Options/Futures markets and liquidity in p99

[koros]

I work at a trading firm in real life, and it's a slow day today, so I got to thinking about options/future markets and how/if they would work on p99. At the very least it might make for an interesting thread.

Obviously, in real life contracts have a lot more legal binding then they do on the internet. Someone on p99 could sell you a fbss future and then disappear without ever delivering. But when the financial markets first came into being, they operated very similarly to how things are here. People established reputations for trustworthiness, and just as Hagglebaron and Bob and whoever is the current market maker, became trusted for item/char transfers - people could become part of it as they established their reputation.

Currently people who sit in EC all day can make an absolute killing arbitraging bid/offer spreads. A future or option market or even some sort of bid/offer forum would go a long way towards people who looted an item and then selling it making more, and people who want to equip an item paying less by lowering middle man involvement.

Anyway, probably not going to happen, but what do you guys think?

[rahmani]

Interesting idea. As an economist, I've always been fascinated by EverQuest's economy.

On the demand side, one of the things that is required for prices to maintain their integrity in MMOs is a constant influx of alts or new players. That's because there is no consumption. If there are no new players, prices will drop.

WoW got around the quandry is by implementing consumption; gear was not reusable. Once you put it on, it was consumed. But even in the case of WoW, gear is only usable until a certain point, and at the end-game you'd typically consume less gear. Anything that can drive up consumption will help keep prices up.

Now, there's the issue of supply; Norrath can supply an infinite amount of FBSSes, they will never become more scarce, the way natural resources become depleted in real life. If you dig a coal mine deep enough, the costs eventually outweigh the benefits and the operation is shut down.

However, in MMOs the only way things can become more scarce is by players perceiving their value to be less and deciding to not camp the item anymore.

In short, items are simply doomed to loose value and prices are destined to plummet in the long-term. To respond to your question, I don't believe there's enough price confidence to structure a market like this.

[finalgrunt]

In short, items are simply doomed to loose value and prices are destined to plummet in the long-term.

Depends, if people stop playing without selling their gear. That's a huge consumption sink.

Also item values will vary if new and better items are added into the game.

[rahmani]

Originally Posted by finalgrunt [You must be logged in to view images. Log in or Register.]

Depends, if people stop playing without selling their gear. That's a huge consumption sink.

But it's still dependent on people creating alts or having new players who are hungry for gear.

Originally Posted by finalgrunt [You must be logged in to view images. Log in or Register.]

Also item values will vary if new and better items are added into the game.

In general the functional value of gear will only fall, after Velious is added almost all new gear is better gear. Expansions don't typically add inferior gear because people have less incentive to explore areas if they aren't in pursuit of gear.

But if you're a collector, the value of some rare gear from under populated zones may actually go up.

[webrunner5]

Yeah, but the Turd in the punchbowl now is RMT. So this blows any futures out of the water. So if I was you I would sell short.

From a VERY rich past investor. [You must be logged in to view images. Log in or Register.] The end is near.

[Pend]

Originally Posted by rahmani [You must be logged in to view images. Log in or Register.]

In short, items are simply doomed to loose value and prices are destined to plummet in the long-term. To respond to your question, I don't believe there's enough price confidence to structure a market like this.

I'm not an economist, so maybe you can help me on this. But a related problem is that there's no consumption of platinum either. And so it piles up in high level player banks, causing the "value" of platinum to plummet. The demand in item sales is coming more from high level twinks with lots of cash than from new players, so the prices of items are skyrocketting--they're WAY above what a new player can afford for a level-appropriate item.

It's not that the item has inherently increased in value, because it doesn't. As you point out, there's abundance/endless supply. It's that the platinum used to buy it has decreased in value.

The only platinum sinks in the game are food/water (sort of), spells, minor vendor crafting supplies, and gem spell reagents. LOTRO introduced armor degredation/repair to provide a major money sink. EVE resolves this by making it extremely costly (money-wise) to lose a ship, which is also a relatively common occurrence. EQ was just too new to the genre to know how to deal with MMO economics.

[koros]

"In the long run we are all dead" -John Keynes

My undergrad degree was in economics so I can speak to this somewhat.

I completely agree with you about the supply and demand equilibrium... in theory or on a long enough time frame. But observations on actual item prices has shown that certain "high demand" items constantly defy the expected effect of an ever increasing supply.

A couple of points... "production" (people farming said item) is based on the selling price of an item, so that finds a quick natural equilibrium. People aren't out farming Scepter's of Rahotep, just because there's a low supply of them.

Additionally, a lot of items are illiquid, so they end up sitting on alts and never being sold.

Compare the price of a FBSS pre-kunark to now, or a Fungii 6 months ago to now. Demand shocks on p99 clearly have an asymmetric effect on prices rising vs. falling, just like markets in real life (except in reverse).

[rahmani]

Originally Posted by koros [You must be logged in to view images. Log in or Register.]

Compare the price of a FBSS pre-kunark to now, or a Fungii 6 months ago to now. Demand shocks on p99 clearly have an asymmetric effect on prices rising vs. falling, just like markets in real life (except in reverse).

You're right about the Fungi tunic. In fact, I quit about 8 months back then came back a few weeks ago. From my observations, the population of the server is about 2-3 times what it was.

[webrunner5]

Originally Posted by rahmani [You must be logged in to view images. Log in or Register.]

You're right about the Fungi tunic. In fact, I quit about 8 months back then came back a few weeks ago. From my observations, the population of the server is about 2-3 times what it was.

And why is that?? [You must be logged in to view images. Log in or Register.][You must be logged in to view images. Log in or Register.] Tons of people quit playing WoW? EQ Live? I think it has to do with RMT. One day there were 500 people not long ago, now 1,000 people. Duh. Overnight we have twice as many people with lots of plat to spend. Like I said before its not because of alts. The population would not change if that was the case. And prices have doubled on some items. Hmmm. Somebody has a DAMN GOOD website.

[Pend]

Originally Posted by webrunner5 [You must be logged in to view images. Log in or Register.]

And why is that?? [You must be logged in to view images. Log in or Register.][You must be logged in to view images. Log in or Register.] Tons of people quit playing WoW? EQ Live? I think it has to do with RMT. One day there were 500 people not long ago, now 1,000 people. Duh.

RMT greatly exaggerates the problem that I was referring to in my post, which is why it's so dangerous to MMO economies. RMT providers do not play a zero-sum game, otherwise there's no point. So they're always selling plat more than they're buying, which means they're supplying plat into the market that isn't being removed. In RL economy terms, this is like the US Fed Reserve dumping tons of new cash into the market which devalues the dollar, only RMT is way more extreme in its effect on plat, IMO.

EVE's solution is to make it pointless to go RMT because you can always buy PLEX (virtual game time cards) for real money, and they're in-game items which can be traded on the in-game market for in-game currency. Easy $$->isk conversion, just like RMT. But the key here is that they're consumable. People buy PLEX because they want to extend their account play time without paying real $$--that's the only reason they have value in-game. So in EVE, this process is zero-sum.