A million competitors and a million customers

| Tuesday, September 11, 2012
People are expressing worry over the effects of the globalized market.  With so much competition prices end up extremely low, to the point that most crafting is unprofitable.  I could have taken the last part of that statement, "most crafting is unprofitable" and pointed it at WoW, where indeed, most crafted items are not profitable and you often are better off sending items to the vendor.  In those cases where they are profitable, it often seems to be due to the presence of enchanting, not because the leveling items are particularly useful on their own.  From this perspective it could seem that the global market isn't actually doing the supposed harm to crafters, but is instead just the easy thing to aim at.

Think back to your intro econ class with your supply and demand curves (which back then are straight lines).  Push supply out and there you go, quantity goes up and price goes down.  Now push out demand and suddenly price is back up where it was and quantity is even higher.

Competitors and undercutters are not the problem of the globalized market.  Time is.  With so many people, someone is online crafting when you are, which means that you don't get to be the one single person who is making copper wizzbangs.

On the plus side, this means customers.  Not only are there more customers, presumably in direct proportion to the increased crafters, but they will be more even than on a single-time zone server.  No longer is there the guessing game of posting and hoping that a buyer arrives before another seller.  It might happen, but with so many people from so many time zones in the market, you'll get enough buyers at more times, despite the sellers.

The constant stream of buyers means that a seller can do a constant stream of business.  Flooding the market is a much smaller problem, since the market is that much bigger and able to handle that many more goods over a given time.  Tap into a stream and you can get a lot of gold.  But if you fail to do so, if you cannot find a stream of your own, then you're going to have a hard to getting in.  You'll be competing with people who know their marker, how to efficiently get supplies and create their product with as little effort as possible, and who know exactly how low they can go on their prices while you're fumbling in the dark.  In this way, the global market may have little effect on the average seller, but will concentrate the rewards among fewer sellers.  That could cause problems.

5 comments:

Kring said...

RL has solved that problem long time ago. Whenever you discover an item in GW2 it should check the following.

a) You're the first one to create it. You get a patent on it which protects you for 25 years. Now you get rich.

b) Someone else already has a patent on it. You will not be allowed to craft this item.

Klepsacovic said...

@Kring: What you just described would restrict the supply of items so much that even someone crafting 24/7 couldn't keep up with demand for consumables. There would need to be a licensing system as well. Or as in real life, the possibility to craft anyway, either due to the country not following the patent or having different rules on it.

Intellectual property law is a balancing act. Too strong and it cripples the spread of ideas, too weak and it reduces incentive to innovate. Trying to apply it to a game with pre-made formulas for everything would just mean that whoever logs in first wins, without any innovation.

This problem is hardly solved in real life, nor would it be solved in games.

DSJ said...

Perfect competition means zero profit margin. Profits in a system of large buyer and sellers are actually driven by either innovations or market imperfections. The first isn't possible in an MMO and the 2nd is engineered out of the game except for patch days or by UI mistakes that make crafting such a pain that only those who automate the system as with glyphs can effectively profit (innovation of a sort!).

tremayneslaw said...

DSJ - not quite correct. There's always some profit in a trade - each party gets something worth at least as much to them as what they're giving up, or they wouldn't bother to trade. What varies is how the pie is divided up, that is how much of the benefit each side gets. In a seller's market there's a scarcity of the good, so the price goes up until demand drops to match the available supply, i.e. it's so expensive that it's barely worth buying this stuff, and the benefit of the trade goes almost entirely to the supplier. If supply is plentiful, then the buyers get bargains instead.

To make money in a perfect market, you need to be supplying something scarce - because only you control the source, or because the cost of setting up in competition with you is too high for most people - e.g. it took the resources of an entire guild to get me to max out weaponcrafting in DAoC, so for several months I was one of only three people supplying top end weapons to my realm. In Guild Wars 2 there's an abundance of almost every good apart from certain dyes, jute scraps and mystic coins - at least at present. That may change as the market matures.

Diego said...

The difference between IRL crafting and MMO crafting is that the first one is done mostly for profit, whereas in MMOs a lot of people will craft just because they find it entertaining (I'm somewhat included in that group), whether profits are made or not...

Since there's just one market, people expecting profits will have to compete with the ones doing it just for the fun of it...

That being said there can be some niche segmets where a profit might be made, which dissapear rather quickly as people learn about them...

Like somebody said, right now the best bet is supporting other people's fun in crafting by supplying them with mats and then buying their products for less than it costs to make them...

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