Tobold's Blog
Monday, September 14, 2009
 
The inefficient market hypothesis

Getting rich in a game like World of Warcraft or getting rich in the real world are two very different things. In the real world buying something and then reselling it for twice the money is incredibly hard, for the simple reason that there are quite a lot of people jumping on every opportunity to make a profit, and if that profit can be made by simple buying and selling with little barrier to entry, then there is a lot of competition, driving the profits down. There is an economic theory, the efficient market hypothesis, which basically says that in financial markets there are enough people buying and selling everything that prices reflect all known information about a financial product. Thus traders are forced to use increasingly complex methods, like milli-second trades, to make tiny profits, leveraged with lots of debt, to end up with annual profits of a few percent.

In World of Warcraft you can make thousands of percents of profit per year if you are inclined to do so. It is completely feasible to start the year with 1 gold piece, and end the year at the gold cap of 214,748 gold, only by trading and crafting, without farming anything. To an economist it is clear that this implies that the market of World of Warcraft is inefficient. Players constantly sell goods for less than market value, and constantly buy goods for more than market value. Thus both simple buying and selling, and the only slightly more complicated way of buying, transforming, and selling, can result in huge profits every week.

If you check out the various WoW economy blogs, you'll always find the same set of tips: Transforming ores into gems, transforming herbs into inks and glyphs. People who reached the gold cap nearly all used inscription to get there, and report how they made hundreds of percents of profit every week by posting 1,000 to 2,000 glyphs at any given time. That is a great example of the inefficient market hypothesis: It is obvious that having over 1,000 glyphs on the AH all the time only works against minimal competition. Imagine just 10 players on the same server and side all trying to pull this off at the same time, and the market would be completely flooded with glyphs way beyond demand, with profits crumbling in consequence.

So why, out of thousands of players on each server and side, is there only so few trying to get rich quick? Why are markets so inefficient? The answer is simply that money doesn't have any intrinsic value, but that its value is defined by what you can buy with it. In the real world there is no money cap, and even if you have billions there is always something you could buy with it, whether that is a company or the cure to malaria. In World of Warcraft it is quite difficult to imagine what to do with 214,748 gold. A part of the economy is "price controlled", that is run by NPCs with fixed prices, only changed occasionally with patches. The other part of the economy is operating at a price level which is basically determined by what a level 80 character can make in gold without farming, buying, or selling, just by regular playing, looting, and daily quest rewards. Thus even a stack of copper bars on most servers is worth several gold now. And the level 5 character who can gather copper ore and transform it into bars and sell those thus is able to earn several gold pieces per hour, making both the fixed costs of lets say training or flying, and the fixed monetary rewards from loot and quests at that level comparatively tiny and irrelevant. If somebody is just playing normally, selling the boe loot he finds in the process on the AH, and maybe doing a bit of herb or ore gathering just for fun, he'll have enough money to pay for everything he needs.

Thus compared to the effort of crafting thousands of glyphs, needing several dedicated alts just to handle the inventory, the huge profits of inscriptions are simply not interesting to the average player. Why spend so much time and effort to make money you can't spend, because you already have everything you need? In fact most people have *more* gold than they need, thus they don't mind overpaying for those glyphs somebody else made. And if they ever plan to buy something more expensive, like an epic flying mount for 5,000 gold, and don't have the money immediately, they still prefer to earn that gold in ways which more closely resemble their regular play patterns. This weekend, just for the fun of exploring, I spent one hour mining, and ended up with one stack of titanium ore, and five stacks of saronite ore, about 500 gold after prospecting. I make 100 gold a day in the 10 seconds it takes me to log on my alchemist and transmute a rare gem into an epic one. And when I do daily quests for the Argent Tournament, I get over 13 gold per quest as extra to the token or reputation I was actually after. If a player who just plays whatever he fancies in a casual way already makes over 1,000 gold a week, it is no wonder that you can easily sell a glyph for 20 gold, although the materials only cost you 2 gold. Players spend their gold in inefficient ways on the auction house, because there is no need to be frugal. Using these market inefficiencies to make a virtual fortune is easy enough, as long as there aren't too many people around with the same idea.
Comments:
I tried to earn money with inscription.

It doesn't work on my server. I can earn money, but not the thousands other players make. Problem is: My server is really small. At all times there are no more than 4 or 5 of each glyph type on the AH. During weekends good glyphs sell like 5 or 6 times. Most glyphs don't sell at all.

Then we already got several people who compete against each other in the inscription market. Prices are at 5-9 gold constantly for all glyphs. Production costs are at about 2-4 gold.

If the market were bigger I could thus earn 100% profit on every glph, but I sell no more than 30-40 glyphs during a weekend. It's nice money, but it's faster and usually more fun to just farm to gold.

Otherwise I 100% agree with your article. Fanatasy MMOs need some trading. Make people have to transfer goods from A to B, make in dangerous, but necessary.

Like: To build a house in town A you need stones that are only available in town B. You need to transport them there with a caravan though dangerous environment that's hopefully partly randomly generated, because it's unfunny to walk though the same terrain hundreds of times.

A lot of things are possible without removing the ability for players to join a dungeon instantly via teleports - if you really want that.

Nowadays companies are talking about pillars for MMOs. One of those forgotten pillars is dangerous, but interesting traveling/trading. Another one is unpredictablility/random-generated-content. A third one is player-generated-content.
 
Maybe I'm just underestimating the demand for glyphs, but Gevlon & co seem to already be in the position where the undercutting wars are driving the prices sharply downwards.. but they keep their overall profit by compensating with volume and minimizing their costs (read: effort). Making 50% less profit per glyph doesn't hurt much if you sell more than twice as many glyphs because you captured the competitors' market share. IMHO, it's not unlike the arrival of one Henry Ford into the automobile market or what Valve is now doing with Steam, where price cuts result in more overall revenue.
 
I'm queitly saving for my epic flying mount with Herbalism/Alchemy and yes, the market is clearly inefficient with the profits I'm able to make.

Speaking as a finance lecturer though, I'd be a little surprised if I'd found that Efficent Markets Hypothesis actually applied in the play-setting of Azeroth.

In Azeroth, the currency of the land isn't gold whatever that little counter at the bottom right hand of your screen says. It's time, and, dare I say it... fun. One of those currencies we can measure the other you may as well try having a snowball fight on the slopes of hell before you can measure in hard economic terms. Basically, the *real* "currency" isn't really measureable in a consistant way.

Added to that, in the game world, there a clear limits to what money can buy, and, at a certain point, money becomes meaningless because you have everything you can possibly buy. This skews the market completely, and truely makes it a "play market". If you have ten thousand (or more) gold because you've bought everything you can and can't spend anymore, 20-30 or 50gp on some ore or a potion that you desire.. or indeed, on RP realm, some grey staff that just looks good.. Why not?

I'm not going to complain though. I actually find the playing the AH side of the game as "fun" itself (and indeed, a lot damn safer than playing the stock market! :-) ) so I'm happy to spend a few hours making several hundreds of gold in arbitrage profits.
 
I tried to earn money with inscription. It doesn't work on my server. I can earn money, but not the thousands other players make. Problem is: My server is really small. At all times there are no more than 4 or 5 of each glyph type on the AH. During weekends good glyphs sell like 5 or 6 times. Most glyphs don't sell at all. Then we already got several people who compete against each other in the inscription market. Prices are at 5-9 gold constantly for all glyphs. Production costs are at about 2-4 gold.

I would replace "it doesn't work" with "it doesn't work easily". You could, with considerable effort and creating some alts just for that, make several thousand glyphs and post them for 4 gold each, keeping the AH stock at that price up for a month. Profits will be minimal for a lot of work, but most of your competitors will have given up by then. Then you spend one month posting all those glyphs for 5 gold each. Then 6 gold. If anyone undercuts you, you undercut him ruthlessly. Sooner or later you will have a monopoly, except for a the few people who produce just a handful of glyphs from time to time. If you just make one or two gold profit per glyph, but you are the one selling every single glyph on your side and server, you'll make a fortune sooner or later.

Of course you are totally right that the absolute profit then depends on the absolute size of the market. But on a more populated side or server there will also be more competition.
 

Basically, the *real* "currency" isn't really measureable in a consistant way.

ironically that problem also exists in real life.

If you asked me to work for 10€/hour during my free time I'd say 'No'. Not because I got something to do that earns me more, but because € isn't everything I value.

Free time also is a currency in real life. As is 'fun'. If you ask me to take a stupid hard and non-satisfying job I will ask much more money from you. If you won't pay, I won't work.

Actually I am pretty certain that a lot of men only work so much, because they have a wife. Women love hard working men for evolutionary reasons; just as men love beautiful women.

Some people buy really expensive cars. Cars that cost 30.000€ more than the car they needed to buy. Now, assuming some average 20€ netto per hour salary. That's almost 9 months of work just for a bigger car. If they had the choice and the desire to take a 9 month holidy instead, you might think they'd take it.

I don't think they have the choice and quite often they don't even have the desire, as they worked all their life and wouldn't even know what to do with their time if they couldn't work.
Fazit: Most pepole do not work for money. It's something they getin addition to work, and they are happy about it, that's all.
 
Great Post Tobold and an important insight into the workings (or non workings of an mmo economy).

Most players are probably happen enough with the broken market as it is. Non traders are happy because they have more than enough gold to cover their game playing needs and traders are happy because they can make extraordinary profits.

To fix it you would probably have to tweak the gold sinks in the game so that most players were in cash deficit, which would hardly be popular. Creating a cross server auction house would be good too to increase competition among traders.
 
I've spent some time being an AH player. Not nearly as good as Gevlon but enough to make 65k gold after a few months. And yes, it was with the help of mass glyph making. Then I stopped as I already had everything I wanted and got tired of it.

I did it because I enjoyed getting the gold, it's a subgame. The gold itself doesn't offer much. You can be creative with it and buy your way into a guild. But if you want to buy an item the only use seems to be on vanity items. Which is of course a waste. So the only reason to make tens of thousands of gold is because you enjoy it.

And yes, maybe inscription does not work on your server. It's possible. The market is big however, there's always something you can do to make gold. And some very efficient ways like using your daily cooldown which takes a few seconds and gives you a nice profit.
 

If you just make one or two gold profit per glyph, but you are the one selling every single glyph on your side and server, you'll make a fortune sooner or later.


Even that is impossible, because there are no enough herbs in the AH. I bought almost all of them during the last few days and it resulted in an (expected) price increase for new herbs.Now I needed to sell the glyphs for up to 7G just to make a profit. the competition sells at 9G. With an immense amount of work it might still work - but farming the herbs and selling them for +50% may be more efficient ;).

Point is that to offer all the different inscriptions (which are a lot!) you need a certain minimum amount of herbs. If they are not available without increasing the market price of herbs dramatically (or even buy up all of the supply).
You just can't get the business running - at least not without even more sophisticated strategies, like time-shifted buy-up of herbs and transformation into glyphs.
 
I think there's a lot more to what Gevlon and other successful traders do.

First off they use addons to automate and monitor. This makes them vastly more competitive than someone casual checking out the market to make $$$ and finding himself undercut all the time. It takes some time to figure out on your own how to use the addons effectively.

Next they do what is often called "market pvp". Most players have a notion of the value of their merchandisable goods. Gevlon's Moron of the Week posts are mainly about this. Some guy thinks that because he sells something for 40 gold the item is "worth" 40 gold and may cease to compete if the price is dragged to 10 gold or 5 gold or even 2 gold then kept there. It's a good understanding of this that allows Gevlon to be successful.

Lastly (and this particularly applies to Eve Online which is where I'm daytrading these days) there are sectors of the market that are competitive and sectors which are not. I can buy a gun for 20 000 isk which I can resell for 200 000 isk and be the only person daytrading that gun. Then I check the next one and there's 5 people daytrading it and they buy price is 95K and the sell price is 100K. People get very stuck on a particular commodity.

If someone went to Gevlon's server and tried to wipe him out by keeping 10 of each glyph on the AH for 1g each he'd just switch commodity until the guy got bored and went away again.

MMO markets are indeed terribly inefficient but it's not quite as easy to make money as you imply. In fact I remember you yourself Tobold posting in some frustration when you tried the mass glyph making market and failed a few months back.
 
"It doesn't work on my server"

@ Nils

I think Gevlon's answer would be you have to deep undercut for a bit to drive your competitors out of the market. Sell for 2g for a few weeks.

Once you've eliminated most of the glyph manufacturers you can let your prices rise again.

Market share is more important than profit margin.
 
It's kind of silly to talk about an economy at all in MMOs, unless you're talking about EVE Online.

Why? Economics is the study of the allocation of scarce resources. Key word there is scarcity.

The only truly scarce resource in an MMO is player time -- everything else that people trade time for (in-game money, loot, prestige titles) is not scarce.

EVE's an exception to this, where the amount of resources is pretty rigidly controlled by the CCP hand on the spigot. But in MMOs in general, the only scarce resource is player time.
 
In fact I remember you yourself Tobold posting in some frustration when you tried the mass glyph making market and failed a few months back.

The problem was I wasn't mass glyph making, I was only making hundreds, not thousands. I did it with my mage, which I also actually play with from time to time, so I didn't have the luxury of a completely empty inventory with large inscription bags.

In the end I simply wasn't dedicated and ruthless enough to really succeed. Which of course is a question of motivation: I already have an epic flying mount on my 3 characters over level 70, plus 30,000 gold in cash, plus every BOE epic there is for my warrior. I just wasn't motivated to make gold for the sake of making gold, or to buy some expensive vanity mount.
 
It's not how economies work in MMOs that intrigues me, it's why they were included in the first place.

Wouldn't it have been easier in every respect for the game designers to have kept total control over the supply of all items by distributing them only through quests, drops, crafting and NPC purchases, only to the specific character involved? It would have largely prevented the growth of various perceived problems of farming, twinking and gold-selling from the outset.

I've never played either a tabletop nor an offline RPG that made it easier to buy what you needed than to adventure for it, and it puzzles me how the mechanism ever got incorporated nto MMOs in the first place.
 
Why spend so much time and effort to make money you can't spend, because you already have everything you need?

There have only been there times in my 5 years of playing on and off where I wished I were "rich".

One, my very first epic ground mount. Two, my very first epic flying mount (or riding skill whichever was the most expensive). And three, when they introduced traveling mammoths and choppers.

By the time I got to three, I realized I no longer have fun trying to make gold for the sake of gold.

If I enjoy doing dailies, or fishing or running instances and happen to make gold that way - great! But having these goals in game that require me to log on just to make gold isn't fun anymore. Even "easy" get-rich-quick-scheme of selling mass amount of glyphs doesn't make it more palatable.

I don't play the market because while I may not have everything I want I have everything I need. It's enough for me.
 
It's kind of silly to talk about an economy at all in MMOs, unless you're talking about EVE Online.

Why? Economics is the study of the allocation of scarce resources. Key word there is scarcity.

The only truly scarce resource in an MMO is player time -- everything else that people trade time for (in-game money, loot, prestige titles) is not scarce.


Excuse me, but where exaktly is the difference to real economies?
Time is money in real life as well.

And actually there is scarcity in WoW. When people get a new item and want to enchant/socket they buy the stuff from the AH. And it's not for nothing! Most players do not horde gold. For most players in an MMO there is scarcity.

For some there is no scarcity, because they are rich. That's also something not unknown in real life. You can spend 100mio if you really want (a yacht, your own island..), but 1 billion is already almost impossibe to spend, unless you just buy up stuff you cannot use.

If you buy a company for 500mio you didn't really buy someting. You just changed the way to store your money.

In real life it is
- 1€ / month income (third world or pocket money for wester neuropean children)

800€ / month income (western european welfare)

- 1.500€ / month income (western european normal salary)

- 10.000€ / month (wester european very good salary)

- 100.000€ / month income (top salary. Only achievable with interest rates or social contacs that put you on top of an international company)

In WoW it is

- low level

- casual player

- serious player who does some dailies every day.

- power player doing many dailies and sometimes trading in AH

- AH guy with massive amount of twinks/bags/addons for his mail etc. etc.

There are differences, but it's not as easy as you put it.
 
@ Bhagpuss:

Some players love trade. They won't play your game if you don't implement it.

It's also a very good way to allow people to achieve what they want in the way they like most. I can farm for herbs or complete some quests and then buy them.

The rate at which farming time translates to questing time for this specific herb and these specific quests can also be determined by a market system.

A planned system would fail just like all planned economies failed or were ( /are about to be) replaced on this planet.
 
I think that another factor in MMO economies is the risk factor. If your investments do not pan out in real life, you may have to make changes in the way you live, possible drastic ones if you took too large a risk. Anyone planning to invest must plan ahead very carefully, as their financial viability can be at stake. If you're irresponsible or unlucky with money, the deprivations can be very harsh. And it can be very difficult to regain even a portion of what you've lost.

If you run out of gold in WOW, your character will not starve to death. He will not be kicked out of his home and forced to live on the street. He won't have to work out a payment plan with the bank (or, if he's really dumb, the local loan shark). He won't have to go from well-paid investment analyst to well-paid burger flipper. And he can even continue to progress his character, at least until his gear goes red. (He can cover that cost by doing a single daily quest, most likely.)

There is comparatively no risk to losing gold in WOW. Even for the person who scrimped and scraped and saved, and then buys that epic item only to win a better item in their next dungeon or raid, and feels as if he's been punched really hard in the stomach... there's no risk. He is not hindered in his continued attempts to rebuild his stock of gold (and may have an easier time of it, now that he has an upgrade or two). The worst he has to deal with is disappointment and recriminations.

The ease with which you accumulate gold, the paucity of things to spend it on, and the lack of risk involved in spending it makes gold something of an afterthought for WOW players.
 
Blizzard has made a series of deliberate changes to Warcraft to devalue gold. On one hand they started adding a lot more gold to the system via daily quests. On the other hand they stopped making anything valuable cost gold. All useful epic items are bought with alternate currencies: badges, emblems, PvP points. Even crafting patterns are bought via daily quest tokens now, not gold. WotLK didn't even add any expensive new item like the BC 5000g epic flyer; the only new expense was 1000g for Northrend flying, and I've never heard of anyone for whom that's a hardship.

In August 2006 I did a survey of gold seller IGE. Back then they sold 1000 gold for $150. Today, 1000 gold costs $10. I think Blizzard's goal with changing the economy was driving the gold sellers out of business. I can only hope they're succeeding.

(For those of you interested in Eve Online trading, check out the new Small Time Trader blog. He's just getting started, lots of interesting stuff.)
 
It fits perfectly to this article, that's why I add on more comment.
(not much to do at work today:)

If you want to find out how time players spend for activity A translates into the time they are willing to spend for activity B, you have quite a problem as MMO producer.

Problem is that if you make activity A too rewarding they will ignore activity B and vice versa.

What we have is a classical problem of attaining information from a a crown.

There some good books about this, like "the wisdoem of crowds".

It happended I just read an article about this book:
http://www.amazon.com/Infotopia-Many-Minds-Produce-Knowledge/dp/0195189280

The article is in german
http://www.dradio.de/dlf/sendungen/andruck/1030304/

Both books suggest a market based method - which is exactly what MMOs use.
I was rather surprised :)
 
The market is inefficient because there is no really solid information about it. If there was a stock ticker you could check with the last transaction price & average trading price of any given good, AND buyers and sellers had the flexibility to buy and sell at the average trading price instead of what the seller thought the going price was days ago... that would go a long way towards making it more efficient.
 
Agreed on the lack of information. Other games do a better job of having their auction houses display lets say the price of the last 10 transactions for that item, or some average price. In WoW you can buy up all available copper bars for 5 gold and repost them for 8 gold, and nobody will be able to see the previous market price unless he has the auctioneer addon and did a daily scan.
 
@ Nelson:
That's not completely true. Gems, inscriptions, enchantments are what really costs money in WoW. and you need to spend this money to get anywhere.

What Blizzard does masterfully is introduce luxury items.
They realized that their market based system tends to concentrate the money on a few players (just like in real life). But you can ask these people to spend 16.000 gold on a mount and they do it.

That's the way they get the money out of the system. There is no big inflation or deflation in WoW right now and that means that Blizzard succeeded! The casuals and other players who farm dailies introduce money into the system. The Gevlons concentrate it on a few players and then they either just store it or buy mammoths :).

Well done, Blizzard.
 
I think Gevlon is proving a valid point with his apprentice thing he has going on.

Anyone with any trade can make a profit. Some are harder than others, but there is always a profit to be made in WoW.

I applied Gevlon's M&S AH rules to WAR for a time and they worked very well their too. Just got back into WoW and haven't sat down and mapped out my gold making plan yet though.
 
If making gold is so easy, why there are goldsellers?
 
@ Nelson

Small Time Trader is an awesome blog! Following a link there led to this quote:

"I have some funny entries in my wallet where I'm buying an implant from him at 375,000 only to sell them back to him later at 450,000. Always accompanied by an Evemail from him like "You Have NO Clue about how the market works do you?"."

Made my day, thanks for the heads up!
 
Another limitation to the utility (usefulness) of massive gold is Blizzard's gold limit in a server transfer. I think the cap is currently 20k. So if I ever want to transfer 200k, I need to pay for 10 server transfers (using high-level toons, as low-level toons have even lower gold transfer caps). Which means that making all that money locks you into your current server.
 
Very interesting post. I've been fascinated by in game economies since my EQ days(now that was a broken economic system). In WoW, my best luck has been with herbalism.
 
Gevlon asks: If making gold is so easy, why there are goldsellers?

Shouldn't you ask that question to yourself? After all, it is you who calls everybody who doesn't make gold easily a "moron and slacker".
 
Still - it is a very good question. I look forward to read about it on your blog, Gevlon :)
 
I did the glyph market thing, and frankly, I found it insanely boring. It just wasn't fun. I'd much rather be actually doing something like gathering, that feels far more productive, than these get rich quick schemes. Golds value is limited in WoW, and if you aren't having fun, what's the point of playing.
 
Tobold said, "Shouldn't you ask that question to yourself? After all, it is you who calls everybody who doesn't make gold easily a "moron and slacker"."

Tobold,

He's asking a rhetorical question to get you to think about what you postulized. Rather than turn the question and avoid a difficult question -- you might try to answer it?

You moderate your blog posts to avoid posts like you just made.
 
@Nilis

There is another way besides crashing the price on glyphs in an attempt to drive competition away. Your competition has already succeeded in driving you out of their market.
This leaves an open invitation for you to capitalize on a market they may be overlooking. Rather than selling glyphs as finished products, sell glyphs as raw materials (INK).
Define a market price for the inks that make glyphs. Buy herbs cheap and mill them. Use Jessica Sellers to help you out with inventory. Check out a few posts Gevlon has made regarding selling inks. Sell inks in individual stacks as well as full stacks. Make the price tasty for the glyph producers as well as the rest of your server's population. You might also set up a deal with a glyph producer to supply them ink.
 
@Tobold

With Gevlon's series of Apprentices he has been trying to help people make enough money to do what they want, ie raid. It's not always about hitting the gold limit. He also teaches responsible spending.

Furthermore easy is subjective. Some people find it easier to farm mats, some find it easier to manipulate the AH.

The M&S are the ones who say they CAN'T make money. People are lazy, gold sellers capitalize on that.
 
As someone already said, in an MMO like WoW, money = time. However, a player in an MMO is looking for more that just virtual money for their time, they are looking for "fun" (however they might define it). For example, some people in vanilla bought gold (money) so that in-game they could use their time to raid.

I financed my first epic mount, in large part, by buying stacks of 20 Arcane Dust and re-listing it singly for a profit. As simple as that was, eventually I stopped because it took time - boring time. A daily quest is often 'fun enough' to repeat some, or many, times - especially if there is a tangential reward like an achievement or reputation. I find that when I’m chasing something that costs a lot of gold I will play the AH and do dailies much more diligently.

Finally, an MMO has no risk. Expenses are minimal, and you won't go hungry, lose your house, or fail to feed your children. Debt is essentially non-existent.
 
Inscription profitability is seemingly VERY server specific. True, very few people are willing to dedicate the time and effort into making inscription profitable. On my server, that one fact is the contributing factor of low profitablility.

Glyphs on my server will (even with proper price "resets") be forced into sub 2g range within 2 days. This goes for ALL glyphs. 2 ink glyphs, researched glyphs, minors and even book of mastery glyphs (which the scribe undoubtedly paid a hefty price to learn) will all be driven to not only unprofitable levels, but actually into the negative territory, without so much as a flinch from the scribes.

I have learned to deal with this fact, and treat the glyph market on my server like the annoying cyclical beast it is. However, I am also considering migrating to another server where the economy is less flooded with idiots selling below mat price on such a mass scale. For now I deal with the annoyances with a careful approach (read: not brute force like greedy goblin suggests).

I keep a database on the most popular glyphs based on my beancounter reports. I am constantly evaluating my inventory, and have even generated lists of the "priority" glyphs that I deem worthy of price reset. All of this yields only modest profit increases some weeks. I have a dedicated account on a separate computer JUST for handling AH toons. Even while I'm playing, raiding, prospecting AH purchases, doing homework, I am always scanning, canceling, and reposting. I am keenly aware of who else is counterposting, their hours of play (yes, even their mains) and even some of their other AH alts. I know my market.

While I'll stop short of saying the inscription market is dead in the water (it's certainly close), anyone looking at this thinking inscription is your golden egg laying goose: think again. It requires MUCH research on most servers I've visited.

There are too many players that are happy just to get rid of their glyphs, even at 75% loss across the entire spectrum. In some cases it's because they're over-charging for snowfall ink, in most others, it's pure ignorance. Whatever the case may be, it require much maintenance and diligence to make any REAL money from glyphs. 75% of my income actually comes from my other professions.
 
Rather than turn the question and avoid a difficult question -- you might try to answer it?

I can try. But still it is a huge discrepancy between him running a blog claiming that making gold is so easy that everybody who doesn't know how to do it is a moron, and then coming here claiming that it is actually hard.

My answer is in my original post: Nobody needs to buy gold to pay for his training and repair cost, these are cheap, and people have enough money. But buying an epic flying mount, motorbike, mammoth, or a set of boe epics would still require several days of work. As Nobs said, people are lazy, and the gold sellers live from that.

And Gevlon lives from the gold sellers. Who do you think is farming all those herbs he buys and makes all that profit from?
 
Runescape actually has one of the most interesting economies in MMOs.

About two years ago they created a Grand Exchange -- essentially a stock exchange for items -- to combat RMT (all direct trades above a certain amount between characters were banned).

The Grand Exchange works across all Runescape's servers. As Runescape has something like 7 million free and paying customers, this is the pool of potential buyers for anything offered for sale.

Does this create an "efficient" economy? I don't know, but it is interesting to watch. Runescape's inventory gold cap is 2 Billion (a limit of the underlying java software). Thus there is room to amass wealth.

And what to spend it on? Luxury items. Rare and discontinued items like "party hats" and other special clothing (purely visual, but very rare) sell for 2-3 million.

All tradeable items in Runescape are actually enumerated and tracked on the Exchange. Take a look here. This economy is actually more interesting than Eve's (not to say vastly larger).
 
I make enough real money in a week to buy 200000 gold. Unless he is just awesome as hell, even the Greedy Goblin can't go from 0 to 200,000 in 40 hours played.

And that's why there are gold sellers. Gold is cheap as crap. It's not that its hard to do, its that its boring to do, and its extremely rational to farm that out to professionals rather than DO it yourself and burn your precious free time fucking off with Auctioneer and making $.75 an hour or w/e it works out to at the current gold/dollar exchange rate. Buying gold is the ultimate in rational economic decisions.
 
I would agree with your article, I have made gold a variety of ways sometimes from something as simple as I need x and their is none on the AH, I make two and sell one and make a good profit . It got stupid enough that when I was only making 500g per hour disenchanting pants I could no longer be bothered compared to the 2000g I had been making a month before.
 
I can try. But still it is a huge discrepancy between him running a blog claiming that making gold is so easy that everybody who doesn't know how to do it is a moron, and then coming here claiming that it is actually hard.
Making money is not hard, but it can have a large opportunity cost, which varies from person to person. For example, there's this guy:
I did the glyph market thing, and frankly, I found it insanely boring. It just wasn't fun. I'd much rather be actually doing something like gathering, that feels far more productive, than these get rich quick schemes.
He puts a high cost to crafting and standing around in the AH, because that's time he isn't having fun: roaming the world, killing monsters and so on. Conversely, Gevlon puts a high opportunity cost on having to farm mats, because that's time he's not using on the AH or raiding or whatever.

Now, smart people realize the market opportunity here: If they sell the herbs, they can skip the boring part of crafting and market PvP. Or they buy the herbs, skipping the tedious part of farming the mats. At best, the market allows one to optimize their play experience. Win-win, right?

..except when you apply the same thinking to the market and even the game itself. The opportunity cost is not just measured in fun and money, it can also be measured in (mental) effort. In a sense, the M&S can be seen as experts in optimizing the effort: They buy and sell stuff at silly prices, because installing Auctioneer and occasionally hitting one button is too costly. And you can always get more money by spending a few minutes at the local goldseller, right?-) They don't compete, because forming cartels seems easier. They don't minmax their characters, because a few kind words (or a nasty whisper or two behind someone's back) gets them a raid spot.

Some of the M&S are incredibly good at this, getting a huge bang for the proverbial buck. The trick here is that only few people evaluate relationships (including casual ones, like a PuG) with the same rigor as business deals. If I had to pick the most important thing Gevlon's trying to teach, it would be this one.
 
Toxic earns more than 2000€ the week, 8000€ the month? While working a 40 hours week?
Not bad at all after taxes and fixed costs for a living room, cars and such stuff.

However, just because players optimize in-game gold making out of the game this doesn't mean that they wouldn't like it if it was impossbile to do so. After all we know by now that we tend to optimise the fun out of it.
 
There's an important difference between the WOW economy and the real world one. The "currency" you need to get the best items isn't gold, it's a non transferrable token you get from running heroics (which, being non tradable, isn't really a currrency at all).

This means that there is a limited value for gold itself. It's handy (there are still some good BOE items out there), but not essential. Hence many people don't bother acquiring it directly. Spending a couple of hours running heroics will get them closer to their chosen goal than spending a couple of hours making glyphs and trading on the AH.

If all items were BoE or freely tradable, the art of gold making would be studied more. Right now, it's just a fun mini-game, rather than a key part of play.
 
Changed, if you need to move more than 20k gold in a server transfer, rather than moving multiple characters, you can buy loads of goods with the money, transfer, and then sell them. This also opens the door to the fun auction house game of seeing how much profit you can make exploiting the differences in pricing between your old server and your new one - I've heard of people enlarging their bank hugely doing this, and having a lot of fun in the process.
 
@ Sven
I strongly disagree.


There's an important difference between the WOW economy and the real world one. The "currency" you need to get the best items isn't gold, it's a non transferrable token you get from running heroics (which, being non tradable, isn't really a currrency at all).


In the real world the most important things you cannot buy, either.
A nice familiy, love, health (in part) are all examples of things you cannot buy.

Just like in WoW you cannot buy what is best. But you can buy things that make the best out of what you have.

You can enchant your items and gem them. Just like you can eat expensive but healthy food in real life.
Actually you need to buy the enchants and gems to particibpate in a lot of content of the game. They are absoluetly necessary to participate in raids - like possessing good clothes is required in real life to be able to work.

You can also obtain luxury items that really just give you some benefit, because other people see that you possess them - just like in real life.

You say there is a limited value for gold in WoW and I agree that you could call it like that. But this effect is there in real life as well.

That's why almost nobody in real life just strives for money. For men it is a bit more useful than for women, because money makes them more sexy, but even they do not just strive for money.



If all items were BoE or freely tradable, the art of gold making would be studied more. Right now, it's just a fun mini-game, rather than a key part of play.


Agreed - but that's not a difference to real life currencies.
If € could buy you true love, a lot more people would work much harder.
 
@Nils

I'm not sure we disagree. I deliberately phrased my comment as the "best items", rather than "best things", because I intended it to mean gear rather than other aspects of the gaming experience.

It is of course true that there are other things that matter (e.g. a good guild atmosphere) that you can't buy. However, these are areas where the game is similar to RL, rather than different. On the other hand, you don't need special tokens to buy a Ferrari. Cash will do.
 
@ Sven.

I don't think it makes sense to distinguish between 'things' and 'the rest'. Especially if you define the difference such that 'things' are stuff you can buy and 'the rest' isn't.

If you do it, though, it is only consistent to argue that WoW and real life differ, because the list of 'things' in WoW naturally differs from the list of 'things' in real life.

Thus, in this case I had to
admit that WoW differs from real life in this aspect. But I do not think that it makes a lot of sense to distinguish stuff like that.

There's stuff you can buy and stuff you cannot buy in MMOs and in real life.

This effect devalues money in real life and it devalues money in MMOs.
Thus it is not a principal difference.

If you argued that fraction of things you can buy in MMOs were much shorter than the corresponding fraction in real life, you certainly had some point.

I wouldn't instantly disagree, but I disagreed if you claimed that there were a fundamental difference, like some posts in this thread already did.

Hope that's understandable ;)
 
@Carson63000: Yes, you can convert gold to items to transfer over, and even turn a profit if prices are higher on the new server. But there are downsides:

1) It takes a lot of time to convert 200k gold to items that will fit in your bags. For example, herbs and ores are right out because you can't have enough inventory in your bag and bank slots to hold enough to be worthwhile.

2) During the time you are converting, prices will go up on the items you are buying. You're increasing the demand and decreasing the supply, hence prices rise.

3) Conversely, after you transfer to the new server, you have the inverse problem of falling prices as you flood the market with your transferred goods.

4) Finally, after the server transfer you're probably interested in raiding with your new guild immediately, and you don't have as much time to play the AH and sell off your good slowly without over-flooding the market too much.
 
@Nils

It does sound like we more or less agree. I think there is a significant difference in that more of the important things in WOW can't be bought with gold than IRL, but it's a quantitative difference, rather than a qualitative one.
 
I don't make €2000 a week.... But I can find much cheaper wow gold than you!! Looks like you euro types get hosed in every video game related price.

The larger point that in terms of hours of work, anyone making minimum wage in the western world would do better to work a real job and use the money They earn to buy gold is still accurate, regardless if your opinion of my annual income and/or honesty.
 

The larger point that in terms of hours of work, anyone making minimum wage in the western world would do better to work a real job and use the money They earn to buy gold is still accurate, regardless if your opinion of my annual income and/or honesty.


I'd agree with your intutively, but actually I think that's wrong.

Point is the freely available income. I have a very good friend who has to rely on welfare to make a living right now and I received welfare myself for 6 months after my diploma.

Although you get some 800€ the month the amount that is freely available after costs for accomodation, health insurance (yeah - you have health insurance here even if you receive welfare and I am very glad that I don't have to pay for the graves instead! :), costs for food etc., you usually have left some 50€ the month.

A lot of people in Germany work, but earn less than these 800€ with one (or more) full time job(s). They get help from the government as well and thus have slightly more € available than those on welfare alone. Quite a lot do not receive welfare, because they just earn enough to not need it. thus they have some 900€ available the month.

If you look at somebody like that (some 6 mio as far as I know in Germany alone), his freely available income is less than 100€ the month.

To buy WoW gold with this money is unthinkable. You need to save it in case the computer breaks down, you get a job offer far away and need to travel or all the shit that happens all the time whenever it was the least desireable.
 
@ Sven
Yes, I agree :)
 
Nils, of course as a practical matter its a lot different. I too went through a period where I couldn't really afford gold. Of course, if I had worked at the gas station with all my WoW time, I wouldn't have had money problems, but anyways...

But my point is that from a purely Greedy Goblin standpoint, gold is cheaper than pretty much anyone's time. If your goal is to make wow gold, your optimal course of action is to get a real life job and use that money to buy gold. You will end up with more gold per hour than if you farmed the gold directly.

Hence, why there is gold buying and always will be gold buying. Not that gold buying really makes sense for everyone in the real world.
 

But my point is that from a purely Greedy Goblin standpoint, gold is cheaper than pretty much anyone's time. If your goal is to make wow gold, your optimal course of action is to get a real life job and use that money to buy gold. You will end up with more gold per hour than if you farmed the gold directly.



It's quite ironic to say that from a greedy goblin PoV you should buy gold and not make it in-game :)


I do agree that from a pure €/hour PoV it usually makes more sense to work a RL job and then buy WoW gold.

If you consider welfare however and the fact that no western country has basic income yet
(http://en.wikipedia.org/wiki/Basic_Income), the conclulsion is different.

If you receive 800€ the month for not working and 850€ the month if you work for 40 hours the week in a lowly payed job, the extra money per hour is negligible.
(For example you get 400€ the month from the job and 450€ from welfare)

In this situation it doesn't make a lot of sense to work for WoW gold at all.

Actually it doesn't make sense to work at all, which is exactly the problem of western welfare systems.

Ironically it the kind of people who tell you that you need to reduce taxes to increase productivity, also tell you that the current social welfare system is great and basic income is not :)
 
@Toxic

"If your goal is to make wow gold, your optimal course of action is to get a real life job and use that money to buy gold. You will end up with more gold per hour than if you farmed the gold directly."

I'd agree with that if you don't enjoy your gold-making scheme. If that's the case, it does indeed make sense to do an RL job instead. If, however, you find your way of making gold fun (presumably Gevlon does, as he blogs about it so enthusiastically), the gold becomes simply a means of keeping score in a game, in which case it is better to play.
 
Hello guys,
If I can join in the conversation, economics is understood as the distribution of scarce materials. But more importantly it's supply and demand. If someone is willing to pay 10g for something that that only costs you 2 g to acquire is a great profit. Does it happen in the real world as well as the virtual, of course it does. However, once others realize the profit potential competition arises. That competition now shrinks your profit margin to 100% instead of 500%, woe is me.

Edward Castronova recently posted an enlightening research paper.

http://terranova.blogs.com/terra_nova/2009/08/virtual-economy-as-real-as-real.html

This basically proves that virtual economies have the same cycles as reality. Now from my standpoint I work the percentage edge of the market. Making 10 - 25% is a score especially if I have a decent amount of volume turnover. And I usually do. Most players are looking for the 100-500% home run while I consistantly see base hits.

Now economically, who will win in the end? If you analyze some companies their margins are maybe 1-2% and they have healthy growt and lofty stock prices. According to this article on wiki, "stock's price represents an aggregation of the probabilities of all future outcomes for the company, based on the best information available at the time." Time changes everything: customer demographics, ecological elements, management changes. The same happens in virtual worlds between patches, expansions and new players coming on board.

Recently there was a big patch that changed the whole rig system (in EVE online). I kinda feel bad (not really) for the players that were making rigs for a living. Now it is easier and more profitable to make them yourselves and more profitable just to sell the raw salvage. Yes I am talking about EVE, a game that has a solid economy. Mostly because it was designed with the help of an economist.

Wall Street Rule 124549.2 Article A: "Something is worth only as much as someone will pay for it."
Thanks,
Frank
 
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