What is an item worth?

[Hwasung]

With the proliferation of posts on these threads complaining about undercutters I started thinking about what exactly the items that we have in the game are worth.

Without an established "worth" it is almost impossible to judge a fair price - so I set about thinking about how to determine this. I came up with three basic criteria that should determine a floor on the price of a commodity. Given that once a player has competition and every good that they make will be the same as any other player's good, the need to treat goods as commodities becomes integral to this idea. A second given is that supply will outstrip demand. Since there is no absolute limit on most materials in the game as more people loot more things, craft more things, and try to sell more things they will eventually outstrip demand.

[Hwasung]

1. Vendor Price

If you can sell an item to a vendor it is automatically worth at least this much. Most items vendor for a ridiculously low price so the floor is set low with this metric.

2. Cost to obtain

With gathered mats this is a cost of repairs to gear. One can argue that one's time should have a cost associated with it but everyone values their time differently. Even mind numbing activities like farming shards only incur a base price of the damage/cost to repair your gear once one is done farming. Any additional cost is just that - something appended onto the price artificially.

3. Cost to list

When using the market board one needs to recoup at least as much as they incur in items 1 and 2. Current MB taxation is listed at 5%.

[Hwasung]

What does this mean?

Those people complaining about rampant undercutting aren't looking at the situation with a critical eye. Some people are more than willing to craft hundreds of ingots to level their professions and only make back what they invested to make the items initially - which can be very little. Others are even willing to pay for the benefit of leveling their craft. All of these factors contribute to lowering prices on the market boards and no "true" or "fair" price aside from that listed under items 1-3.

As long as the price is at or above 1-3 it can continue. Under that mark at it is a limited time reduction in price. Using current market rates for materials to set the cost for number 2 is also unrealistic as it removes from the equation the individual that is willing to farm their own materials and who doesn't value their own time.


All the best,

Hwasung

[Zigkid3]

Completely agree.

I was actually going to make a thread similar to this today. It's ridiculous how a lot of people on here complain about being undercut because they don't understand economics.

As you've mentioned, items that can be sold to an npc for X price, has a price floor at the npc price. There's no reason to sell on the market an item for less than what the npc will give you, and if there are any, someone will buy them up and just resell to the npc. For the most part however, the price floor doesn't really do much as it 90% of the items out there the price floor is below equilibrium anyways. The only items that are really effected are the super common and level 1-10 crafting stuff that have hundreds of sellers.

Because the price floor is below equilibrium and thus doesn't have any adverse effects on the price of an item, the price will be determined by supply/demand.

The value of something is determined by how much someone is willing to pay for it and how much others are willing to sell it at.
People will undercut because they are willing to sell it for a cheaper price. People will buy the undercut because it's the cheapest.

I see quite a few threads of people wanting to limit how often you can adjust an item, which is a terrible idea. The more often people are freely allowed to adjust their prices the more stable the market because you'll reach equilibrium faster.

[Conradus]

With the proliferation of posts on these threads complaining about undercutters I started thinking about what exactly the items that we have in the game are worth.

Without an established "worth" it is almost impossible to judge a fair price - so I set about thinking about how to determine this. I came up with three basic criteria that should determine a floor on the price of a commodity. Given that once a player has competition and every good that they make will be the same as any other player's good, the need to treat goods as commodities becomes integral to this idea. A second given is that supply will outstrip demand. Since there is no absolute limit on most materials in the game as more people loot more things, craft more things, and try to sell more things they will eventually outstrip demand.

"Fair price" is a meaningless term, mostly used by people angry that others are refusing to pay them what they feel they are entitled to. An item is worth what somebody is willing to pay for it. No more, no less.

[Kazamoto]

I was going to say this post is Zigkid3 and Bizzybeast/MentalPoison bait, but Zigkid3 beat me here.

Anyone who thinks that there is no problem with the current level of undercutting and degree to which things gets devalued must also feel that Walmart is good for a local economy.

When someone doesn't care that they are selling at a loss and undercuts an item for a third the cost of its base materials (you see this with lumber frequently), it drives out other producers.

Often the price of lumber will drop to the cost of a single log. And when it does, I sell logs rather than lumber, following the money with the goods I have.

But in what business model does selling something that costs 300+300+300+50 for 300g -tax make sense?

Granted, people who gather the base mats, like myself don't lose money as those who bought the mats would have.

The frequent adjustment angle means someone who just wants to liquidate some unneeded materials has now set the new price point, unless someone who makes it their business to sell only that item is constantly camping the markets to buy out undercutters. And if that is your idea of gameplay, you should really be playing EvE.


"An item is worth what somebody is willing to pay for it."
I wish this phrase were the truth in FFXIV, but the truth is:

"An item is worth as little as someone would take to liquidate it for, at this exact moment"


TLDR?
(Sensible) people are upset because items are constantly being sold way under cost, not for less than they are entitled to.

[Zigkid3]

I was going to say this post is Zigkid3 and Bizzybeast/MentalPoison bait, but Zigkid3 beat me here.

I am a snake in the grass! (you also forgot Wazabi)

Anyone who thinks that there is no problem with the current level of undercutting and degree to which things gets devalued must also feel that Walmart is good for a local economy.

The item(s) are that are being undercut are being devalue from being overvalued.
And yes Walmart is. A lot of people may dislike Walmart from an ethical stand point maybe, but I don't see how someone could argue that whole selling a variety of products under one roof at a cheap cost for cheap prices for buyers is bad for the economy.

When someone doesn't care that they are selling at a loss and undercuts an item for a third the cost of its base materials (you see this with lumber frequently), it drives out other producers.

Yes, that is the point. If a certain market/industry is profitable, in a free market people will enter that market for a slice of the market share. People will continue to enter that market until profits reach 0. At the point where profits are 0, this is where suppliers are matching demand. If profits for a certain market are below 0, then people will exit the market because there are too many unneeded suppliers.

But in what business model does selling something that costs 300+300+300+50 for 300g -tax make sense?

Depends, do you know exactly how that other person got it? they might've gotten it for cheaper some how for all you know.
If they did get it for 950g total whether through crafting or buying it, normally people will sell it at 950g or more obviously.
In some cases however, if the item just isn't selling in the first place then they'll have to put it for a cheaper price because it was overvalued. Yes it is a loss to them, but at least they are minimizing their losses instead of having 950g be gone forever. So usually it's to minimizes losses on something they can't otherwise sell for whatever reason. In other cases someone might have a monopoly on a certain product thus far but a new person attempts to enter the market. The monopoly owner sees this and will price things at a loss to themselves on purpose in order to drive out their competition, this is called predatory pricing, then after the potential competitor has left they'll go back to continue selling at their normal price again which while might be a loss in the short run it'll be better for the long run. Luckily though in a game like FF14 its hard to monopolize on anything, though it might happen from time to time.

"An item is worth what somebody is willing to pay for it."
I wish this phrase were the truth in FFXIV, but the truth is:
"An item is worth as little as someone would take to liquidate it for, at this exact moment"

An item is worth both of those statements. If you can't compete with the person willing to sell it for less than you then that's your fault.

[IndigoHawk]

Even mind numbing activities like farming shards only incur a base price of the damage/cost to repair your gear once one is done farming.

This is wrong. The time spent farming is an opportunity cost.
If you farm shards to level up mining or because it's fun, then the shards are a waste product. You can sell them for anything.
If you farm shards for profit, then shard price has to be competitive with gil you would make doing something else.

In games like FFXIV, the people who mine for fun or education have a large impact on the ore supply. This turns the MMO economy into a garage sale instead of a self sustaining free market.

If you want a market, take away dungeon loot, quest rewards, and make crafted items only available from crafters. This makes it harder for casual players to attain items (since they have to compete with the hardcore players who have more resources), which is why MMOs have quest rewards instead of self sustaining free markets.

[Zigkid3]

What Indigo said is correct, Time is an opportunity cost in gathering mats.

[Conradus]

I was going to say this post is Zigkid3 and Bizzybeast/MentalPoison bait, but Zigkid3 beat me here.

Anyone who thinks that there is no problem with the current level of undercutting and degree to which things gets devalued must also feel that Walmart is good for a local economy.

Yes, it often is.

When someone doesn't care that they are selling at a loss and undercuts an item for a third the cost of its base materials (you see this with lumber frequently), it drives out other producers.

Which lowers the supply, resulting the prices rising again. Problem solved.

Often the price of lumber will drop to the cost of a single log. And when it does, I sell logs rather than lumber, following the money with the goods I have..

But in what business model does selling something that costs 300+300+300+50 for 300g -tax make sense?

The business model where an open slot in your inventory is worth more than 650 gil + tax

Granted, people who gather the base mats, like myself don't lose money as those who bought the mats would have.

The frequent adjustment angle means someone who just wants to liquidate some unneeded materials has now set the new price point, unless someone who makes it their business to sell only that item is constantly camping the markets to buy out undercutters. And if that is your idea of gameplay, you should really be playing EvE.

I do play EvE on occasion. Fantastic economy. FFXIV's economy could stand to be more like it.

"An item is worth what somebody is willing to pay for it."
I wish this phrase were the truth in FFXIV, but the truth is:

It is a phrase that is true everywhere. It is essentially a tautology.

"An item is worth as little as someone would take to liquidate it for, at this exact moment"

Yes, if people are selling something for very little, that's what people will be willing to pay for it. QED.

TLDR?
(Sensible) people are upset because items are constantly being sold way under cost, not for less than they are entitled to.

Sensible people know they aren't entitled to anything, and don't try to compete in items that are regularly being sold for under cost when they are looking to make a profit.