Tobold's Blog
Thursday, February 04, 2010
WoW Auction House on your iPhone or browser

There is some excitement on the WoW blogosphere about an announcement of Blizzard that they would introduce web access via browser or iPhone to the World of Warcraft auction house. Some people complained about the fact that, quote "certain elements of the service will be premium-based", others wondered whether the authenticator would be mandatory for this, and the eternal complainers tried to construe situations how this new feature would give somebody some unfair advantage.

I have some thoughts of mine to contribute to this discussion. The first is that this isn't really a new idea, I speculated on some WoW functionality for the iPhone, mentioning specifically buying and selling on the AH, three years ago. At the time I called that kind of functionality "tamagotchi elements", that is elements of the game which require frequent attention in short bursts.

So, is this a good idea? Actually I don't think it really matters. In my experience an overwhelming majority of World of Warcraft players is *not* "playing" the auction house to an extent where doing so when not logged into the game would be useful. The people buying underpriced goods on the AH, and reselling them with some profit margin, are by definition a tiny minority. Because if more people would do that, the opportunity for that sort of profit would simply disappear. That is a consequence of the efficient market theory, if everybody is looking for an opportunity for arbitrage, that arbitrage becomes impossible or at least so infrequent and tiny as to be not worth it.

A somewhat larger number of players, but still not all that many, are using the auction house frequently, in combination with crafting. Buy herbs, mill them to pigments and inks, buy parchments from an NPC, inscribe glyphs, sell glyphs. That simple basic example shows that one of the difficulties of the new browser AH system will be *what else* you can access via that browser or iPhone. Can you even open your mailbox? Can you craft? Can you interact with NPC vendors to buy crafting materials? The usefullness of the browser AH functionality will be limited if the auction house is the *only* thing you can access.

For the large majority of players the auction house does not play a huge role in their daily virtual lives. They might be selling some loot, buying some consumables or gear, but not frequently enough for them to feel the need to have access to that 24/7 from wherever they are. The auction house for most players is an integral part of the game, and having access to it, but not the rest of the game, doesn't make much sense.

Ultimately it all comes down to how you divide your time between the real world and the virtual one. A lot of players are totally capable of compartmentalizing, and keeping the two apart. Real life has priority, and at some point in the day when you just want to relax you delve into the virtual world and play a bit for fun. Those who either have problems of keeping real and virtual apart, or got their priorities wrong and think their virtual life is more important, should go and seek psychatric help. Believe me, being caught in class or in a business meeting playing WoW on your iPhone is going to get you into trouble.
That is a consequence of the efficient market theory, if everybody is looking for an opportunity for arbitrage, that arbitrage becomes impossible or at least so infrequent and tiny as to be not worth it.

Somewhere the EMH has to be wrong,
looking at the recent 5 billion Euros of Deutsche Bank or even some US financial players.

Bubbles would appear in the WoW auction house (already do appear sometimes) if many players traded professionally.
That is because following a bubble - even knowing that it is a bubble - can earn you a lot of profit. .. Well, of course, it also can make you lose a lot of wealth :).
In the real world financial instruments have a real use, funneling money from savers to companies, which can make an actual profit and really create wealth. The profits of the financial system are a spillover of that really created wealth.

The auction house in a game like World of Warcraft does not have such functionality. It is strictly a zero-sum game (or actually a negative sum game if you consider AH fees). No gold is actually created on the AH, it is only transferred from one player to the next. That limits the possibility of bubbles. Using addons like auctioneer telling them what the average market value of an item is, it is unlikely that players that trade professionally will try to buy goods that are already overpriced in the hope of flipping them.

Bubbles in WoW are usually caused by some patch making a certain item more rare or desirable. After that there is usually a long phase of deflation. Have you looked at the prices for lets say Crusader Orbs lately?
The auction house in a game like World of Warcraft does not have such functionality. It is strictly a zero-sum game

Ignoring inflation and credits for the moment, money is a zero sum game in real life, too. The distribution of goods and services, however, is strictly not zero-sum. Developed countries are wealthier, not because of the numbers on the paper money, but because of the efficient distribution of goods and services.

Counting real life credits and inflation doesn't change this fundamentally. They add some potential benefits .. and some risks.

You can have a bubble even without an external money supplier (like central banks trying to 'save' the economy).
I do agree, however, that such policies have the potential to make bubbles much worse. (And to actually do save the economy - it's never so easy :).

Imagine Blizzard announcing to reduce the amount of cloth in WoW drastically in the coming weeks.

A market full of professional traders will instantly judge what that means exactly. They will buy clothes. The prices increase.
Some traders will guess that the real future price will be 2x as much as today, others will guess at 3x, others 4x .. etc.

The guys who are most optimistic will eventually own all the cloth. But it is very unlikely that those who were most optimistic were actually right.

But it doesn't stop here. Actually, some less optimistic traders might look at the market and think that exactly this is happening. They will buy the cloth at prices that they know are too high. They just hope to find an idiot to buy it later. Eventually these people will trade the toxic clothes with each other (and know about it); always hoping to not end up having the clothes when the patch comes along.

That's a modified example for the winner's curse.

When Blizzard eventually introduces the patch the price actually crashes. Depending on the expectation of the most optimistic traders drastically so.

That's a small bubble. It happened, because a lot of smart people acted quite rationally.

The EMH ignores recursion.
money is a zero sum game in real life, too

No, it isn't. Money in real life is a representation of other wealth. As such wealth is created every day, the money supply grows with it. See chart here.

Inflation describes a process in which money supply grows faster than real wealth, deflation happens when its the other way around. But the underlying growth of wealth happens pretty much every year, unless there is a big recession. GDP growth in real terms is nearly always positive, both for individual countries and for the world as a whole.
Um, I MUST have misunderstood your last paragraph. You're not saying "anyone who wants to use the browser/iPhone AH app is a saddo who needs to seek psychiatric help", right?
I said you shouldn't play WoW on your iPhone in any situation where real life is more important, e.g. in class or in a business meeting. Don't recommend it during a romantic date either.

I'm not saying anything against using the app in your lunch break, or while waiting for the bus, etc.
But the underlying growth of wealth happens pretty much every year, unless there is a big recession.

I think we misunderstand each other.
I want to stress underlying in that quote.

The money itself can be zero/negative/positive sum - whatever; if you use paper money. But that doesn't necessarily have anything to do with the underlying wealth.

Some money the financial system earns is certainly spillover from underlying wealth that has been created due to their service.
Some of it, however, is just money given ('printed') by the central bank.

If there was no central bank the money supply (just money, not derivatives like credits etc) would by definition be a zero sum game.

That's not necessarily bad for the underlying wealth, although it can lead to deflation - and has in the past centuries.
Drifting of the topic :)

You haven't responded (and don't need :) to the main point of my last comment, which was that bubbles can happen in WoW, where the auction house is indeed a negative-sum game and the economy more or less zero-sum when measured strictly in gold.
In my opinion too many professional traders make the market more efficient and better for consumers on the one hand, but introduce bubbles on the other hand. Turn at the last comment for an example.

Looking at wealth, not the superficial currency, the auction house does, of course, offer a service and adds therefore to the wealth (the 'prosperity') of the WoW players.

What the services that are offered by the AH specifically are and why it is good for Blizzard to have an auction house is actually a very interesting topic that I haven't seen tackled by the blogosphere yet.

As a starter:
If Blizzard wants to introduce something like crusader orbs and also wants to offer them for gold, the AH offers a tremendous service for Blizzard.
It would be next to impossible to even determine, let alone constantly adapt the 'just' price for crusader orbs.

Even if Blizzard managed to do that they needed to determine what to do with the money they thus suck out of the economy. If they didn't add it to the economy again they might get a serious deflation which would make the price determination even harder.

The AH also makes the exact numbers of crusader orbs that each players should get easy to control.

etc etc..

There are (many) more things to say here, but I'd like to stay on topic, for once :)
If Blizzard does that I would really like to know how they will stop automated trading...

In respect to real financial life:

For those who still believe in it, please go tell about EMH to Renaissance Technologies or DE Shaw guys and girls...For those who fancy Modigliani-Miller theorem, go tell Buffet or our present credit-leveraged crisis.

In trading and so in valuation of goods, the problem is not in the fact that it is or not a zero-sum game (usually negative-sum due to brokers fees). It's can you generate cash/value? consistently? That is, are you better at this game than the others? can you keep it that way? like in poker.

For the record, it seems a journalist found a £10 at Davos last week:

The fact that financial system (equities and credits) is a good (or the best) way to optimize allocation of capital is not that obvious. Perhaps it is just the least bad.
Fees taken by financial institutions may be spillovers or some sort of friction in economic activity due to a better understand of valuation of goods and services than the others actors. Seeing the growing of the sector since the 70', I will bet on the latter.
But it is very possible that we can't do better.
That is a consequence of the efficient market theory, if everybody is looking for an opportunity for arbitrage, that arbitrage becomes impossible or at least so infrequent and tiny as to be not worth it.

WoW is not an efficient market for a few reasons.

The first is the pool of players very small relative to real world economics. A small market is easily manipulated (i.e. through hoarding and other means) even by a single individual. The result is that a motivated player can create artificial 'bubbles' in which to make a profit.

The second is that players in WoW don't behave rationally. Unlike real life, "gold" loses it's importance relative to what it can buy. In fact, the best things CAN'T be bought. Many players reach this point where gold loses it's value in what it can buy you in-game and spend irrationally.

That said, your point is right. The effect of the iPhone is largely inconsequential. I see it having the most value to people on the 'buys' which are typically better mid-day than the early evenings.
The parts that concerned me the most that I highlighted in my post:

- Potential to open up web-based "addons" or applications that can interact with the Auction house, making it more so that if you don't have these addons or applications it would make it impossible to compete with those who do. (example: those who use QA3)

- Will the authenticator be used in these situations? or is this another avenue to have your account hacked.

- Main Arguement: Two different people go to school/work for the day, right after cancelling/reposting their auctions (they are competitiors in the same market)
One has paid the premium price on the wow armory AH and during breaks between classes or lunch break logs on with his iphone and cancels/reposts further or buys up cheap materials while the other can only wait until he gets home to find none of his auctions sold and no cheap materials available.

Also, what if I could be in a raid, but at the same time be managing my Auction House posts/items from my iPhone?

just some examples of how this DOES give an advantage, however who knows what parts will be "premium"
But what would you do in such an app?

For example, as a glyph trader - I have one or more characters that sell glyphs, each of these characters has a stock of glyphs either in their bags - or (more commonly) distributed between the bags, banks, and guild banks.

So an app such as this, assuming it will allow to sell and buy, needs to also allow some kind of management of inventory.

Such management of inventory might be worth while for other, non professional auctioneers, all on itself.

Especially if this also includes the gear that a character is wearing as part of the inventory management.
But what would you do in such an app?

In the right hands, it could be very useful simply to make BUYS.

I.E. -- players with a lot of wealth can hoard items until they can sell them (or craft them) at a more opportune time.

Lets take the glyph example. By having access to an AH at all times, you could presumably buy up your Herbs during off-peak hours when prices are lower and then convert them to Glyphs for sale during peak hours.

Sure, you can't relist them immediately -- but in lots of situations you don't want to do that anyways.
So, I think this is a good idea over all, but I have to wonder how they'll prevent bots from taking over the AH. If you have data on the web, it can and will be scraped.

If you can scrape data, you can do long term and efficient price analysis.

If you can do that, you can bot the AH like nobody has been able to do in WoW before.
Sid67 brought up a good point.

If you are selling crafted items then you have to sell the crafted items at a cost equal to the value of the materials used to craft it.

Throughout a day prices slowly drop due to inactivity and then as more people log on and buy stuff the prices start to climb back up.

So there is a small drop and rise in the average price every day. If I could say, log on via the web or an iphone during the middle of the day and buy out materials at a lower price then relist at night or craft something that is a viable profit plan.

I was doing this in Aion for awhile. I knew what time of day the mats shot up in price and when they dropped. I would typically sell my mats when it was high, buy low, then craft/resell every day.
fears over the app mostly seem like hand-wringing. It's main use will be so the working man/woman can grab their flask on the way home from work that they need for the raid that night. The premium service will likely be a cost for buying more than X items at a time, to put a check on unnecessary hardware load more than anything. Any glyph hoarder will be able to operate their business faster from the WoW UI and addons than on the IPhone, anyway.
My comment on the article that announced this was that Blizzard is going against their own stance with this idea.

For nearly the entirety of the game's lifetime the company has maintained a stance that anything that allows the user to do something while not actively at the keyboard (and you can construe this to mean in the game) is against the "rules".

Lawsuits have been filed and cases won in Blizz favor because of this (i.e., the Glider case). Now they are on the verge of offering people the option to interact with the game's mechanics without actually being logged into the client.

The armory has already set a number of bad precedents with exposing player information on the web and the AH feature will do even more.

Example 1:
Players, new or old, will roll characters on realms with favorable AH economies and servers will start to die off.

Example 2:
Guilds will look at historical data to see if players routinely sell drops in the AH rather than bank them in the guild bank. This will create another level of inquiry to players seeking to join guilds.

The slippery slope has already been reached with paid customization, transfers, etc. and now we are seeing further decline into the nickle-and-dime operation of premium services.

You can currently play WoW on the iPhone so I don't see how this changes the rules of "not being their"

You still must be on some form of internet in control.
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