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10-22-2009   #1 (permalink)
Cruz
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Default Understanding Lunia Economy

This isn't a guide for how to make money, only how to use it effectively. If you're looking how to make money, there are a lot of great guides elsewhere.

This guide also applies for real life economy, as well as economy in other MMO's. This will help people who don't understand why prices raise/lower, and how they should price and buy their items.
It is not effective, by any means, to give a price on an item, and expect that price to stay exactly the same forever. There are many factors that make the market a constantly fluctuating business.
One thing that you must accept is that you cannot change the fact that people want more of an item and are willing to pay more for it, or that nobody wants your item because you are selling it too high, and will buy from other people. People buy cheap, and sell high. That is the basic marketing principle.

The most basic principle in the Lunia market-place is supply and demand. Most of it is common sense, but I'll explain it anyways to make it clear. Supply describes how many of a certain item are available to the market. For the most part, the generation of items remains at a constant rate (items that appear out of nowhere like equips that come from stage), unless the game changes the output. These are items that people do not pay for, except for their own time. When these items enter the market, depending on the demand, they will sell for certain prices. Demand is how many players want a certain item.

Now, if you take supply and demand, and compare those two factors, it is easy to see how the price will differ depending on the values of the two. There are two significant values that determine supply and demand on a seller's point of view. One is price, and one is quantity.

Let's say that we have an Random Box Key. It sells well for 25g each at one given time. When people are willing to buy keys for 25g, and can find them very easily for that price (meaning they don't have to shout for it, or stalk shops), that is called the equilibrium price and quantity. If people all sell for that price, and the supply and demand stays the same, they will continue to sell for that price at the same rate. The basic rule for equilibrium price/quantity is that: if the price or quantity changes, and does not meet the equilibrium requirements, they will naturally change to meet equilibrium.

However, let's say something changes. The game has just released a new character, and people are trying to get ahead to buy cool new CS items for their new character. This creates a higher DEMAND in random box keys. If demand increases, the supply will decrease due to too many people buying keys at 25g. In turn, people will no longer be able to buy keys at 25g without scrounging around, and will be willing to buy the keys at a higher price. Sellers will now raise their price because their keys are selling like hot dogs, and can make more money by selling them higher, because people will still buy them at a higher price.
Going back to the principle of the price and quantity changing to meet equilibrium, from when the price and quantity was unbalanced before, the price and quantity has just met an equilibrium now of 30g per key at a constant rate. People will buy keys at 30g at the same rate as before the price was raised from 25g.
One thing you might be wondering is, what if everybody sells at 25g again to lower the price? The answer is that that will not work because the demand will stay exactly the same, regardless of what price you put it at. Meaning, if you sell it at 25g, people will snatch it up as soon as they see that, because they know that they can easily sell that same key for 30g at another time. Then you will regret selling it at 25g because you could have done the same exact thing and made 5g more than what you sold it for. In retrospect, if you try to get people to sell it for a lower price, you and all the people you convinced are losing a lot of money, while everybody else laughs and profits from your loss.

Given another example, where the demand of that key DECREASES, there will be too many keys in the market, where keys will just be sitting in stores with dust building. Let's just say Ijji put out a discount that would give you a free key for every few random boxes you get. Sellers will realize that they can't sell their keys at 25g anymore. The supply of keys at this point is much higher than the demand of them. Sellers will start selling their keys at 20g in order to meet the lower demand of keys. Assuming 20g is a price people will now be willing to buy it at, the new stable price of keys will now be 20g each. Then now you can laugh at that idiot who failed to notice the change of prices and still sells it at 25g or 30g each. Nobody will buy from that person, because obviously, why buy at 30g when you can easily find one for 20g?

Supply works the same exact way. If the supply in keys decreased, say, it now takes two keys to open one box, the demand would increase, causing to people either want to buy more, or pay at a higher price, or both. Price goes up.
If the supply increased, the demand would decrease. Price goes down.

There are some other variables that cause significant change in market that aren't directly related to supply or demand. One is inflation.
You can always assume that in most MMORPG's, currency is not effectively monitored. This means that the amount of gold people have in their pockets won't always remain the same (on average). One factor that contributes to this lack of stability in currency is the generation of gold. Everyone knows that you can get gold that nobody owns, it is appears out of nowhere, otherwise known as gold farming. An example would be obtaining gold from quests by killing a certain amount of monsters. We assume that the "entity" that produces this gold has an infinite amount of gold, and assuming our time doesn't cost anything, the "entity" gives out gold for free.
The one thing that is supposed to balance this is giving back the gold to the "entity" that has an infinite amount of gold. Ways to give back this infinite amount of gold in order to balance the economy includes: quitting players who take a large amount of gold with them, buying items from NPCs, or some kind of lottery that eats money like pigs, in our case, slime race.
In Lunia, people don't necessarily pay back the "entity" as much as we get from it, so naturally, it results in an inflation.
Inflation has only a temporary effect on making people happier because now they can buy whatever they want, but in the long run, the worth of everything they own becomes insignificant, because what you gain is nothing compared to what you have.
As a result, people will start raising their prices in order to make more than if they were to just go to the "entity" and ask for money. Why sell a more valuable key for 25g when you can keep it and kill three monsters and get 25g for just that?
Prices will now increase to meet the supply/demand, and everything will go back to normal in due time.

To put this in real context, Lunia just released new quests that give you a TON of gold (compared to what it used to be). It made everybody much richer, and if you payed attention to the principles above, the prices of everything increased to nobody's surprise.




Here are some tips on how to use these rules to make YOUR shop a much better place.


Selling:
Tips on how to sell effectively

1) PAY ATTENTION TO YOUR SURROUNDING MARKET!!
If a shop is selling an equip for 200g next to you, don't be stupid and sell yours for 500g. It will NOT sell.

2) Patience. It is overall more profitable to leave your shop for a longer amount of time than to shout your prices to everybody.
Shouters generally are people who don't wish to leave their shops on overnight. The downside to shouting prices is that they can't sell at market price. Why should you waste your time whispering to somebody spamming the chat, when you can buy the same exact item at a shop that's right next to you? You shouldn't. Shouters can only sell if their prices are lower than market prices. This means they make less money than that of long-term vendors.

3) Applying different marketing techniques to make people buy your items instead of your neighbors'.
Selling at equilibrium price give you an advantage over people who don't. But you must be smart if you want to sell an item at a price that everybody else is selling at.
Location: putting your shop near the place where people come into a town is the best. Placing your shop where nobody can see it is obviously not a good thing. People will tend to buy the first thing they see, if they know exactly what they want at what price.
Quantity: If you're selling an expensive item, don't force people to buy it in gigantic chunks. Nobody wants to buy 600 Gold Carps at a time. Not to mention if you put it in smaller amounts, the number looks nicer. Put it in nice intervals of 10 and 5 and 1.
Title: Don't spam! Nobody is going to see PLLLLZZZZZZZZZZ BUYYYY!!!!!WWWWWW and say, "hey! that looks like a cool store!!" and buy your things. Put something VERY simple. You don't have to list everything that you're selling because nobody is going to read it. Just two or three words does describing your shop or listing the most important item you are selling does the trick.

4) Waiting for the right buyer: For selling items that aren't mainstream, like a specific level of item for a specific class, you can keep your items that you want to sell until you see a buyer who is willing to buy your item at a high price. This is the only way to sell this category of item because the demand is extremely low but the price may be very high. Buyers may not expect to find exactly that item in common shops.

5) Basic items sell the best: As mentioned above, selling an item many people may not want is difficult, such as items for a specific class. If you're looking to vend overnight, stick with items that everybody can use, like random box keys, Soul of Moon/Wind, catalyst/forts, big gold stars, great boxes, unbinds, or Ancient White Dragon boxes. I must mention here that CS items don't sell particularly well. Many people buy their own random boxes because they aren't willing to pay 400g for your trash items that you don't want. If you don't want it, other people will most likely not want it, either. It is understandable that because it is a cash item, the price is high, but in reality, who wants to pay 500g for something that gives you 20 def? I'm not saying people won't buy it, just that it's hard to sell the lower-tier cash items for that high of a price.



Buying:
Tips on how to buy effectively.

1) Always look for good prices: Whether you're pvping, playing a stage, or browsing, look at the chat. Look for people who are willing to buy items you have at a good price.

2) Pick on the stupid people: If you see that person who is selling their items at a very low price, snatch it up immediately, even if you don't need it. If people want it, it is guaranteed you will make a profit from it.

3) Browse shops: It is easy to make money without even playing the game. Constantly keep a track of every shop that goes on in all the major areas. Once a good price appears, snatch it up. Don't let any other competing buyers buy the cheap items.

4) Buy low and sell high: Using the two tips above, picking on cheap prices and keeping track of all shops, you can sell your items for greater than that of what you bought it at. This gives you an extreme advantage over the market because then you can sell your items at a higher price than what you bought, but STILL LOWER than the market price. This gives you a quick profit without much effort on your part.

5) Compare opportunity cost: Knowing the opportunity cost of an item involves comparing how much the item costs, and how easily it would be for you to obtain that item via the all-giving "entity". The price cap on items are determined by how common it is. If it's a rare item, it obviously will be more expensive, and if it's common, it will be less expensive. However, prices of these items will be capped if it is just easier to go and get the item yourself, or getting a more expensive item just as easy.



All in all, if you've read everything above, you will now be a very effective buyer and a seller.
Good marketing entails paying attention to all the things that can change the way people sell and buy. To maximize your profits, take all factors into account. Pay attention to the upcoming patches. If you know inflation will occur, stop selling your items, but buy, buy buy! People will eventually start paying more for the items you have, and you will be able to sell your things for much higher than what you payed for them.
If you see an upcoming patch that will release a new class, you can probably expect a lot of people to buy random boxes, and thus, you will start buying random keys because you know the price of keys will rise
In marketing, common sense prevails. Be smart, and you will ultimately become very rich. Game economy is very easy to predict, as everything is announced before-hand, unlike real life economy. People would KILL to have economy as predictable as we have it in Lunia. Make use of that advantage.

Hope this helps. Don't bother bashing me because I won't read this after I post it. It's just to help you understand the game a bit better.
Cheers.