I want to talk a bit about the market system, and its potential in WoW. As an example, currently on the Smolderweb server, Devilsaur Leather sells for about 6 to 8 gold per 1 but it vendors for 5s. Using the vendor price as a baseline, people could sell it for 2g per 1 on AH and still make 40 times more than vendor. They would be making a profit, while at the same time guaranteeing sale by offering it cheaper than the competition. This can be applied to almost anything in the game, and would simulate a free market system fairly well. Just wanted to see what people thought about that.
Weâve already heard Blizzardâs position on free markets today.
Boom
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Except price isnât based on the âvendorâ cost. Itâs based on demand versus supply in a free market.
There is only so many devilsaurs out there. The leather sells for alot because of that.
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thatâs not logical. there are unlimited devilsaurs out thereâŚ
isnât the idea of a free market that there is no oversight or regulations, the market corrects itself, if you are suggesting implementing some sort of limit on potential value an item can sell for - it no longer be a free market
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this post is further proof of our plummeting educational standards
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No, devilsaurs are limited by time.
They have a relatively long respawn timer and there arenât many of them.
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I am an economics professor and hope that our standards are not too low.
The idea of a free market isâŚwell, itâs just that â an idea. Itâs easy to show, under some pretty restrictive assumptions, that the market clearing price will maximize the welfare created by a perfectly competitive market. However, not many markets can fully meet those assumptions (perfect information, no external costs or benefits, homogeneous goods, no barriers to entry or exit, and all buyers and sellers are small relative to the market). Commodity and financial markets come very close, and I would argue that the simulated economy in WoW comes close to perfect competition for most items. If something is very rare, or very difficult to obtain, then the suppliers will have market power and competition is, at best, imperfect.
Basically, we use the supply and demand model that everyone thinks they understand (until they actually have to sit for an exam!) as a kind of benchmark for efficiency, and compare actual market outcomes to it.
Go for it. No one is stopping you from doing this. But then, why would you sell something for 2g that you could sell for 6? It would only reduce your revenue with no, or virtually no, change in costs. Usually people do not do that because it is not rational profit maximizing behavior. Beyond that I have no economic argument to dissuade from doing this. Knock yourself out â the people who buy your leather will appreciate but I doubt it will have much effect on the price in the long-run unless you are farming a lot of devilsaur.
You could think of 5s vendor price as a lower bound to opportunity cost. That is, whatever you choose to do with the leather, the alternative minimum value is the 5 silver you could have received from a vendor. But I donât think that is a good measure of the opportunity cost since, as you point out, you could also have sold it for 6g.
Also, and importantly, Devilsaur leather requires some effort to obtain. How much time did it take you to farm the leather? Did you need to use consumables? Repair bill? Maybe you just really hate raptors or Unâgoro crater⌠All of these things are going to be reflected in the lowest price that producers are âwilling-to-acceptâ for a good. The market clearing price will ultimately reflect our costs of obtaining the leather, and our desire or âwillingness-to-payâ for it. The high cost producers who, for whatever reason, find it more costly to farm leather (maybe they have limited play time, for example) will be driven out of the market.
If you can post enough leather at 2g each, you will be the one driving them out in this case. Part of the beauty of competitive markets is therefore that price gets driven down to the marginal cost of the lower cost producers. That is, only those people who enjoy/donât hate farming leather, and can do so efficiently, will survive as producers as the price is driven down to their marginal cost (the cost to them of obtaining one more leather).
And that is interesting, actually, because it provides a kind of experimental/simulated measure of our real life time. The prices of ore, leather, etc. provide a measure of how much people value their time, i.e. the time cost of gathering those items. But I wouldnât think about that too much since, if you watch those prices, it might make you feel a little sadâŚ
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Your idea will be fine if the vendor sell those but not⌠So why iâm taking a reference to someone who donât sell me the stuff? Itâs like i want the pawn shop price of the item lol
Why would I sell something worth 8g, for only 2g?
The price they are selling for is what it is. The issue is when an organization controls the supply.Creating a monopoly. Which is the opposite of free market ideology.But I am not sure that is happening yet.
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thatâs a pretty good explanation, thank you for taking the effort of actually being constructive
Iâm amazed at this post.
This should be copy-pasted as an auto-response to any person who tries to make a thread complaining about WoWâs economy.
and then less people would go and farm them since theyâre not willing to put the time and effort to farm them for that price.
OP whats stopping you from doing this?
The entire player market has no value.
there is way more gold then there is time played because of raid boss layering abuse allowing players to farm hundreds of thousands of gold. This undermines the value of everything.
After the layering abuse Blizzard never wiped everyoneâs gold and cleared the AH of all items and reset the game. Since they didnât, itâs a useless line of garbage.
I think Blizzard is employing Modern Monetary Theory (MMT) without realizing it. Basically, you are correctly pointing out that there is an ever increasing supply of money. If the money supply grows at the same rate as production, then prices will be stable.** If the money supply grows faster (slower), then prices will rise (fall). That is the âquantity theory of moneyâ and people have been contemplating it for centuries.
I am no expert on MMT but I think a key part of it is that, when necessary, government can fund projects simply by printing more money. If doing so puts too much upward pressure on prices, then money can be removed through taxation. In the game, it rains gold. But Blizzard can support stable prices by âtaxingâ us through repair bills, training costs, mount prices, etc.
As a side note, I am skeptical that this viable in the real world since it is hard for us to wrap our primitive ape-minds around any potential benefits of taxation. And because politicians almost never do anything unpopular. So, in the real world, I suspect this would result in an inflation rate that is âtoo highâ.
**The U.S. tried this (monetarism) a few decades ago and people hated it. If the central bank targets the money supply as a means of enacting monetary policy and keeping prices stable, then they lose control of interest rates. Apparently people prefer predictable interest rates to predictable price levels â and inflation has been low since we switched to targeting interest rates anyway.
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Low prices on everything is evidence that gold, our currency, is the thing with the most value. Adding lots and lots more through layering abuse, as you say, should theoretically reduce the value of gold, not of all the stuff people use the gold to buy. Evidence of this would be rising prices (inflation) as the gold loses value you need a lot more of it to buy the same piece of devilsaur leather than you did yesterday.
Unless, the actual result of layer farming abuse is not people throwing massive amounts of gold at the economy but rather throwing tons of devilsaur leather at the economy faster than demand can catch up. Then theoretically prices for the specific items being farmed should go down until demand catches up.
But either with the gold or with the leather neither one will affect the economy much when the economy has so many thousands of players unless you have lots of abusers. Lots of gold and/or stuff coming in. Enough to make even a ripple compared to what other people are doing. And in either case the people doing the layering abusing have to release their gold and/or stuff into the economy for it to have an affect. If they hold onto their gold long enough for Blizzard to decide to take it away then how was it circulating in the economy and causing changes?
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Everything on the AH is not being sold for the amount they are being posted for. Some of the extreme prices are to throw off addons that average prices to tell players what to buy.
There are two strategies to the AH, some items net a huge payout, some net minimal payouts but you can move huge volumes. The economy is constantly changing based on the cumulative incomes of all players. Devilsaur leather will plummet once other options and patterns are attained, just like boe blues will shoot up once twinking starts. The economy is an evolving system different on each server, know the trends and use them to your advantage to get that cream.
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I saw âI am an economics professorâ and thought âOh god, this is going to be horribleâ, but then I was pleasantly surprised! Unlike most people who claim education or a specific job on these forums, I have a reasonable belief that youâre actually telling the truth!
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