Hey guys, I've been thinking about how the economic system I want to implement in my MUD. I was thinking of using a pyramid idea for the currency. Let me explain this, because I know "pyramid idea" is not descriptive. What would happen is, whenever new currency is needed (more than X players register, everyone is poor, I feel like it), raw materials, such as a valuable ore, will be added to the world. A certain player class is responsible for mining this ore. After being mined, it can be refined (by another class), further refined (by another class), then made into coins (by another class). This system would not only allow players to interact in the economy, but it would heavily encourage it, as players are responsible for creating the money in the economy. However, I realize there are several pitfalls with this system. To prevent these, there will NPC's who are willing to buy/trade the raw materials. However, using the NPC's will be less profitable than collaborating with other PCs. To allow the economy to be somewhat dynamic, the NPCs will each offer different prices from each other and for each type of material. This amount will change occasionally, to simulate market conditions. I realize a very careful balance with supply vs demand will need to be found to keep this system in check, but I figure that being able to regulate supply (through sinks and fountains), as well as value (through the NPCs), should allow me to keep the economy pretty stable. Thoughts/Comments/Criticism?

Quote:Original post by samoz
I was thinking of using a pyramid idea for the currency. Let me explain this, because I know "pyramid idea" is not descriptive. What would happen is, whenever new currency is needed (more than X players register, everyone is poor, I feel like it) raw materials, such as a valuable ore, will be added to the world.

Being poor is relative, also so is being rich. If you flood the world with valuable items that everyone can access everyone is going to become rich, which will leave them once again poor.

Quote:A certain player class is responsible for mining this ore. After being mined, it can be refined (by another class), further refined (by another class), then made into coins (by another class).

This is called the multiplier effect in economics. Keep in mind that any work people are doing and getting paid for is a service they are offering, will there be enough demand for their services. Also could demand be relatively to great compared to cost of the service.

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To allow the economy to be somewhat dynamic, the NPCs will each offer different prices from each other and for each type of material. This amount will change occasionally, to simulate market conditions.

To simulate market conditions the NPC's should be paying based upon recent local transactions for the goods. (The past transactions for price reference can be between PC and NPC or PC and PC, it doesn't matter, but should average over a few past transactions if possible otherwise prices will swing too fast.)

You could just let supply and demand sort it out.

More coins, ceteris paribus, means inflation. This devalues the currency. This makes minting coins less attractive (more expensive in nominal terms for the same nominal output). Thus, price levels will be kept roughly in check naturally so long as minting is not too cheap in terms of resources.

Quote:This is called the multiplier effect in economics. Keep in mind that any work people are doing and getting paid for is a service they are offering, will there be enough demand for their services. Also could demand be relatively to great compared to cost of the service.

That's not the multiplier, that's merely different stages of production. The multiplier effect is AD/GDP rising/falling by more than the net change in injections/withdrawals that causes the change. Totally different things.

Quote:To simulate market conditions the NPC's should be paying based upon recent local transactions for the goods. (The past transactions for price reference can be between PC and NPC or PC and PC, it doesn't matter, but should average over a few past transactions if possible otherwise prices will swing too fast.)

Basing it on PC to PC transactions is open to abuse and simply failing - players often sell things at uncompetitive rates.

Quote:Original post by Captain Griffen

Quote:Original post by moomin

That's not the multiplier, that's merely different stages of production. The multiplier effect is AD/GDP rising/falling by more than the net change in injections/withdrawals that causes the change. Totally different things.

It is exactly the multiplier effect, and for the reasons you stated. He is putting in an investment (the valuable ore) and due to his multi-tiered system (the ore being refined) the increase to AD is the value of the ore (from the original sale) plus any the value of any further services performed on the ore, of which, he stated many.

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Basing it on PC to PC transactions is open to abuse and simply failing - players often sell things at uncompetitive rates.

That simply doesn't make sense, people do not sell things at uncompetitive rates. Firstly, uncompetitive means they are selling at rates too high and so not selling - i.e. not competitive. If they are selling to high then they won't shift it and will likely revise their pricing. If they sell something cheap (i.e. competitively) it has no value to them. If they sell it under the going price (read: competitively) that is fine, it does bring down the value of the item, but that is the value of them item and means there is a greater consumer surplus. Players will sell the item at its value (the value to get the item) as if they over price they can be under-cut, and if they under price they will lose wealth due to opportunity cost. Making NPC's buy items for inflated prices is fine, but it does not simulate an economy.

Quote:Original post by Moomin

Quote:Original post by Captain Griffen

Quote:Original post by moomin

That's not the multiplier, that's merely different stages of production. The multiplier effect is AD/GDP rising/falling by more than the net change in injections/withdrawals that causes the change. Totally different things.

It is exactly the multiplier effect, and for the reasons you stated. He is putting in an investment (the valuable ore) and due to his multi-tiered system (the ore being refined) the increase to AD is the value of the ore (from the original sale) plus any the value of any further services performed on the ore, of which, he stated many.

That's not the multiplier. The multiplier would be the additional extra increase to AD due to the circular flow of income, rather than simply in the production of money.

The valuable ore isn't investment - it's additional land being utilised.

Quote:
Basing it on PC to PC transactions is open to abuse and simply failing - players often sell things at uncompetitive rates.

That simply doesn't make sense, people do not sell things at uncompetitive rates.

I'll stop you there, since the rest of it is based on the presumption that people are profit maximisers in MMORPGs.

They aren't. Some mugs will always buy way above the realistic price, or simlpy because they are in a hurry, and people sell things at below market prices to their friends - transactions such as that shouldn't really be included.

The bigger point would be selling things between themselves at insane prices (since it is within a closed group, it costs them nothing), then selling it to the NPC at the same price, making vast amounts of money.

Well when I was talking about having dynamic NPC values, I was assuming that the NPC value would keep the price in check to an extent. Obviously, if a player can get it cheaper from an NPC than from a PC, he will. But to make it interesting, the NPC's won't have unlimited supplies, unlimited money, and not all NPC's will have all items.

This would make fluctuations occur depending on NPC supply and location of the player.

And an interesting point has been raised, regarding how profitable it is to mint money vs. how much a coin is worth. That will be a point that needs to be balanced...

Quote:That's not the multiplier. The multiplier would be the additional extra increase to AD due to the circular flow of income, rather than simply in the production of money.

The valuable ore isn't investment - it's additional land being utilised.

It is an investment into the economy, because it wasn't there before - he's adding it. Also it is the multiplier effect because AD increase by the value of the ore and the value of the multiple services that he stated would be demanded.

This is because the original finding of the ore will result in more income for the player. The player then has more money which increases the flow of income.

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I'll stop you there, since the rest of it is based on the presumption that people are profit maximisers in MMORPGs.

Nope I'm not making that assumption. As I said, uncompetitive prices are prices too high that people can't afford. Read the rest of my post and try writing something that makes sense.

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They aren't. Some mugs will always buy way above the realistic price, or simlpy because they are in a hurry, and people sell things at below market prices to their friends

Exactly which will average out to the items real price. This all happens in the real world to you know ...

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The bigger point would be selling things between themselves at insane prices (since it is within a closed group, it costs them nothing), then selling it to the NPC at the same price, making vast amounts of money.

An algorithm to accurately set the market price for goods would be very complex. Finding an accurate price for a good is a very hard task, especially new goods to the market, so there is always going to be pitfalls. My example was just a simple solution, one that could easily be improved upon to work more effectively.

Quote:Original post by Moomin

Quote:That's not the multiplier. The multiplier would be the additional extra increase to AD due to the circular flow of income, rather than simply in the production of money.

The valuable ore isn't investment - it's additional land being utilised.

It is an investment into the economy, because it wasn't there before - he's adding it. Also it is the multiplier effect because AD increase by the value of the ore and the value of the multiple services that he stated would be demanded.

This is because the original finding of the ore will result in more income for the player. The player then has more money which increases the flow of income.

Yea, which will set off a multiplier effect (albeit probably a small one, given the high marginal perpensity to withdraw in most MMORPGs). It is not in itself the multiplier effect, though. This isn't important for what we're discussing.

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I'll stop you there, since the rest of it is based on the presumption that people are profit maximisers in MMORPGs.

Nope I'm not making that assumption. As I said, uncompetitive prices are prices too high that people can't afford. Read the rest of my post and try writing something that makes sense.

Quote:
They aren't. Some mugs will always buy way above the realistic price, or simlpy because they are in a hurry, and people sell things at below market prices to their friends

Exactly which will average out to the items real price. This all happens in the real world to you know ...

Quote:
The bigger point would be selling things between themselves at insane prices (since it is within a closed group, it costs them nothing), then selling it to the NPC at the same price, making vast amounts of money.

An algorithm to accurately set the market price for goods would be very complex. Finding an accurate price for a good is a very hard task, especially new goods to the market, so there is always going to be pitfalls. My example was just a simple solution, one that could easily be improved upon to work more effectively.

Not really. You'd need something considerably more complex, and it would still be foolable. A better approach would be using players' own initiative to keep NPC prices in check, and base it on NPC-PC interactions only. (This would only work if the number of players and transactions were large enough, which is a fair assumption to make.)

Quote:And an interesting point has been raised, regarding how profitable it is to mint money vs. how much a coin is worth. That will be a point that needs to be balanced...

Balancing that is very easy. It will balance itself out eventually, and the balance that is there will determine the worth of currencies. Roughly where normal profit results from mining+minting (so it will depend on how profitable other uses of time are, etc.).

In MMOs gathering raw materials is usually very easy and cheap. This means that no matter what you set the price at (without constant retuning), it will always devalue to the cost of producing it. Since this is not much effort, the price of these raw materials will drop.

Now, if you made gathering these raw materials harder and more expensive, then the cost will not drop as far.

In real life we assign values to gold and other rare items beyond what it realistically takes to produce them, because they are rare and in demand.

So the value of an item is based on the cost of production and an artificial assignment based on desirability and rarity (unique items are by definition extremely rare).

Mines that produce identical objects (minerals) will not have this rarity factor and so will tend to devalue to the cost of production.

Many implementations of mining try to introduce a rarity into mining simply by not having it spawn as often. This is bad, as all it takes is enough people to go out and gather and horde it and it then devalues because it is no longer rare. So an artificial rarity will not work in the long term.

What you need is a negative feed back loop to control the rate at which players will seek out the resources. What you need to do is introduce a cost to the extraction process. Also, make a chance that they can loose their investment in that extraction. This cost, not the rate of respawn will direct the value of mined resources.

Imagine two different resources that respawn at the same rate and have the same amount in the game world. We will call the first one Alphernium and the second Betaite.

Alphernium has no real cost to gather other than the time taken to go out and get it.

Betaite on the other hand cost around 10gp to extract and you have a 50% chance that the extraction won't produce anything.

Players can freely exchange these resources for other good and services and the prices of these are not set by the game designers, but by the players themselves (think of an auction house setup).

Which of these two resource would end up being the more valued one?

What would the value of Alphernium settle on? (it would settle at less than 10gp and most likely settle close to 1gp - assuming that 1gp is the minimum value that something can attain)

What would the value of Betaite settle on? (it would settle at greater than 10gp and would end up being around 15gp to 20gp. Any less than this then there would not be enough to warrant gathering it, any more and the demand would encourage people to go out and get it which then reduces the demand and reduces the value).

So your suggestion is to make resource gathering/processing more expensive.

Here's an idea then. Since I want people to get better as they level up, I could make a player under level X only be able to gather resource A, and only with a 50% chance of getting a usable sample. However, as the player progressed, they would get a better chance at gathering usable samples. Also, they could gather different ores. Since only higher levels could gather these resources, this would give them value. Making the higher levels of resource more difficult to gather, even for high levels, could also make things more valuable.

This policy could carry over to the other stages of production. Higher levels can refine resources more efficiently. A level 1 character may only get 30% efficiency when refining materials, but a level 10 character may get 50% efficiency (or something like that.)

Thoughts? Would that pose a problem with higher level characters flooding the market with currency though and then making it impossible for low level characters to do anything?