Supply and Demand

This was inspired by Ysharros’ recent post about crafting.

I find it interesting that auction houses in MMOs mostly still adhere to the eBay model, which is entirely supply-driven, when there’s a clear argument for a demand-driven model as well.  That is to say, if you have something you want to sell (a supply of something), you can post it for sale, generally for a limited time, and generally there’s a posting fee involved.  But if there’s something you want to buy (a demand for something), and nobody has put it up for sale… you’re out of luck.  This is obviously a bit silly.

I always get involved in economics in MMOs, and I’ve quite often found myself perplexed by the supply-only model.  That’s not the only approach in existence though – CoX for instance has both supply and demand auctions.  In fact, a while ago when I went back to CoX to try out the CoV content, I hit the auction house lottery jackpot… I put something up for auction (supply) and found to my delight that someone else had previously posted a demand for that item for a fairly ridiculous sum of money (ridiculous to me anyhow). As it turned out, the item was of considerable rarity, but I had no idea of that when I put it up for sale. I made a lot more money there than I was asking for.

There’s a strong argument in favor of full transparency for demand postings – that is to say, every demand that’s posted should be searchable and completely visible to the public.  If e.g. I know that someone has offered outrageous sums of money for something, then I might reasonably seek to acquire or create the item myself, so I could sell it for said outrageous sums.  CoX’s auction house has an opaque demand system… so I, as a seller, can’t see exactly what people are offering for various items; instead, I can only see what the last 3 of those items have sold for, and I have to guess what a good price is.  This leads to an interesting but unnecessary and unfulfilling metagame where people try to figure out how much to sell things for.  A more fulfilling and natural system would allow us to see what the actual demand is, so selling prices can meet the demand.  This becomes fairly fundamental when selling crafted items… since I, as a crafter, would like to make the items I know are more valuable to my local economy, and spend less time creating things that have little value.  As a consumer, having demand postings means I can seek the items I desire more readily, instead of having to check back at the auction house regularly to see if someone put it up for auction.

8 comments so far

  1. Lars on

    The lack of a way to express demand is one of the major reasons why I think the economy in Pirates of the Burning Sea is/was a failure. People congregated in a handful of ports, and there was no way for people based in outlying areas to really attract goods. Buy orders would have allowed that. But instead people ended up bypassing the auction house system entirely and trading within their Societies (guilds.) I don’t know if it’s improved since I played it, but it was in a sorry state when I left the game.

    Buy orders on the other hand are half the game in Eve Online. People can have fun in Eve just finding stations where someone has a buy order and determining whether its worth your time and money to buy (or manufacture) the good elsewhere and bring it to them.

    Aside from making the economy work, it even acts as a form of content creation. If you see someone wants something, that’s, well, kind of like a player-generated quest. So even in games (like EverQuest II) where you don’t really have tons of different markets, buy orders are still advantageous because it lets people know that they can sell something, which is really useful on lower level content. If you’re leveling up a new crafter, you could check to see what people want in that level range and make THAT instead of just making some of everything and dumping it all on the auction house in the hope that it sells.

  2. foolsage on

    Agreed; it’s like a player-generated quest where the reward is money instead of experience. 🙂

    Demand postings can also help stabilize pricing, since they allow players to set threshold prices for purchase, which reduces wild speculation. I guess this might cut down on the insane profiteering to be seen in auction houses, but only to the point where pricing is more realistically tied to demand. So e.g. if there aren’t any Frizzlebits on auction, and I have one… I might be tempted to set it up for an insane price (since the supply is so low)… unless there are demand postings for Frizzlebits at reasonable prices, which lead me to see that consumers won’t pay outrageous prices for them. This mostly works to protect buyer’s interests, naturally.

  3. Tesh on

    Agreed on all counts, especially transparency in the markets. There’s plenty of profit to be made providing the service of crafting or harvesting stuff and selling it; there’s no need to enable price gouging by using opaque markets.

  4. Wiqd on

    I just think it’s more of a symptom of crafting not being very important in today’s MMOs (to the devs). Eve’s crafting system is necessary. People build the ships other people fly and few things are purchasable from NPC vendors (even skills become non-vendor later on).

    As many of us have said before, crafting has been an afterthought in many MMOs, or at least implemented that way, so things like complex auction house setups aren’t there. When we have REAL player economies like Eve has in more games, I think you’ll see more AH options available.

  5. foolsage on

    I agree that crafting isn’t often very central to MMOs, but I think the auction house’s functionality involves more than just crafting; it’s central to reselling looted goods as well. The old-school “trade channels” never honestly worked very well, nor does establishing a physical presence in-game for trading. Auction houses are quite efficient and a huge draw for anyone interested in trade, and they should be given design attention commensurate to their importance.

  6. JC on

    EVE has a system where you can set up buy orders as well as sell orders. And since the only things in the game that aren’t player-made are skill books, it’s heavily reliant on all the crafters out there. As the game started they had NPC sellers, but they were phased out as the population grew. Anyway… you can set the demand level for distance also — just in the station you placed the order, through the whole solar system you’re in, up to 5 jumps from current location, 10 jumps, etc all the way up to encompassing your whole region.

    Makes for some interesting price wars at times. Thing is, though — there’s no 1 market for the whole EVE galaxy, but rather 66 regional markets. So if you’re willing to do things to gain price intel in several regions, and willing to haul things around a bit, you can make some really nice profits.

    Though some would tell you to sit in the Jita system (biggest market hub in the game) and just do everything there. And yeah, this is possible, but because it *is* the biggest single market it’s also where the competition is the most cutthroat.

  7. foolsage on

    I love the idea of regional markets; this works a lot better in a game with a single server than in ones with multiple servers of course, since there are more players overall and the markets in each region can remain active.

  8. […] auction house with both supply and demand […]

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