An auction house without speculator buyouts

| Monday, July 23, 2012

Annoying, isn't it?  The first person into a forum thread or comments section can completely derail it, ruining it for everyone else, for some personal gain, but a net social loss.

This can happen in the auction house too.  Whoever gets there first, particularly as a buyer, can reshape it dramatically, to the detriment of others.  As an example, I offer this story of my own.

I occasionally engage in speculation, acting somewhat like a futures broker, though without anyone asking me to.  I'll see things which are at absurdly low prices and buy them up, sometimes reposting them all higher, thereby setting the market price at what I want.  Or I may simply hold them.  At the time there may be a glut of supply or a lack of demand.  Reposting later keeps a more consistent price, which helps future sellers, though obviously all of this comes at the expense of buyers.  They do get something for that expense, a more stable supply.  So at times this speculation may be an economically productive activity.

At other times it is little better than theft.  The incident which inspired this post was when I saw moss agate at a mere 3 gold.  I bought it up and feeling unkind, reposted, not at the usual market price of around 15g, but at an outrageous 20g.  One sold a minute later.  Clearly it would be absurd to suggest that I added value here, since it's not as if I have moved them through time, bringing them to the market at a time of a shortage.  If I had arrived a minute later, the buyer would have gotten an item for about 12g under the usual price, rather than 5g over.  In effect, he was 17g worse off and I was 17g better off, not because I added value, but simply because I got there first.  While this clearly was to my benefit, it is still ridiculous.

What would fix this?

Bring the auction, by which I mean bidding, back to auction house.  Either remove the ability to buy out items or add some extra cost to it to make short-term market manipulation significantly less profitable.  If I could not have instantly bought out those moss agate, then all I could have done is placed bids.  In the event that only the one sold, then I'd walk away with cheap gems and the sellers would have had successful auction (if underpriced, but that's purely their own faults.  Reposting would have then meant I was putting them up at a time that they might not have been up otherwise, allowing other players to buy when they otherwise could not.

Removing buyouts entirely would probably be unpopular, since sometimes we're in a rush and just need that flask before the raid.  For this, remove the ability of sellers to set a buyout price and instead make buyouts automatically double the current bid.  That means that if something has been bid up a great deal, it's going to cost a lot to buyout, and if it was bid up so much, it was likely closer to the market price than if it had started off with a buyout near the starting bid.  This removes the profit of short-term speculation without removing the ability to carry out time-based arbitrage or for people to get what they need at the last second.  As a side benefit, it might encourage players to plan ahead more, a useful habit for everything except murder (in that case it's a tradeoff between better planning and an increased sentence if caught).

To clarify, the "double bid price" is not set in stone.  Merely adding 10 or 25% would be enough to entirely stop some speculation and reduce others.  Furthermore, since I know you're thinking "everyone uses buyouts, so if the speculator pays 25% more, they'll just get that back when the end user pays 25% more" the extra buyout fee does not go to the person running the auction, but is instead removed from the game, much as the auction house cut and lost deposits are.


rowanblaze said...

Most games I've played since WoW have in fact gone the opposite direction, eliminating bidding entirely and leaving only the buyout. As in every market, there is a huge component of "caveat emptor" at the AH. No one held a gun to the head of the moss agate buyer. They got the product at what they considered a fair price. Well, fair enough to make the purchase.

A better option to achieve price stability is to fully incorporate "Auctioneer" functionality (with server-side scans) into the basic UI, so everyone can see how over- or underpriced a given item is.

Kring said...

Much more important would be a change that sellers can't cancel auctions on which someone already bid...

One problem I have with your suggestion is that the additional money disappears. If you buyout one of my auctions I get x, you pay 2x. But if you wouldn't have bought it, it might have increased to 1.2x. Because you're lazy and had to buy a flask 5 minutes before raid, I get 0.2x less? That doesn't sound fair.

Another solution would be to put a hold time on the item. Like you can't put something into the AH for 72 hours after you've bought it. (Doesn't D3 do something like that?)

Anonymous said...

Everything is worth what its purchaser will pay for it. The value of a moss agate is subjective. That value was 3g for the seller, 15g for you and at least 20g for the buyer. You were better informed than your seller and your buyer (or at least more patient), but for some reason you believe that information is free. It is as ridiculous as to suggest what you mine yourself is free. Sure being informed in WoW requires very little time and effort, but as you see some people are unwilling to put any time or effort into a video game.

Your “fix” would dramatically increase prices. Starting bid is often the minimum sell price for an item; it’s simply not worth it under that price. With your fix, price increase is guaranteed because items at starting bid are more likely to be bought out. That would be a huge profit loss, since the extra gold is simply lost. So if you have an item for 80g starting bid and 100g buyout now, you will have something like 100g start bid, 200g buyout after your fix. Oh and I can still buy that 3g agate for 6g and put it back for 20g and the next buyer will pay 40g…(The first seller got no extra money in the process, everyone else lose some.)

Anonymous said...

Why do buyouts on the AH at all? If you need flasks now, post in trade looking for an alchemist. You know, actually buying things from people...

Klepsacovic said...

@Kring: The buyout may be lower than future bids, but it also delivers the sale and therefore gold, sooner. If players believe they can get a higher price, then it is up to them to put the starting bid a little higher.

I like the cooldown on reposting.

@Anonymous1) We have absolutely no evidence that I was better-informed than the buyer. Certainly the seller, but we can say nothing about the buyer except that he was a couple minutes slower and derived at least 20g of utility.

Let me put this another way: If I had not logged in that day, the player would have gotten a gem for 5g. Because I logged in, it cost 15g more. In effect, my mere presence cost the buyer 15g. That's the exact same effect you'd get if I had hacked his account and taken 15g.

Information is not free, but it should be freer. An efficient market relies on well-informed buyers and sellers (which in part relies on others not manipulating price information). Beyond that market distortion is that fact that with buyouts I can create a monopoly. Monopolies will naturally deliver a less-than-optimal output relative to a competitive market.

"With your fix, price increase is guaranteed because items at starting bid are more likely to be bought out." Why?

@Anonymous: I like having buyouts to give a buffer against population variance. I like that I don't need to be on at exactly the same time as the crafter, even if I did think the old enchanting system was a bit more interesting.

Azuriel said...

Yes, you extracted value out of the system. No, it is not equivalent to hacking the other person's account - what he/she lost was consumer surplus at most. You assumed the risk of a lost sale at your inflated price (something the original seller was not inclined to do), but the risk paid off.

If you are willing to entertain the "logged in 15 minutes later" scenario, you must also entertain the "seller priced the item correctly" scenario. Do sellers "hack" the accounts of every buyer when they price above what they strictly need? Or, hell, would the second buyer not also get "hacked" if you actually used the Moss Agates in crafting/hoarding? Now they may need to go farm Tin Ore for an hour or find a JC.

As one of the Anon posters point out, your hypothetical AH system would not have prevented what occurred with the Moss Agates; you would still have extracted value from the system with the 6g buyout. Your margins might be less, but it would still be worth one's time to speculate as long as it is still more profitable than the 2nd most profitable action you could do (like dailies, amirite?).

The Final Solution for the AH, as it were, is simply to link multiple AHs together. Or all of them. Speculation is only possible with a constricted supply; you might have bought a lot of 3g Moss Agates, but if there were 10,000 other people selling them at 3g all day, nobody would buy yours. Just like with the global economy, there is always someone who values their own time less than you.

Klepsacovic said...

@Azuriel: Risk-taking is not itself a virtue, nor necessarily economically productive.

You're bringing up entirely dissimilar scenarios. In none of those is my presence alone responsible for the price. If someone charges more than the market price but is not creating a monopoly, then they are just taking their own gamble that the lower prices will eventually get bought up. If there are no competitors, then they are responding to a low supply. If I used the gem, then I would be the buyer and would not be simply someone manipulating the price.

I know that my suggestion would not fix all speculation. I already said that. Thank you for supporting with my original post.

Expanding the AH would certainly help to ensure that supply and demand rarely drop below a certain number of participants and therefore even out prices. Though as with any other fix, it isn't perfect (not that "it isn't perfect" is a valid argument against progress).

Anonymous said...

I suspect the population variance would sort itself out for the most part. Once person-to-person trading became normal for instant satisfaction, enterprising alchemists would start advertising their availability and building up client lists of procrastinating raiders.

Anonymous said...

„We have absolutely no evidence that I was better-informed than the buyer…”
If you put it that way, we have absolutely no evidence that you were better informed than the seller. Maybe he was just impatient. Maybe he knew the market price, but he is mentally retarded. Maybe it is something else. We don’t know. I think it is reasonable to assume that he was uninformed or impatient or both. Those options seem more likely than the others. The same is true for the buyer. I can be completely wrong of course.

“Let me put this another way: …”
If you had not won the lottery last week, someone else would have won a bunch of money this week. You argue that this is the same as stealing the same amount of money from him. I feel I miss something important.

„Information is not free…”
You can create a monopoly and lose a lot of money. If you manage to keep the price high people won’t buy from the AH. (They will use guildies/trade chat.) This is unlikely, as any goblin can screw you over at any time (and they will).

"With your fix, price increase is guaranteed because items at starting bid are more likely to be bought out. Why?”
We have 5 items for sale on the AH for some time, the current bids are between 120-150g (all started from 100g). Someone puts up 5 more items for 100g starting bid. When a buyer comes he can buy the old items instantly for 240-300g or the new ones for 200g. The new seller could increase the starting bid to even the chances out (and increase his profit), but that is a price increase as well.

Twice said...

Two things, as ponderables:

Thing one: "Everything is worth exactly what you can get someone to pay for it" as modified by about eleventy billion aknowledged Economic variables. I consistently underprice when I list stuff on the AH, because my sole desire is to sell it. I don't run an AH addon, and I don't pay any attention to what I've sold it for before. In a free market that contains people like me, no system will work to stabilize prices because a certain portion of the market just doesn't care about price/earning, simply about > vendor price.

Thing Two: The "just find a crafter" requires iteration allll the way back. If you can't buyout finished products, you also can't buyout materials. Now you're looking for people with Herbs for sale AND an Alchemist with the Flask you need. And God help you if you're trying to get armor or a weapon made...

Anonymous said...

Buy orders. In EVE you can't sell lower than the highest buy order.

If you want more stable prices just allow buy orders and probably link the AHs for more competition.

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