WoW Economic Collapse

[Boardin087]

Tell that to my former guildmate who wrote his macro-economics thesis on how real-world economic principles can be applied to artificial virtual markets, such as the ones in MMORPGs.

He generated his data from two servers whose economies he controlled, one established, and one recently released. His approach was different, controlling the price on limited availability items rather than market flooding, but demostrated that there is nothing magicial about the WoW market that protects it from real-world economic practices.

Tell what to him. Tell him congratulations on your thesis but you haven't said anything of what he did. Im not saying that no real world economic strategies will work in Wow. Im saying the one the OP proposes wont with the items that matter. Whether or not your guildmate did whatever he did with whatever item doesn't prove anything in the OP's behalf. Elaborate if your going to prove a point.

Btw my dad owns the internet.

 

[Boardin087]

Tell that to my former guildmate who wrote his macro-economics thesis on how real-world economic principles can be applied to artificial virtual markets, such as the ones in MMORPGs.

He generated his data from two servers whose economies he controlled, one established, and one recently released. His approach was different, controlling the price on limited availability items rather than market flooding, but demostrated that there is nothing magicial about the WoW market that protects it from real-world economic practices.

Oh and btw the Op's theory is fairly sound however its just not practical. Saying hes going to control the wow markets that matter is like saying that I am going to sell oil to the whole world at 20 dollar a barrel until I control the whole market. Yea if I had the oil I could do it but its not going to happen

 

[MenuBoy]

Oh and btw the Op's theory is fairly sound however its just not practical. Saying hes going to control the wow markets that matter is like saying that I am going to sell oil to the whole world at 20 dollar a barrel until I control the whole market. Yea if I had the oil I could do it but its not going to happen

QFT

the op even admitted in his 1st post that he never played WoW, that his friend does, a lvl 40. this pretty much confirms they dont control any "endgame" markets.

 

[Torgo]

Time to shore up some Limps...

torgo,

What is your highest level character and how far have you progressed end game

My highest level character is zero and I haven't progressed to the end game at all. I find my voracious need for sex outweighs my WoW committment at present so I vicariously play through Meatpuppet's character. Since he only needs to manage his AH items for 30 minutes at most, it leaves him plenty of time to also score some action.

This is the reason for so much of the holes in your theory. You have no idea which items are valuable and the ones that are you have no freaking idea why.

Most of our theories are being carried out on a medium size server. It has a wide range of character levels to which we can cater to lower-level characters who just happen to need our goods. Which falls into your next point...

The items that matter you can not corner, however you can buy them out low and raise the average price causing a gain for you when you sell them. Its not a "genious economic strategy" but it follows more economic laws than the OP's stategy does. Considering the OP breaks two of the biggest rules in Econ in

1. Know your market
2. Know your consumer

Considering there will always be lower level characters needing our items, there's a constant steady demand. Since CodeX brought up the car dealership idea, here's an example that even Meatwad could follow (ATHF trifecta now in play)

You can make plenty of cash selling luxury items to level 60 characters. It's like selling Porsche 911s to a Billionare Society. What's the cost of actually making that car? About the same as a Honda Accord for all intents and purposes. So the average player does a quick "buy low and sell high" trades and cashes out.

Our model is not based on cash or profit. We only care about control. Let me repeat: we only care about control. Our goal is to lock certain key markets down and monopolize them to our advantage. Profit is secondary. Once you have one market locked, you move into another, and then another, and then another. Eventually, and yes it's going to take a while, you will have a permanent steady income stream that pretty much manages itself. Over time, that income stream can or could match your luxury market day trades.

Using our strategy, let's take a look at your example of selling luxury goods and see where you screwed up.

Btw last night i bought 15 Arcane crystals off the AH (everyone) for 20g each. I knew that a guild on my server had a naxx attunement deadline coming tomorrow ( you dont know what that is but it requires arcane crystals) i posted my arcane crystals for 50g each. I checked this morning and 13/15 sold. Yea there were people who undercut me but they based thier price on mine and only sold them for approx 45 gold. the demand was so high tho that eventually they bought mine also.

Let's break down your costs. 15 Arcane Crystals @ 20g = 300g cost. So right off the bat, you're down 300g but looking to quickly turn your inventory. Knowing ahead of time that there was going to be a demand for naxx attunement you focused on this market. (Yeah, I know about Naxxramas and Revered status and blah blah blah). So you listed at 50g each and sold 13. So the gross profit is 650 for a profit of 300g. Nothing really wrong with that is there?

Well, here's the rub. Knowing that demand was high, there was competition. Before anyone bought any of your stock, they bought the lower priced ones. Assuming that some other guy had the same amount of Arcane Crystals priced at 45g, he made 675 gross profit. In other words, you lost a further 25g. That could have been yours. Over time, that adds up. What if you misjudged the demand? You had the higher price and since there's no quality difference, there's no reason to pick your goods over the cheaper one.

Let's go a step further. Let's say I decide that same evening that I'm going to do the same thing that you did, but go at a much lower price following our model. I know the demand is going to be at least 28 crystals so I'd come in with at least that much inventory. If I price at 30g and my cost of goods is the same as yours (20g), I come out with a profit of 280g. I'm not after profit, just control.

If I manage to soak up demand, you and the rest of your competitors not only didn't sell anything, but now there's a chance that you didn't capture that market during the deadline. Yikes, that's lost income there. Oh, but you're just going to buy my inventory out and resell it at 50g, right? Buy low, sell high. That's the common model that you're touting.

So you spend another 840g buying my inventory. Now you have 43 crystals that you have to move @ 50g. Those buyers are still going to buy from your competitor @ 45g first before you. You've got 1100g tied up in inventory with a ticking time block on the product demand.

By keeping a close eye on demand and maintaining a good supply; and totally not caring about profit, it's easy to shut someone like yourself out of the market. To sum, up you said it best.

Oh and btw the Op's theory is fairly sound however its just not practical. Saying hes going to control the wow markets that matter is like saying that I am going to sell oil to the whole world at 20 dollar a barrel until I control the whole market.Yea if I had the oil I could do it but its not going to happen

I am saying that we do have the "oil" so we decided to make it happen. You control the oil, you can control the oil by-products. Then you have a steady income to which you can start moving into other markets.

Next post... Transportation of goods in WoW and how that can affect supply and pricing.

 

[Torgo]

QFT

the op even admitted in his 1st post that he never played WoW, that his friend does, a lvl 40. this pretty much confirms they dont control any "endgame" markets.

Nor do we want to at this present time. To control a "endgame" market it requires a massive investment of inventory and captial. It has to be built up way in advance. We're getting there. Just takes time and we're about to move in those markets. We both know that a lot of naysayers are going to require proof on those markets before our model is to be believed. We expected that and are working on documentation to bear it all out.

 

[gamz247]

Before anyone bought any of your stock, they bought the lower priced ones.

You're assuming that all these auctions were posted at the same time, were all set to last the same amount of time, had reasonable buyout prices, and the people who needed the crystals waited until both sets of auctions were up.

I know the demand is going to be at least 28 crystals so I'd come in with at least that much inventory.

While the demand for Arcane Crystals is always relatively high, this example is basically a one-time bump. And to come in with that much stock, you'd either have to make a number of purchases on the AH, or do a lot of farming.

By keeping a close eye on demand and maintaining a good supply; and totally not caring about profit, it's easy to shut someone like yourself out of the market.

You're kidding, right? All he has to do is buy out your stuff and hold onto it. Then when you try and enter the market again, he can flood it because he has his own inventory and yours.

 

[Martyr]

you cannot create the supply. there is your problem.

 

[Boardin087]

you cannot create the supply. there is your problem.

he wont listen it doesn't matter.

 

[Boardin087]

I understand where you say you care only about control and not about profits. And that you dont care to control high level markets. However the reason i brought them up is that unfortunatley for you, someone who does make enormous profit on high level markets will just buy our your suppply forever. If you sell pez and I sell oil, Im going to buy you out and laugh, I have so much capital that I can buy our your entire supply and destroy it just to laugh at you. Thats the difference between the markets, thats why I brought up the higher level ones.

The demand is virtually limitless for Arcane crystals during certain points in the server. I bought them sure as hell knowing that I could sell them for 50g. If something strange happened and I had to sell them for 25g even, I would still make money with AH fees. The 20g figures were on average lower. But I exploited it knowing that I could sell even higher than average. Your whole theory on how you can tie up my inventory is not going to work

I am saying that we do have the "oil" so we decided to make it happen. You control the oil, you can control the oil by-products. Then you have a steady income to which you can start moving into other markets.

YA IM SURE UR LEVEL 40 CHARACTER HAS ENOUGH GOLD TO TIE UP MY INVENTORY AND UNDERCUT ME FOREVER /END SARCASM

do you even have any idea how much of a constant demand there is for some high level items. your "voracious love for sex" stops u from farming enough crystals(hundreds per week) to maintain control, however all i have to do is go buy 5 crystals and resell them and log off, go out and party with my girl.

Come on altar of storms and corner a market, I double dare you

 

[SimpleMinded]

Torgo and MeatPuppet (fan of the band perhaps?)

I just wanted to say that, being a WoW player myself, I found your posts extremely interesting (and intellectual as well). The explanations have been very well done, I think, and I begin to understand how it's possible to pull it off.

Keep up the great work, I think your experiment fascinating.

 

[pain.angel]

yeh i dont think he realizes he can spend his 30 mins trying to control the ah but if i go spend 3 hours farming the raw mats ive got him beat. my proftis: 100%. you buy me out post it at your higher price. 3 hours later: my stuff is back up and your not selling any. You cant control a market because you can not control the flow of resources and to think that you can control the flow of resources from the auction house window is ludicrous.

 

[agent420]

I say just do it, collapse the whole thing.

 

[Kreator]

I havent read a whole lot of your "theories" but this is my experience..

you all speak of "progression" highest lvl chars... etc

i used to lead a guild during the time bwl first came out and aq 40 came out. we progressed along with every other guild on the server at a good rate. during that time MC BOE epics were a hot commodity.


when i first became the leader the guild bank had 0 funds, no mats, no resources to speak of. in 5 months i had obtained 38,000 gold, two sulf hammers fully made, an entire account with 8 characters decidated to holding:

completed potions
MC mats
blues
herbs ( 2 just for that )

and a variety of other MC BOEs and the like. its not hard to make money.

heres a good trick, and a simple one. when i would sell MC BOEs i would auction it, and field the responses. i would narrow it down to those who bid the highest, and gradually work my way down to 2 or even just one person. at that point i would play the person for a fool pretending that they are bidding against someone. you can easily jack up the price by making them think there is competition.

3 people message you , tell them 5... etc, etc...

even still i have 18000 gold and about 10000 more in assets which i have never tapped into. making money is easy in wow

and yes, if you really need a screenshot of that to believe it, its able to be shown

 

[kaddar]

Agreed with SimpleMinded, this is really an interesting read, infrequently can someone put skills learned through real life experience and education to use in a game, I'm looking forward to seeing where this goes, keep it up.

 

[Neurofreeze]

even still i have 18000 gold and about 10000 more in assets which i have never tapped into. making money is easy in wow

and yes, if you really need a screenshot of that to believe it, its able to be shown

Well when you have an entire guild's resources at your disposal then yes, it would be very easy to make money, however that's really the guild's profit and not your own.

Also I find it really strange that:
1) This thread is still going.
2) So many people are on servers without AH farmers; I thought every server had them.

People who attempt to make ridiculous amounts of gold just through the AH exist and some are very successful at it. It doesn't matter what bracket you talk about. I've seen people singlehanded jack up prices on everything from wool cloth (I'm not joking) to nexus crystals. Yes, no one can have complete control over a commodity but it doesn't matter; as long as that person holds the majority of stock in the AH, the few non-overpriced commodities that slip through will be bought up because people who actually need them see a good deal, soon creating a shortage (and eventually complete lack of) low-priced commodities. If a person is one nexus short of a +15 agi enchant to tier 3 gloves and there's no cheap nexus on at the moment, you better believe he's going to spend the extra cash for that one last crystal and not wait. Conversely if you're a competitor selling cheaper, I seriously doubt you're going to keep selling super cheap when you could easily squeeze out more gold. Your prices may always be a little cheaper than the market controller, but you'll still be raising it to maximize profits on a much smaller scale than he.

 

[Torgo]

Some responses and a report on a interesting situation that just popped up. I promise I'll get to the logistics and transportation article soon.

You're assuming that all these auctions were posted at the same time, were all set to last the same amount of time, had reasonable buyout prices, and the people who needed the crystals waited until both sets of auctions were up.

I didn't have much to go on from his example. I had to extrapolate a bit.

While the demand for Arcane Crystals is always relatively high, this example is basically a one-time bump. And to come in with that much stock, you'd either have to make a number of purchases on the AH, or do a lot of farming.

The principle of the action still applies. The one-time bump just creates a situation in which the sudden increase in demand creates some opportunities. If you know that these bumps happen fairly often or if you can anticipate one in advance, you can build up for your market entry in plenty of time. I've always maintained that the setup time for luxury markets takes more time than a processed raw good.

You're kidding, right? All he has to do is buy out your stuff and hold onto it. Then when you try and enter the market again, he can flood it because he has his own inventory and yours.

Go back and look at my example. If I re-enter the market and he decides to flood the market at a lower price, he's going to cut into his profits. Please remember that his goal is profit, not control. I don't care about profit, but I crave control.

Let's continue the example I wrote above and combine it with your continuation. He's got 48 crystals selling @ 50g. I come back in with just 10 crystals at 45g. Instead of buying my inventory, he decides to flood the market and relist his 48 crystals at 40g. For the moment, let's just assume that demand is going to stay the same and 28 crystals are going to be bought at that price. He ends up making only 20 credits net profit. That's because WoW really uses a LIFO (Last-in, First-Out) system. He's got to clear out his inventory purchased from me before he can really profit from his initial inventory.

So, I can either relist at a lower price still (which I would) or stay pat. If he buys my inventory out again, I just go gather more and just work on soaking up the demand. Eventually, it does cause a downward spiral of pricing which in the worst case scenario by even your theories, I've succeeded at manipulating the marketplace. In the end, it doesn't matter how much gold you have. You'll either spend it on my goods buying out my inventory (thus giving me your gold ever so slowly) or you'll have to switch to playing the market my way: cheap goods at a razor thin margin.

you cannot create the supply. there is your problem.

Partly true. You can create the supply, but maintaining the supply is the tricky part. Half the supply equation can be solved by using effective character creation and known farming methods. The other half is done through either guild members or clever purchasing at the lower price end of the market. When you get to the point where you're enlisting other guild members to assist you in either controlling the market, or in defense by keeping your profits high isn't a bad thing. It actually adds a new dynamic to the game in my opinion.

he wont listen it doesn't matter.

No, I do listen. You've had some good examples and they've made me think. It's just that I've been able to demonstrate a solution to every problem you've presented so far. How is that not listening? If you mean that by not listening I'm not agreeing with you, then yes, I don't agree with you on your main points.

someone who does make enormous profit on high level markets will just buy our your suppply forever

What does that gain that person who has the enormous profit? He's stuck with inventory that he may or may not be able to sell and I'm happy because I've got my money. There's also a huuuge hole in that "More Money Than God" theory that I'll show you in a second.

your "voracious love for sex" stops u from farming enough crystals(hundreds per week) to maintain control, however all i have to do is go buy 5 crystals and resell them and log off, go out and party with my girl.

First, at least quote me right. Sheesh. It's a voracious need for sex. I mean, it's a requirement. Secondly, your 5 crystals is all I need as well to harvest to resell them, but at a lower price than you. I just soak up the demand before you. Then I can go off and do body shots off my wife. (And don't even try to out do me on the sarcasm factor. Let's just keep it civil and stick to the facts shall we?)

Come on altar of storms and corner a market, I double dare you

I'm first waiting for the triple-dog-dare. And then we'd need to create a character, level 'im up high enough to compete. Not saying we won't, but to do so would take a bit of time to set up. Unless you want to pay the transfer fee for one of my buddies characters to make the leap.

if i go spend 3 hours farming the raw mats ive got him beat. my proftis: 100%. you buy me out post it at your higher price. 3 hours later: my stuff is back up and your not selling any. You cant control a market because you can not control the flow of resources and to think that you can control the flow of resources from the auction house window is ludicrous.

Your profits aren't 100%. You need to consider those three hours spent on farming (that old equation time = money). Using a razor thin margin methodology, you'd need to undercut my costs. You've spent 3 hours getting inventory (thus becoming my bitc...er, my supplier) and I've only spent 30 minutes doing what I need. I might not need to buy your inventory either. If the profit margin is so thin between us, I just might let you farm those 3 hours and make 30 copper pieces. Now are you really going to farm 3 hours every day for just 30 copper profit? That's why a bunch of farmers have already left our AH in the markets we're in.

I say just do it, collapse the whole thing.

We've considered it. Doing so would be the final colmination of our theory, but also attracts a LOT of attention from Blizzard. Yeah, just what I want. Perhaps, maybe when we don't care about being banned from the game.

MC BOE stuff

While it isn't auction house specific, those are good ideas. Good ol' social engineering at it's best. Although, isn't there a character limit on each server? I don't know, so that's why I'm asking. I don't think anyone would disagree about how easy it can be to make money on WoW, but there sure is talk about how possible it is to control markets and create monopolies that could affect a server economy.

I'll start another message and talk about how logictics and inventory factors into the equation and how it can hose up the Mega-Rich player when buying your inventory to sell at a profit.

 

[Boardin087]

That's why a bunch of farmers have already left our AH in the markets we're in.

they weren't farmers. farmers dont farm silk. Sorry. They were players who happened to be leveling in that range at the time and selling

Partly true. You can create the supply,

Please tell me how to create a supply or Arcane crystals cured rugged hides and elemtium

Your profits aren't 100%. You need to consider those three hours spent on farming (that old equation time = money). Using a razor thin margin methodology, you'd need to undercut my costs. You've spent 3 hours getting inventory (thus becoming my bitc...er, my supplier) and I've only spent 30 minutes doing what I need. I might not need to buy your inventory either. If the profit margin is so thin between us, I just might let you farm those 3 hours and make 30 copper pieces. Now are you really going to farm 3 hours every day for just 30 copper profit? That's why a bunch of farmers have already left our AH in the markets we're in.

What are u talking about. 3 hours for 30 copper? how do u figure. If i go farm arcane crystals I MIGHT get 3 in this time. thats 75g at normal AH prices. You mean to tell me that you think that your going to deflate the price to .1% of that? Your not, even if you had control you never could, becuase like i said. Someone can buy you out easily at that price. I could kill a level 60 mob get 10 silver and buy 20 arcane crystals off the AH if you thought u could lower the prices that much. Sorry bud either your unclear or confused, im giving you the benefit of the doubt and saying unclear. So clarify please.

Half the supply equation can be solved by using effective character creation and known farming methods.

If you played the game you would know that you cant. Period. Known farming methods? Sorry but you have to deal with timers. Yes if you make 12 characters and level them to artisan leatherworking you can pump out 12 cured rugged hides every 4 days but great, the demand is much higher then that. And thats a very large initial investment of time and money. (they need to be level 40 each)

This is what blizzard has done. Every single valuable thing in this game is basicly a big cockblock. You cant do anything to net you tremendous wealth or great items without a long period of time passing buy. raid instances/all good craftables are on timers. Its just the way they made the game.

 

[Boardin087]

A good analogy for the type of market your dealings with would be tickets for the olympics

If tickets retailed at 80 dollars from the box office only to certain individuals in positions of power (like family, royalty, government leaders, extremely wealthy...... or in WoW's case hardcore raiders/high level profession people). Most of the tickets are not going to even be for sale. The ones that are will probably sell at an EXTREMELY inflated price compared to cost.
You will not be able to control the market. If you tried to buy all the tickets at the inflated price ( lets say 300 dollars) then thats your cost. Even if you recieved two tickets for 80 because of your status (or your position in a high level guild/your profession). How will you be able to get control of the market? You can buy them all at 300 and have a Dollar cost average of slightly under 300. but then what? relist the tickets at 200 dollars. you would drive the price down and could keep it at a lower price but you would have an extreme negative profit. Also this would not be the end of the products life as the tickets would most likely be resold(assuming similarities to the wow economy) for close to 300 again if not more.

How can you control an economy like that and make ANY profit or even break even ^^ because thats the exact economy your dealing with. (ignoring the fact that the tickets expire, because frankly that doesn't matter)

 

[gamz247]

Why do you never figure in time unless it concerns your competitors? You think you can just run out to EPL or Winterspring for 15 minutes and come back with a bag full of Thorium Ore and Arcane Crystals? It doesn't work that way. It would take you hours to farm 10 Crystals, even if you were the only miner in the zone, or had friends helping you in other zones... and by the time you get back, many of his auctions could be either bid upon or bought out. He's got auctions up... you don't.

Also, I don't think you understand how little it costs to post an Arcane Crystal auction. It only costs 6s to put an Arcane Crystal up for sale, but in return you're basically assured at least 20g. That's a 33000% return on your investment. Who wouldn't be happy with that?

Your business model would never work on Arcane Crystals.

 

[CodeX]

That's why a bunch of farmers have already left our AH in the markets we're in.

My buddy has created a character with certain skills that can produce an initial amount of supply of a commodity. Say gold bars....we've tried other goods, like silk and some fish like thing...

FARMERS DON'T FARM GOLD BARS OR SILK

/credibility
/thread

 

[Boardin087]

FARMERS DON'T FARM GOLD BARS OR SILK

/credibility
/thread

QFT

 

[Torgo]

A good analogy for the type of market your dealings with would be tickets for the olympics

That's a horrible analogy. You're dealing with a limited commodity. That's absolutely perfect for the scalper who's trying to make as much as possible. There's one box office, ultra-high demand and a limited amount of space at a one-time event. That's not what I'm talking about whatsoever.

You're right. There's no way I could control the market unless I was first in line and bought all of the tickets. Despite your actually well crafted analogy, it doesn't work. The AH has a limitless supply available to anyone that is willing to go out and get it. There isn't just one "box office" but three houses and you can buy from whomever. Then you add that you can buy anything at anytime you want.

That isn't to say that your analogy isn't truthful. In fact, it's a serious problem that faces venues and promoters alike in real-life.

(ignoring the fact that the tickets expire, because frankly that doesn't matter)

No, actually expiration would matter if it was implemented fully in WoW. It's something that I personally think would add a bit more to the game and open up lots of dynamics; both positive and negative. I wrote a post on it earlier in the thread. Look it up.

Your business model would never work on Arcane Crystals.

You raise a valid point about the time factor involved in Arcane Crystals. But everyone else is in the same boat. Once I determine the optimal number of Crystals I need to put out in the market and how much to keep in reserve, the model still works. Farmer Bob would need to lower his price to match or beat mine to move inventory. If he sells his inventory, he still needs to go out and replenish. The problem with luxury markets for our model is that it requires more inventory and initial gold outlay as the value of the items increase. That requires more time. That's all. As for the 33000 kajillion % profit... yeah, I'd be happy with that. But I'm a smartass and get more enjoyment from frustrating those rich bastards and famers by removing the profit from a market so I can prove a point. Now that's fun! Making money is easy, but turning the world upside down... now that's something.

FARMERS DON'T FARM GOLD BARS OR SILK

I'm sorry, I couldn't quite hear you over your smugness. Just because most farmers don't farm gold bars or silk doesn't mean it doesn't occur. Nor does it mean that the entire model is flawed because Farmer Bob isn't flooding the market. Gold Bars and Silk are just easy testing grounds. It requires little initial investment and we can easily project out a timeline on how everything could work.

I'm not sure what point isn't getting across. Let me sum up the main points of the model:

• We don't care about profits. We don't care, we don't care.
• All we want is control. All your markets are belong to us.
• Type of good doesn't matter. Luxury items just take longer to accumlate and require a larger gold outlay.
• The method doesn't necessarily work with BoE items. The supply side of the equation doesn't fit. It's only possible after you control the AH.
• We don't care about profits.

Look, I know there's a lot of doubters and that's to be expected. We're working hard to come up with a diary (and have a great situation that I'm about to explain) of our day-to-day work. We've also made a decision to basically give away our method to someone working on their MBA for Economics. He's also going to try it out with several people as a project. The arguments for and against are getting better, so keep up the comments. However, if you're going to bring up the same ol' arguments about luxury items, farmers don't do this, you can't compete with rich users blah blah blah. Just read the above bullet points and my previous posts. Otherwise, think of something new or just be patient.

 

[Torgo]

Don't have much time to get this written so I'll get straight to it and fill in the gaps later. You'd be suprised how much logistics and inventory can play if you want to use our method for Auction House control. Even the richest player can only carry so much on his physical person and store in a bank. You can use this to your advantage to counter anyone buying your inventory and selling at a higher price.

This is actually happening on MeatPuppets main character. He's in the fish market when someone came online with literally hundreds of fish to sell. We're talking stacks of 20 with many, many listings. He's also listed his fish competitively. So this guy is hoping to use his massive inventory and price matching to take over the market from us. Now MeatPuppet said that he's going to try and monitor the situation and post screenshots on how this is going to turn out, but I can give you a sneak preview of what we think is going to happen based on our knowledge of L&I.

In WoW, a person can't carry an infinite number of items. A person can purchase bags with various holding slots. People at the Auction House will use their bag space to transport items to and from their banks and also carry items to the Auction House. It's also useful for repackaging items. The biggest bag that you can purchase has 16 slots with space to put up to 20 stacked items in each slot. That's a potential of 320 items (some items don't stack to 20). Now, there might be bigger bags out there or will be created, but they all cost money. For our model, this is going to be our warehouse to store inventory. That's what pretty much everyone does anyway, right?

The key to success in WoW is not only having inventory, but moving it. In the real-world, the goal is to move as much product as possible, but also have limited inventory (because it costs too much to maintain and what not) but also tread the fine line of not having any backorders. Not having any product to sell when there is demand is lost opportunity.

If you're mega rich guy with oodles of money wanting to make more money, you could fill all of your bags and bank with product. However, this takes a significant investment. Having your inventory sitting in a bag doesn't do you any good if it just sits there. You need to move product. Having a large inventory also works against you if you're near the limit. Say you've got some smarmy guy trying to undercut you at the AH. We'll call him Torgo. This vile scum has a bunch of items, but with your pockets jangling with cash you can just buy out his inventory and resell it, right? So you buy out his inventory. The next day, this vile scum Torgo brings in another stack of inventory. Hah! This fool doesn't realize that you can buy items like Charlie Sheen buys hookers.

What happens once you reach your inventory limit? You can't buy out anyone's inventory. Now not only is Torgo undercutting you, you've got a huge mass of product that is just wasting space and represents a huge investment. If Torgo is then able to crash the market, you're going to lose your shirt. Your choice is to hold on to your inventory in hoping of riding out the crash or dumping it and cutting your losses before it gets too bad.

If this is really me, I'm not going to let the prices go back up. You've got inventory that you're forced to trade or dump. It ain't a pretty picture. Now to get Mr. Moneybags to this point, all I need to do is make sure I supply more than demand in the market. If Mr. Moneybags has plenty of slots open, then it's going to take a while. A long, long time. But that pressure keeps building on Mr. Moneybags to move that inventory. With the assistance of a guild, you can essentially trick Mr. Moneybags to keep buying out your inventory until he's like a full tick ready to explode.

It's probably the most common argument that I hear against our methodology. "I'll just buy out your inventory." So what? As long as I and my cohorts are able to supply more than demand and entice you to purchase our goods we'll eventually win. The only way out of the situation is to switch over to our methodology and try to recapture the market with razor thin margins and pray to whatever deity you like that your cost to manufacture is lower than the competition.

Now a large inventory hurts in another way. Auction House listing fees. If you are able to soak up demand, those fees eventually eat away at Mr. Moneybags profit and add to his costs. I'm giving away a big key here. As long as your suppy just exceeds demand each day at a lower price, you'll win. You, as the razor thin margin guy will always make a profit. Mr. Moneybags is going to have larger and larger inventories that he can't move. If you're lucky, he'll have to purchase another bank slot or larger bag, adding to your cost. If you're just gifted, you'll be able to fill his inventory completely.

Again, the only way out of the situation is to drop your prices to equal or lower than your competition to free up space and move inventory. For razor thin margin guy, that just plays into your hand. Lower your price more and keep the cycle going. Just keep an eye on demand and make sure you can supply more to just exceed it.

Will this work on luxury goods? You bet; as long as you can supply just enough to exceed demand. This would obviously require you to be a Mr. Moneybags yourself because of the costs involved. That probably means that you'll need a small team or guild to assist you. Should anyone dump product and try and get out, you can buy their inventory to keep up with demand at the low prices. Mr. Moneybags has just become your supplier. As long as you don't get greedy and jack up the price again, you'll control that market. If they're determined to weather the storm, then make sure the storm is like the Giant Red Eye on Jupiter and keep it going forever.

For you as the razor thin guy, it's important that you don't get caught in this trap of having excess inventory. You have to walk the same line that everyone else does in real-life business. Carry just enough inventory to meet demand. Too much and you're going to be in the same position as Mr. Moneybags. Too little inventory on hand and you're going to ease the pressure on Mr. Moneybags and allow him to move his inventory again.

Tomorrow: Logistics - moving goods to and from the Auction House and how it can play into your favor or hurt you.

 

[Boardin087]

That's a horrible analogy. You're dealing with a limited commodity. That's absolutely perfect for the scalper who's trying to make as much as possible. There's one box office, ultra-high demand and a limited amount of space at a one-time event. That's not what I'm talking about whatsoever.

You're right. There's no way I could control the market unless I was first in line and bought all of the tickets. Despite your actually well crafted analogy, it doesn't work. The AH has a limitless supply available to anyone that is willing to go out and get it. There isn't just one "box office" but three houses and you can buy from whomever. Then you add that you can buy anything at anytime you want.

Torgo,
Whether or not its a good analogy or not was not up for discussion. That is how it is. There IS A LIMITED COMMIDITY BASED ON TIME, THATS HOW THESE GOODS WORKS, THATS WHAT YOUR NOT UNDERSTANDING. THEY ARE LIMITED COMMODITIES BASED ON TIME. THEY ARE LIMITED COMMODITIES BASED ON TIME. THEY ARE LIMITED COMMODITIES BASED ON TIME. THEY ARE LIMITED COMMODITIES BASED ON TIME. THEY ARE LIMITED COMMODITIES BASED ON TIME. THEY ARE LIMITED COMMODITIES BASED ON TIME.

There now maybe its stuck in your head. And the AH doesn't have a limitless supply. Besides based on what you said your not buying the items you are using "well known famring methods" or whatever you said.

Accept that the important items are limited or quit this fucking discussion. Only so many people can provide elementium/cured rugged/transmute/arcane crystals at a time. So that makes them a limited commoditiy. Gold is unlimited you can kill things forever, Skinning is unlimitted. Things on 4 day timers to make are limited. So congratulations, here is where ur utter lack of knowledge of the game proving to yourself that it wont work.

Once again:

That's a horrible analogy. You're dealing with a limited commodity. That's absolutely perfect for the scalper who's trying to make as much as possible. There's one box office, ultra-high demand and a limited amount of space at a one-time event.

Again you admitted that for a limited commodity this wont work. The markets we are talking about are limited commodities and thats not up for argueing.

BTW...... the olympics happen once every 4 years not once. I thought youd at least know that

 

[arentol]

Torgo your system, and more importantly your conclusions about it and its relation to the real world, is seriously flawed.

Before I go into why your conclusions are flawed, I will mention that your WoW economic "discovery" was really discovered many years ago... As in 15+ years ago in the Mudds and Mushes that were around back then. So it is nothing new, nor is it really doing anything but making you think you are doing something cool when you aren't doing diddly.

Flaws:

1.) You said earlier that nobody could match your cost of production. However, without hacking, that is an impossibility in MMORPG's, and so your belief in that aspect of your economic model is baseless. Anyone can match your cost, and therefore your price if they so chose.

1.1.) Anyone with far more seed money than you can easily remove you from the market by doing what you do and sellling for less, even at a loss, until you leave the market/server.

1.2) You can also be beaten based on timing.... If you aren't monitoring constantly then anyone can simply buy your entire stock, sell at a higher price while you are away, and then lower their price to match yours when you are active. As long as they are on more than you they will always make more money than you, and at your expense, not their own.

2.) The reason why your process has worked so far is because nobody has bothered to try to beat you because they can move on to some other commodity at a moments notice, and only reenter the market for your cornered commodities when you raise prices or quit dealing on one of the commodities.

2.1.) In the real world there is usually a high cost of entry to any commodity other than what you already make. However, in an MMORPG once a player gains the skill to make an item the player can enter and leave the market for that item at any time. So this means that if you are going to screw with a commodity you have to do so 24/7, and you have to screw with ALL commodities in the market at once. Otherwise players just use the 0 cost of entry to get back into the market as soon as you leave, or they move on to another 0 cost of entry commodity.


Let me put this another way....

A.) Old news.

B.) Only effective as long as someone more wealthy lets it be and you constantly, and actively, work at it.

C.) Hurts almost nobody, and has virtually no impact on the overall server economy unless done with massive amounts of money and in just the right commodities (which you have/are doing neither of).


And if you doubt my qualifications in this matter... I have played MUDDs, Mushs, and MMORPG's almost continuously for 16 years now. I have also worked for the largest accounting firm in the world for 9 years, and I am currently in school part time studying accounting even further.

 

[CodeX]

You know whats funny about this? It's not that there is no one out there who could figure this stuff out, its just that no one cares enough about a GAME to put this much thought and effort into it, especially when you will just end up getting banned for it.

Basically, your big fancy degree and high power job makes you more knowledgable of the principles of economics than the designers and programmers at Blizzard... congratulations. They still have the upper hand though: try it and your banned

 

[arentol]

What happens once you reach your inventory limit? You can't buy out anyone's inventory. Now not only is Torgo undercutting you, you've got a huge mass of product that is just wasting space and represents a huge investment. If Torgo is then able to crash the market, you're going to lose your shirt. Your choice is to hold on to your inventory in hoping of riding out the crash or dumping it and cutting your losses before it gets too bad.

Here is how Mr. rich would do it, if he cared to, which I don't know why he would...

He waits until he is pretty sure you aren't monitoring (you say you only spend about 30 minutes online, so that's most of the time), then he buys your entire stock of say 200 items at your price of 40 silver and starts selling them at 50. By the time you get back to reload your merchant (after work, or in the morning I presume) he has sold maybe 20 items. So he has made 200s profit. When you get back you see what he has done, and so restock more items. He then drops his price to 39. If you don't lower your price then even if he sells ALL 180 items at this price he still makes 20s on the day. If you do drop your prices even lower he keeps lowering his price until you stop beating him. He also reduces his stock as he does so, so you can't buy him out at a loss for the day. Once you quit monitoring, or he thinks you quit, he buys your entire stock at reduced prices and then bumps back up to 40 or 50 and sells some more. If you ever buy his low priced stock then he simply waits until he thinks you left and repeats the process.

As long as he always drains you as soon as you are away and then selling for more for hours on end he will win.

If you monitor 24/7 then that process won't work.

However, there is then a simple, though costlier in the short term process that will work.... He produces his own small stock and sells for 1 silver less than you at all times. When your price gets low enough he buys your entire stock and raises his prices to double what he paid. You bring in more stock, he lowers prices to 1 below you. If you go even lower than what he bought for last time he buys you out again. He has a bunch of Alts, and multiple accounts, and lots of friends and guildies who will provide him with temporary space. So he can last a long time, and since his price is always the lowest he is the only one selling to other players. Eventually, since you always sell at a loss, you run out of money and can't produce more. He then has a while to sell at a profit before you can make enough cash through regular means to reenter the market. However by the time you seriously re-enter the market he will have made enough profit to destroy some of the product he has in stock (which he bought off you for ridiculously low prices!) while still showing a profit, and so he will be back to low inventory and ready to do it all again.

 

[Obi_Kwiet]

Couldn't people just buy the stuff you have have, and sell it back to you at a higher price, until you become bankrupt? It'd be exponential, and you'd only need enough for one item.

 

[MenuBoy]

In WoW, a person can't carry an infinite number of items. A person can purchase bags with various holding slots. People at the Auction House will use their bag space to transport items to and from their banks and also carry items to the Auction House. It's also useful for repackaging items. The biggest bag that you can purchase has 16 slots with space to put up to 20 stacked items in each slot. That's a potential of 320 items (some items don't stack to 20). Now, there might be bigger bags out there or will be created, but they all cost money. For our model, this is going to be our warehouse to store inventory. That's what pretty much everyone does anyway, right?

there are bags larger than 16 slots and if you actually played WoW you would know that there is an "infinite" bag space

 

[Boardin087]

there are bags larger than 16 slots and if you actually played WoW you would know that there is an "infinite" bag space

exactly, he has no clue, mail items to an alt and they sit in the mailbox for 30 days, return th itme after 28 and repeat.


GET A CLUE OP

 

[Qualm]

I didn't read all of the middle pages, did anyone mention Torgo's assertion that this "collapse" can be used to "cause hyperinflation" is dead wrong?

Hyperinflation is caused by printing money. Torgo's scheme cannot increase the supply of money in the world, all it can do is temporarily influence people to spend more of their cash reserves on the items Torgo is trying to control.

I say temporarily because in WoW, unlike the real world, most people can acquire commodity items through other supply sources than just the Auction House - basically they can get it themselves through main character skills, alt skills, guildmates skills, etc.. As you shift the auction house supply price curve outwards, you reduce the demand for the auction house supply and increase demand for other supply sources. Making this attempt to 'corner' supply at the auction house irrelevant.

 

[Kreator]

not really worth making theories about this its pretty simple.

with a few well placed and thoughtout lies you can make lots of money on an online game.

like the guy said, social engineering > all

 

[jebo_4jc]

You know whats funny about this....no one cares enough about a GAME to put this much thought and effort into it, especially when you will just end up getting banned for it.

However, many, many, many people care enough to grind their way to level 60 in this GAME. Doesn't that require at least a ton of effort, if not thought?
You're missing the point of MMO's altogether. Some people can be crafters, some people can be warriors. The whole point is to play the game the way you want to play it. If these guys want to try to dominate one server's economy, they should do it, because that's what they want to do, even if they do get banned.
If it works, what will Blizzard ban them for anyway? Using the principles of economics?

 

[]|[ Mar']['in ]|[]

exactly, he has no clue, mail items to an alt and they sit in the mailbox for 30 days, return th itme after 28 and repeat.


GET A CLUE OP

lol I was getting ready to post this, but behold. Two people already did!


Silly op.

 

[agent420]

If these guys want to try to dominate one server's economy, they should do it, because that's what they want to do, even if they do get banned.
If it works, what will Blizzard ban them for anyway? Using the principles of economics?

That's what I said!

Viva la Revolution !!

Anything less will only serve to perpetuate this thread into uesless flamewars and conjecture. Proof in the pudding as it were.

 

[MeatPuppet]

No exploits have been used to accomplish what has been done up to now. One has been discovered, but I do not intend to use it. As for what we do, all of it is within the confines and rules of the game.

I was just attempting to make a character which undermost circumstances by most players, would have been abandoned. How many toons have you created that you never got past 20th lvl because the character was hopelessly unlucky. Bad drops, bad server, no money... The list goes on.

My toon is 48th lvl now. If it had not been for the extracurricular money making, he would have failed at about 12th... Friends kept telling me dump this toon, “He will never be able to compare to other characters his lvl…” By the time I hit 40 I was buying them armor, weapons and mounts .

Sure, I have not been through "end game", but again you miss the point. It appears to me that you are whining because you have not been able to do the same. Where I have been happy with sustainable income and control of a few markets, you want to know why I have not gone for the kill. The reason is simple; I don't want to kill the market. I just want to control it and make some money doing it. I don't want a killer profit, I want to sell everything I put on the market and turn a margin on that.

This is being done! The methods are not earth shattering. It is simple economics and psychology at its best.

So how has it been done...? Okay, here it goes:

1. I analyzed the market of each commodity I was going to sell. It had to be something that everyone needed or wanted at some point in their game that could not readily be produced. In other word it required an investment that I could afford, but not everyone was willing to do.

2. Understand what drives the demand for your commodity. The more important the product you sell is to the market, the more elastic your pricing model can be with respect to your costs. The greater the elasticity, higher your margins can be.

3. Build enough of an inventory to meet your demand. You have to be able to put up enough to deny others the opportunity to sell their product. If they can not sell their product they incur carrying cost from auction fees. This is a double whammy, because they are out the cost of producing the product and out the cost of not selling it as well. This put pressure on them to sell their inventory at lower and lower prices or sit on it.

4. Only put up enough product on the market to use (consume) the demand plus a small percentage. Keep your carrying cost below your margins.

5. Don't worry about your inventory being bought out. YOU got your money and he paid your expenses.

6. Watch for great deals. I check the auction house for people selling product below my cost. It takes 2 - 5 minutes to check the AH as you pass through a city. If some one is selling product below my cost, they are either dumping inventory, competing with me or have no clue what they are selling is worth and the cost to make it.

7. Resist the temptation to post multiple times a day. You will end up competing with yourself. See #6.

8. Resist the temptation to buy more than what demand will consume. You want the other guy to pay your bills not the other way around. You want him to pay the auction fees and carry the inventory.

9. Watch what competitors do in your market. Devise a strategy that will make him less adaptable to the market changes and keep his cost higher than yours.

10. Capitalize on your competitor’s failures, but never “dis” the market. You want people buying from you because you provide them with low cost goods, not just because you are the only player in town. You want competitors to abandon the market when they see you post auctions.

11. DO NOT GET GREEDY. This only works on an individual level (i.e., sole market source) if you do not get greedy… When you get greedy, you create an opportunity for your competitors.

Now, I have left out one or two key details, because I do not want to give up my market advantage. But if you were to come after me, you would learn those details after I snuffed you a couple of times.

As for the results, if you are doing it correctly and have a large enough market you should make between 15 to 40g per commodity you exercise. It has worked for me for characters as low as 10th lvl. Your results may vary, because you really don’t know what I sell.

To those who are concerned that I am a recent MBA grad… I have not been in school in over 20 years . I play WoW because I can.

With that I will leave it to Torgo to answer your remaining posts.

Have fun,

MeatPuppet

 

[MeatPuppet]

none because im not a moron.

I will let your reply speak for itself...

 

[Boardin087]

Now that I have made a post like you two constantly do. Here is me actually adressing the things you say. Even if most of them are too pointless to warrant a response.

My toon is 48th lvl now. If it had not been for the extracurricular money making, he would have failed at about 12th... Friends kept telling me dump this toon, “He will never be able to compare to other characters his lvl…” By the time I hit 40 I was buying them armor, weapons and mounts .

No your chacter is level 48, not 48th level. And What the hell are your friends talking about not being able to compete with characters his level. My character hit 60 with 5g and all greens. Hes in all purples now.

1. I analyzed the market of each commodity I was going to sell. It had to be something that everyone needed or wanted at some point in their game that could not readily be produced. In other word it required an investment that I could afford, but not everyone was willing to do.

No you didn't analyze the market. Your making bullshit. I know this because your selling silk and gold bars. GOLD BARS EL OH EL. And yes everything requires an investment. And believe it or not every single player that passes through the levels 25-45 will get an extremely large amount of silk. Its just most of them are actually good players and use it for bandages

2. Understand what drives the demand for your commodity. The more important the product you sell is to the market, the more elastic your pricing model can be with respect to your costs. The greater the elasticity, higher your margins can be.

Nice use of economic terms to essentially say nothing. You picked silk and gold bars. You obviously weren't thinking. They aren't important (Yes silk has uses for rep grinding, but compared to higher level cloths....... they are just a stepping stone, and gold bars really truely are useless as well as rare)

3. Build enough of an inventory to meet your demand. You have to be able to put up enough to deny others the opportunity to sell their product. If they can not sell their product they incur carrying cost from auction fees. This is a double whammy, because they are out the cost of producing the product and out the cost of not selling it as well. This put pressure on them to sell their inventory at lower and lower prices or sit on it.

Um, at one point in the server when leveling up faction, i bought up every single piece of silk in the auction house to make into bandages and turn in for reputation. That means you made profits but guess what, your competitors made more.

10. Capitalize on your competitor’s failures, but never “dis” the market. You want people buying from you because you provide them with low cost goods, not just because you are the only player in town. You want competitors to abandon the market when they see you post auctions.

I bought 48,000 runecloth off the AH. I never looked a single name, no one else does either, get a clue.

To those who are concerned, that I am a recent MBA grad… I have been in school in over 20 years .

Thats nice, we figured you had to be older as you have no clue about the game.

 

[MenuBoy]

the bottom line is, controlling low level markets is trivial.
because anyone can if they actually cared.
the thing is no one cares.

i give credit to the op, some points were sound, but a lot of it was theorycraft at its worst.

 

[Boardin087]

the bottom line is, controlling low level markets is trivial.
because anyone can if they actually cared.
the thing is no one cares.

i give credit to the op, some points were sound, but a lot of it was theorycraft at its worst.

exactly.

I would love to stop posting in this thread If I could here the OP simply say this. I hate people who post on forums trying to act sophisticated and original when they are simply an amateur in the topic up for discussion.