflection of economics and relying on them as a pattern for supply-and-demand will just leave you with a horribly messed-up system.

Now, if your game is the standard H&S and doesn't feature a "treat NPCs just as you would PCs" policy, then I think it sounds fine. Most MUDs naturally develop something like this anyway with whatever skewed economy they possess. Hard-coding it would just compliment that I suppose.

Take care,

Jason
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Old 08-25-2007, 10:56 PM   #13
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Re: Supply and Demand

Supply and demand will determine prices in your mud. I dont think you can ignore that or deny that. But you have a great deal of control over those things. You have a great deal of control, even in a world where players do lots of crafting.

Underlying the supply curve is the scarcity/abundance and cost of the inputs (of the crafted good) plus the difficulty of the crafting itself. You control all three of those things. Underlying demand is the players' preferences for particular items. You control the amount of value that each of these items have, in that, you determine what a standard leather torso armor provides for ac. Of course players in some systems, players can add temporary or even permanent enchantments on normal items, eg. placing an infravision spell on an ordinary iron longsword. You control the number of enchants, the power of the enchants and the cost of the enchants, so you control this aspect of demand also.

If you want a more 'real' economy, then you should make each shop's pricing independent of the others. If player's want to spend their time traveling across the ocean or across the continent to engage in arbitrage, let them. That will actually end up equalizing the prices across shops. ...which can have inherant benefits.

As for the newbie items, you will find that if you write the correct supply/pricing equation for your shop, then the items which are of low value, will have a low price. Think about it for a minute. The most basic dagger with the lowest hitroll/damroll in the game. It may take 2 ores of iron to craft it and a low craft skill. Lets say you sets its initial SetValue to 50 gp. So the very first one sold to the shop will sell for 25-50 gp (however you decide to do the sell rate). Then the second will sell for about 75% the value of that, the next will sell for 50% of the original value, and so on, until eventually, they are selling for 5 gp each at the local shop. Now as a player, are you going to continue to go mine the ore and invest the crafting time to earn 5 gp? I doubt it. So the price will remain there. I see no problem with gp inflation for low level eq or any other equipment.

The trick in all of this of course is to correctly balance the availability of the inputs, the difficulty and time-consumption of your crafting skill, and the amount of power you give each item. If you allow players to get the ubersword of doom from Morganna the Witch with great ease, and they can sell that ubersword for 20,000 gp, then you clearly will have balance issues with shops, inflation, crafting and other things. You can tweak these as you see player behavior gravitate towards one set of items. If invis cloaks become popular, make sure that the invisible stalker hide is a rare find on corpses, or that invisible stalkers are a super rare encounter etc. I see it as just one balancing issue among many. Supply and demand are your friends, not some arbitrary thing that HLPs can influence at a whim.

-Detah@Arcania
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