DUST Search - Pricing and economy in EVE vs Dust

Gullegubben wrote:

Malinche La Llorona wrote:

So, to put my analysis in perspective, I have an economics degree in real life and am currently attending a Ph.D. program. That doesn't mean that what I'm about to say is correct or should just be accepted without question, I just want you to know where I'm coming from.

Thank you for getting involved, your expertise is appreciated.

EVE is based on a free market ideology, but the pricing schemes of free markets are and must be manipulated to avoid certain things. This goes doubly true in a game. Certain things regulate themselves. I realize you're familiar with this but I'm spelling it out so that everybody can follow along. Let's say manufacturing a Charybdis is not profitable, due to the cost of production versus what customers are currently willing to pay. Well, manufacturers will at that point stop making Charybdises. Those who want one will now have to pay higher prices in order to acquire one. Volume manufacturing will likely bring the price back down, and certain manufacturers will stop building them because of slipping profits. The cycle continues.

However, two things are at play here.

First off, manufacturing costs are to a large extent set by CCP. This is a necessity, because this is a game that takes place in a simulated universe. In real life economies, if the price of gold takes a dump, that's fine. Some investors lose some money, some new industries sprout up, things jumble about and then correct themselves. However, in our make believe economy, our enjoyment and thus willingness to pay our real world money for Dust 514 / EVE Online the product, is directly tied to the relationship between income and expense. If HAVs become too cheap everybody has them and gameplay suffers. If HAVs become too expensive there will probably be a correction based on manufacturing quantity, but even that has limits set by CCP through the mineral requirements for production.

Second, your focus may be clouding your common sense. There is simply no way that a pickup truck can cost more than a spaceship in a free market economy. It wasn't whittled out of a solid diamond the size of a house. It's a truck. It's not a one-off magic truck that flushes rivers of gold out the back end when you drive, it's just a truck.


Author	Thread Statistics \| Show CCP posts - 0 post(s)
Malinche La Llorona Subdreddit Test Alliance Please Ignore 65	Posted - 2013.02.13 00:19:00 - [1] - Quote So, to put my analysis in perspective, I have an economics degree in real life and am currently attending a Ph.D. program. That doesn't mean that what I'm about to say is correct or should just be accepted without question, I just want you to know where I'm coming from. You're looking at this the wrong way around. Eve is based on a free market ideology. The price of goods is based on what people are willing (and able) to pay for them. The same raw materials that go into the Bantam go into other things as well, so when choosing which item to produce, the manufacturer is faced with opportunity costs - i.e. what do I have to give up to produce that Bantam? In theory, if the producer can maximize profit by making the Bantam, they will choose to make the Bantam instead of other things. For the consumer, this is pretty much the same. Is the utility (i.e. bang for the buck) of the Bantam better than the other things they can buy with the same money? If so, they buy the Bantam. When there are lots of buyers and sellers, the price of the Bantam should (again in theory) equilibrate around a market price that ensures that buyers are getting a reasonable value for their money and sellers are making a modest profit. Mind you, all of these prices are relative to one another - the 'real value' of money isn't part of the picture yet. Now let's look at Dust's economy, which is not a free market yet. In Dust, the price of items is fixed by the developers right now. There's no haggling or equilibrium, and the value of a Dust ISK is fixed because of this. In Eve, on the other hand, the value of the ISK is floating - from one day to the next the amount of stuff you can buy with it is dependent on how much ISK is in the economy generally, and what each person thinks it is worth. So, what happens when these collide? If all things were equal, and we simply let money move from Eve to Dust without any other safeguards, then the Dust economy would undergo hyperinflation. The actual value of a dropsuit would be meaningless because incomes in Eve are so much higher than incomes in Dust. However, all things are not equal, and the developers have already discussed, in part, how this merger will take place. At some point in the future we will not be getting a fixed income from battles, but the value of our services will be based on the wililngness of Eve players to pay us through the contracts system. The amount that we get paid for our services will set the level of investment we are willing to make in gear and equipment for any given battle. i.e. I'm not going to risk a 2M ISK investment on a 350k ISK contract. So, the demand for expensive gear will be tied directly to the value of the contracts we receive. Additionally, since the gear we are consuming is going to be made by Eve players, the equilibrium price will be based on their willingness and ability to supply gear, and our willingness and ability to pay for gear. This means that the price of any particular piece of gear should (again, in theory) be tied to its difficulty to produce and its usefulness, as well as the amount we expect to make off of contracts we accept. If this were implemented suddenly, there would be massive chaos for a while until the prices reached an equilibrium state. Fortunately (or unfortunately, depending on how you look at these things) the devs have stated that they intend to implement this process slowly until the two economies are a closer match prior to opening the floodgates.
Malinche La Llorona Subdreddit Test Alliance Please Ignore 65	Posted - 2013.02.13 00:50:00 - [2] - Quote Gullegubben wrote: Malinche La Llorona wrote: So, to put my analysis in perspective, I have an economics degree in real life and am currently attending a Ph.D. program. That doesn't mean that what I'm about to say is correct or should just be accepted without question, I just want you to know where I'm coming from. Thank you for getting involved, your expertise is appreciated. EVE is based on a free market ideology, but the pricing schemes of free markets are and must be manipulated to avoid certain things. This goes doubly true in a game. Certain things regulate themselves. I realize you're familiar with this but I'm spelling it out so that everybody can follow along. Let's say manufacturing a Charybdis is not profitable, due to the cost of production versus what customers are currently willing to pay. Well, manufacturers will at that point stop making Charybdises. Those who want one will now have to pay higher prices in order to acquire one. Volume manufacturing will likely bring the price back down, and certain manufacturers will stop building them because of slipping profits. The cycle continues. However, two things are at play here. First off, manufacturing costs are to a large extent set by CCP. This is a necessity, because this is a game that takes place in a simulated universe. In real life economies, if the price of gold takes a dump, that's fine. Some investors lose some money, some new industries sprout up, things jumble about and then correct themselves. However, in our make believe economy, our enjoyment and thus willingness to pay our real world money for Dust 514 / EVE Online the product, is directly tied to the relationship between income and expense. If HAVs become too cheap everybody has them and gameplay suffers. If HAVs become too expensive there will probably be a correction based on manufacturing quantity, but even that has limits set by CCP through the mineral requirements for production. Second, your focus may be clouding your common sense. There is simply no way that a pickup truck can cost more than a spaceship in a free market economy. It wasn't whittled out of a solid diamond the size of a house. It's a truck. It's not a one-off magic truck that flushes rivers of gold out the back end when you drive, it's just a truck. I get where you're coming from. Let me make two points: 1. Whether the pickup truck or the frigate costs more is irrelevant. It might not be realistic for the truck to cost as much as two frigates, but the reality is that the value isn't based on real resources and real production. The value of a tulip bulb in Amsterdam at one point was higher than many houses. 2. The resources used to produce Dust gear is mined from planetary interaction. The ability of Eve players to mine those resources is tied to the value of service we provide. In this sense, it is a self-regulating system. That being said, I think the question is whether or not you have faith in CCP to set that system up in a way that lets it become a vibrant and functional marketplace or a stagnant pile of crap. So far in Eve I have not been confident in CCP's ability to manage these things as they have made many mistakes in the past. Still, eventually I think they'll get it right.