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Assumptions:

  • Crafting materials are infinite. Limit is player boredom.
  • Players can only trade through the auction house. All prices are fixed. Players cannot decide arbitrary prices.
  • Goods in auction house stay stored for infinite duration and cannot be withdrawn by auction creator (except if he pays 100% item price + 10% auction fee).
  • Sell algorithm is FIFO (First item placed by any player is first item sold).
  • Crafting and gathering professions have a cool-down of 10 craft points per day.

Questions / Points to talk about:

  • All players will be happy, fair 100% prices, scam free, no need to play stock exchange market to make a profit through crafting. New Players would have the same experience even if they arrive too late to the game.
  • Money never loses its value, you could store money in a bank, arrive after 10 years to the game and buy everything at the same price. In contrast in WOW, a simple copper ore was worth 10 silver at the game start and now has ended as 200 silver. That's 2000% inflation.
  • By having fixed prices, you guarantee that even if all players in the universe have 99999999999g in their pocket, the goods are worth the same. So that's guaranteed 0% inflation. Hackers may cry all they want, but goods prices will never change.
  • Why didn't WOW / Diablo III used this model? They would have become billionaires with the 10% money grab technique.

Btw: my previous question on economy overflow was never answered, probably that site is dead. https://economics.stackexchange.com/questions/14609/understanding-inflation-in-a-video-game

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    \$\begingroup\$ That question was answered six days ago... Why do you think that it wasn't? \$\endgroup\$
    – wizzwizz4
    Commented Dec 17, 2016 at 17:08
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    \$\begingroup\$ This seems more like a pamphlet than a question. In any case, no, your assumptions aren't valid. \$\endgroup\$
    – hobbs
    Commented Dec 17, 2016 at 17:23
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    \$\begingroup\$ Your auction house is basically a bad NPC vendor: he has very limited stock and takes unpredictable ages to pay you for your sold items. So either it won't be used (because there is any other system for trading items, possibly with an alternative currency) or the more interesting items (if craftable) will be mass produced by botters with multiple accounts (which basically makes the auction house even more like a NPC vendor from a player's perspective). \$\endgroup\$
    – hoffmale
    Commented Dec 17, 2016 at 23:52
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    \$\begingroup\$ @uoɥʇʎPʎzɐɹC No, money.SE is about personal financial advise, not macroeconomical theory. If this question belongs anywhere else, that would be economics.SE. But because this question is explicitly about the economy in MMO games and how to control it as a game developer, gamedev.SE is definitely the one where it is most on-topic. \$\endgroup\$
    – Philipp
    Commented Dec 18, 2016 at 2:45
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    \$\begingroup\$ You can fix the price of something if you make an NPC vendor that will always buy and sell at the same price (with limitless stock). \$\endgroup\$
    – user20574
    Commented Dec 18, 2016 at 21:30

4 Answers 4

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Publilius Syrus clearly stated it already in ~100 BC: Everything is worth what its purchaser will pay for it. Adam Smith explained why: prices represent an intersection of supply and demand curves.

You ignore the basic fundamentals, with a result we know all too well from failed non-capitalist economies: there's simply excess demand or excess supply. What's the point of a a bag of ore "selling" for 100 silver, when there's a 1% chance of the ore being sold? That's an effective price of 1 silver, no matter what you tried to establish. If I put up 1000 bags of ore, I can expect about 10 sales, 1000 silver, not 100.000. The excess supply will simply not be sold. And with your "no take back" rule, there's 990 bags of ore gathering dust in the back of the auction house. That means my 1000 ores are permanently gone, all for 1000 silver.

In reverse, if a product has a player value of 200 silver, and a fixed price of 100 silver, there won't be any sales at 100 silver, making that fixed price equally meaningless. E.g. if I can turn those 1000 bags of iron ore into iron bars which sell for 200s, then who is going to bother selling raw ore? (Assuming a pure economic choice, i.e. no XP gains for smelting iron or similar non-economic reasons)

Inflation is a shift in the point where goods are actually sold, the point where supply and demand are equal, where the supply and demand curves cross. These are factual curves determined by the real economy. Just wishing that the curves are fixed does not make it so. This is the main lesson from all those failed non-capitalist systems: Thinking something does not make it true. Wanting something does not make it real. (Michelle Hodkin).

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  • \$\begingroup\$ 2 Scenarios: a) Fixed Price too low: No-one is willing to sell = No Supplies available to buy. b) Fixed Price too high: No-one is willing to buy. What if the auction house system is necessary evil, you know you are gonna get robbed by the game, but the auction house is the only way to obtain "Gold" currency. If the game "robs" you the same way across all transactions wouldn't that make it fair? Both buyers and sellers sacrifice a lot to use the auction house. It is cheaper to farm materials alone, but you just don't have the patience, therefore you pay upkeep to hire someone to do it for you. \$\endgroup\$
    – user2186597
    Commented Dec 19, 2016 at 13:31
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    \$\begingroup\$ @user2186597: Actually, the idea of demand curves is that there will be some sellers and some buyers at any price. However, the demand curve slopes down, and the supply curve slopes up, so there's a single intersection. And no, an auction house isn't "robbing" anyone. An typical in-game auction is making the supply and demand curves rather explicit. All the offerings at different reserve prices form the supply curve; all the bids form the demand curve. The auction house calculates the intersection so that every offer below the price point can be matched to exactly one bid above it. \$\endgroup\$
    – MSalters
    Commented Dec 19, 2016 at 13:39
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    \$\begingroup\$ BTW, back from economic theory to gameplay: you have to account for frustration as well. Players won't like it at all if their auctions fail to attract buyers, because you forced them to sell high. Buyers unable to buy pricey items is better, in that sense, because scarcity is a reasonable thing/less frustrating. Going out to do quests to earn money is quite natural to a MMORPG. That means inflation isn't actually a bad thing. Inflation is a silent tax. \$\endgroup\$
    – MSalters
    Commented Dec 19, 2016 at 13:54
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The problem with this system is that it just fights the symptom, not the cause.

Inflation means that money loses value, because players have too much of it. It's not the items which become more expensive, it's the money which becomes less valuable.

When nobody needs money, they won't sell anything to the trading house (I won't call it "auction" house, because it is no auction when the price is fixed). There is no need to do so when they already have more money than they could ever spend. There are certainly a hundred other things to do in your game (I hope) which are more fun and more rewarding. When items can only be sold far under their actual value due to price fixing, people can just as well throw them away or hoard them in case they might ever become more useful. Even placing them in the trading house is more work than they would get out of it.

This will lead to a shortage of items in the trading house. Nobody is going to farm and craft the items other people need, because it's simply not rewarding to do so.

The item shortage will be further amplified due to the market power of your veterans with their 99999999999g purses. A high-level player can simply buy up the whole supply of a scarce good at once just because they are bored. When there are 2000 ore on the market for 1g each, they can just buy them all up and still have 99999997999g. Spare change for them, but they screw up the game for a ton of newbies to whom those ores are important. Why would they do that? For the lulz! Online gamers love trolling. When there is an easy way to grief other players, it will be used.

That means the newbies in your game will still be unable to buy stuff. Not because the prices are too high but because there simply is nothing to buy in the trading house.

Bottom line: You can not create a fair economy by not giving the players a trading system which allows to trade goods at their real economical value.

So what else can you do?

This wasn't asked in the question, so I am not going to spend any time on musing about money sinks, alternative currencies and wealth-by-level curves. Especially because we already have a very good question about this. But Extra Credits made some videos about how to balance ingame economies in MMO games which might be very interesting to you:

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  • \$\begingroup\$ Part of the solution is to address the cost of hoarding. Ore needs to be stored somewhere: do the hoarders need to pay for warehouses to hold it, guards to prevent it from being stolen, etc? (For that matter, the same applies to the 99999999999g they are holding on to with zero effort in the first place.) An in-game authority could tax possessions on a regular basis, meaning you will lose money in the long run by just holding on to a commodity. Such controls would be a start towards preventing characters from amassing such large quantities of money in the first place. \$\endgroup\$
    – chepner
    Commented Dec 18, 2016 at 23:42
  • \$\begingroup\$ @chepner This question isn't asking for alternative solutions. If you would like to suggest any solutions, please do that on the other question which I linked to. \$\endgroup\$
    – Philipp
    Commented Dec 18, 2016 at 23:51
  • \$\begingroup\$ I loved how you tackled the economy. You are 100% right on your points. Your proved why the current model doesn't work, adding another detail in the code could alter the whole economy simulation. 1) What if the auction house had unlimited space, but players have finite inventory space ? 2) What if buying caused a 10 second artificial lag, spam buying 2000 ores would cost 20000 sec = boring. 3) The problem is destroying goods, what if the "destroy" function returned them back to the auction house (that's a 100% money grab fee for you !!!). 4) Going afk? Storage space is finete. Cant Touch This! \$\endgroup\$
    – user2186597
    Commented Dec 19, 2016 at 13:15
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    \$\begingroup\$ @user2186597 You still keep fighting the symptoms, not fixing the causes. If you don't like playing stock exchange, just don't play it. Get rid of inventory keeping in the trade-house and have it buy and sell infinite quantities at fixed prices. But if you like the idea of players driving the economy and just don't want it to get imbalanced due to inflation, read what others have posted on "How do you prevent inflation in a virtual economy?". \$\endgroup\$
    – Philipp
    Commented Dec 19, 2016 at 13:39
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    \$\begingroup\$ @user2186597 If that's the experience you want to go for, sure, go ahead. There is no rule that every MMO game must have player-player trading. There are plenty of other ways you can have players interact with each other. \$\endgroup\$
    – Philipp
    Commented Dec 19, 2016 at 14:27
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Nowhere in your description is there a source of silver/gold. There would be no money for anybody to buy anything. In the end, it would just be a single-player game of crafting. This was probably not what you had in mind.

So, let us assume you have some source of money. If you aren't careful about it, this leads to money piling up on higher-level players. That can be OK, if the game is challenging in other ways.

When you fix the prices, there really is no point in having players trade with each other. Just let them sell goods at one price and buy them at a higher price. No need to fiddle around with trading house inventories.

This is a good thing. It means that a high-level player can buy a potion of Godhood even if no crafter has made one. That takes money out of the system.

On the downside, you no longer have a multi-player game.

Making the economy single-player like this is much simpler for the game companies than making auction houses. When they make auction houses it is because they think it makes the game better. They may be right about that, if they are careful in their implementation.

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No, because inflation is defined as a sustained rise in prices. If prices are fixed by the rules of the game, you cannot have inflation, by definition.

But if you have such fixed prices, the economy won't work very well. If an item is actually worth X and it can only be sold for Y, then nobody will want to sell it.

The MMORPG Runescape had a similar system where players could trade directly with each other, but there were price limits on items and trade limits were in place: trades couldn't be too imbalanced. The game developers essentially set the trade values of items directly. Players would trade a very valuable item to another player for more than the game thought it was worth by trading junk that is overpriced by the game along with the item they wanted to trade that was underpriced by the game, which evened out to the right total price.

For example, if the game considers a high level Sword to be worth $1m, and an unstrung bow to be worth $100, but players value the Sword at $5m and the unstrung bow at $5, then a player can buy a Sword from another play for $5m by trading $5.2m for a sword and what the computer thinks is $4.2m worth of unstrung bows: 42,105 of them. The computer values the trade at $5.2m because $1m + 42105 x $100 = $5.2m, and the players value the trade at $5.2m because $5 + 42105 x $5 = $5.2m. By the way, 42105 is (5m - 1m) / (100 - 5).

The computer inaccurately valuing items didn't actually prevent players from trading, it just made trading more difficult.

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