Game Economy and the gil redenomination

[Reika]

It mattered in the first week of the game, but not now because players have money already. Even new players will make the majority of their profits by selling items on the market wards. Those things only matter when everyone on the server is at 0 gil.


Sorry for them misunderstanding then.



Everyone who already plays the game will be moving into the new economy with the same scaled down wealth with 1/10th of what they have now, but it's important to consider new players will be starting out with 0, and I'm sure there will be a lot of new players. As such, the real impact of this scale down will be seen when we know how fast new players are able to obtain gil. If the prices of items on the market wards stays relatively high they will be able to catch up to us quickly, and that will be what really devalues our current savings.

The point I'm trying to make is that unless the items on the market ward are listed for prices directly proportionate to 1/10th (or less) of what they are now - we lose.

I don't really care about this that much, and I don't think it's the end of the world. It was probably necessary to complement the impending influx of new players, and there was really no way to avoid it. But it just bothers me to see so many people being naive about the subject.

People still very well make money off of guildleves and vendoring items. where do you think the millions and millions of gil came from? You think after the first few weeks there was 500m gil or more in the economy? lol no. It didnt pop up out of nowhere. its going to continue to be created through guildleves, quests, and vendoring items. Thats how it goes in an MMORPG.

[Alhanelem]

The amount of panic going on over this is just insane: It doesn't really matter at all what people do initially. Over time the market and economy will balance out based on supply and demand and the situation will become stable, even if it's not perfectly stable right away. Players may want to be conservative the first few weeks to give the economy time to re-establish itself. After that, things will basically be business as usual.

There really aren't going to be any big winners or losers out of redenomination. Attempting to exploit it is mostly a futile gesture. I for one am rather happy about being able to work with smaller numbers.

[Reika]

There is too much panic, and the ones panicing over it just dont want to lower their prices to go along with the new system. Gotta have that feeling that you're making big money or some dum crap. drop your stuff to 1/10 in 2.0 and get over it, its not going to negatively impact you. Or dont, and dont sell anything. Won't hurt me none any way they chose.

Maybe it is wrong to say 'lower your price'. Your price will be the same in ARR as it is now if you change along with the system.

[VanillaLatte]

Pricing will balance itself per the supply and demand and new needs/wants introduced in ARR (some items may become more valuable and vice versa).

Even if they don't change the gil denomination, an item that's priced as 1000 gil today may not be 1000 gil in ARR anyway (it may even change tomorrow).

[Presbytier]

This is interesting because while the value of the currencies is lowering the standard price of goods on the player market will remain the same. This is called inflation and in this case may even be high-per inflation. here is the real kicker and the reason why your husband will be right in the end; as people with vast sums of gill begin purchasing the highest ticket items they will be in turn reducing the amount of gill they have at a higher rate then they did before(due to their own fortunes being devalued), so what this will do is it will slowly begin to turn the market towards a happy medium. What we will see is over time people will have to unload more goods at lower prices to insure they have enough gill to compete for those higher priced items while at the same time those people with items priced at the top will begin to see people undercut them and they in turn will be forced to lower their prices. Now we also do not know what other gill sinks SE will be implementing and this to can further lower prices. Now as far as gill sellers go that is harder to predict and will primarily be based on how popular the game gets after relaunch.

[gahoo]

if only they could have changed the name of the currency i think this perceived issue would vanish... but of course we are stuck with gil.

[Biggs]

Its important to remember, and we so easily forget, that people can set any price for any item they want, what determines the market is what the consumer is willing to pay for. Of course, this requires people that HAVE the gil to buy overpriced items to also have the patience to not fork over gil for something with a 75% mark up. This of course will be helped by how well or how poorly the new market system is.

[Azurymber]

Ok, so my husband is mad at me because we have opposing viewpoints on the 'currency redenomination' plan of SE.

He is operating on the assumption that the game economy will work exactly like a real life economy and balance itself.

I am operating on the assumption that in an economy where you can buy gil, behavior will not match the real world.

That is the 'too long didn't read' version.

I admit that he does have some very valid points that I do not argue with.
-Everyone's gil is being reduced
-Any quest that provides gil will have the reward reduced
-The total gil being held by gil-seller's is reduced
-The total gil available in the world is reduced

The points that I have, he refuses to acknowledge
-Gil-sellers reduced amount of gil will be important for about a day before they restock
-Market ward pricing will not be automatically adjusted
-Sellers will have no real reason to reduce their prices because someone will have enough gil to purchase what they are selling

It is that last point that he so vehemently disagrees with. He thinks that no one will purchase the highly priced triple melded gear if the seller does not reduce their price.

I say that the seller has no real incentive to do so. Most likely, they don't *need* the gil to survive, and will not be forced into lowering the price. People who bought gil before, will buy it again. Elite groups that kill high level nm's with rare drops will continue to corner the market on that, and they have no real incentive to lower their prices either. Crafters that have access to elite groups that spiritbond gear at a high rate will continue to double and triple meld gear using high level materia. Because they are supported by elite groups, they also will have no compelling reason to reduce their prices.

So I'd like to open the discussion into the above. Will the prices on market wards be lowered with regard to the highest priced items? Someone prove me wrong without getting mad at me and giving me the silent treatment.

Economist Answer:

By reducing currency you create a long-term psychological effect, whereby prices are more stable as there is less opportunity for variable pricing.

In the very short term (1-3weeks) supply of items will probably be less than demand, resulting in high prices
As prices will be uncertain, most individuals will probably try to price above natural equilibrium
Overtime this -WILL- return to equilibrium (where supply = demand) as overpriced products will simply not sell

Since economies (including this one) all naturally move towards equilibirum, and since the new game is supposed to have an AH, prices will stabalize.

What is a stable price? Its the price where supply (how many are available) meets the exact demand (people willing to pay x-amount).
If overpriced, there is more supply than demand, this means that some suppliers will not be able to sell their goods. As it takes up inventory space, and as many of them need gil for other things, they will lower their price or "undercut"
If underpriced, there is more demand than supply, meaning at the low price, people buy -all- the goods and there are no more avalable. Here it makes sense that people would increase the price as its clear people are willing to pay more.

The market will always move to equilibrium whatever happens, for each individual item. However, depending on the supply of items (altered by changes to how the items obtained or the drop rate), items may cost more or less than previously.

However, since everyone is having their gil cut, everyone will still have the -EXACT- same purchasing power relative to others.

So in response to your points:
Gil sellers will relatively have the same amount of gil now. And whether or not they effect the economy will depend on how gil is obtained in 2.0. If they took 1.0 and just reduced everyones gil RIGHT NOW without changing anything, gil sellers would have no effect on market prices if they act the same way they currently do. However, 2.0 will cause an influx of new players and thus an influx of gil sellers resulting in slight inflation from gil seller gil (combined with associated price increases). This prob wont occur for about 3 weeks.

Market ward pricing will quickly adjust. So if your smart, don't buy stuff for the first few days because prices will probably fall drastically from what people "think" prices should be (read supply and demand above for explanation)

Sellers will have to drop prices because of supply and demand and equilibrium. Even if some people are willing to buy at a high price, not enough will to keep prices at that level. When things don't sell, people will drastically undercut. so at first sellers may try to sell high but within a week they will drop prices (most likely to 1/10th the level).

So what effect will gil reduction have?
It completely depends on the ability to attain gil in game. If it is equal to now, it will have no effect at all (other than a long term psychological one)

so thats the economics argument for all this. I tried to simplify it so if any other economists see this, I do realize its a bit more complicated than that but i doubt ppl here would understand utility curves and such.

[Alhanelem]

This is interesting because while the value of the currencies is lowering the standard price of goods on the player market will remain the same.

Ummmmmm... no, you don't understand this at all.

The value of currency is staying (roughly) the same. The number of units you have decreases, but their value increases porportionally, therefore you have the same buying power. The standard price of goods will not stay as they are now, because nobody (or not enough) will be able to afford them. Supply and demand will prevent exploiters from keeping prices high for any length of time. Markets correct themselves over time. The same is true in real life.

If you try to sell a 10 mil item now for 10 mil in 2.0, only a small fraction of people would still be able to pay that price, and they wouldn't want to either. You might be able to sell an item like that, but it will take much longer. It's inefficient and anyone with any common sense will drop their price until it reaches a point where enough people are willing to buy it.
(dammit, I wish I could make this bigger and make it flash and glow or something)

There is not going to be mass market chaos. There will not be a cataclysm. Everything will be fine and people need to, for the love of the Twelve, stop panicking and just be patient and let things happen.

(okay, there will be a cataclysm, but it will just be the 7th Umbral Era, not a market crash)

[Presbytier]

Ummmmmm... no, you don't understand this at all.

The value of currency is staying (roughly) the same. The number of units you have decreases, but their value increases porportionally, therefore you have the same buying power. The standard price of goods will not stay as they are now, because nobody (or not enough) will be able to afford them. Supply and demand will prevent exploiters from keeping prices high for any length of time. Markets correct themselves over time. The same is true in real life.

If you try to sell a 10 mil item now for 10 mil in 2.0, only a small fraction of people would still be able to pay that price, and they wouldn't want to either. You might be able to sell an item like that, but it will take much longer. It's inefficient and anyone with any common sense will drop their price until it reaches a point where enough people are willing to buy it.
(dammit, I wish I could make this bigger and make it flash and glow or something)

There is not going to be mass market chaos. There will not be a cataclysm. Everything will be fine and people need to, for the love of the Twelve, stop panicking and just be patient and let things happen.

(okay, there will be a cataclysm, but it will just be the 7th Umbral Era, not a market crash)

It would seem you did not read all of what I said. i said pretty much the same thing Azurymber said with slightly less finesse and eloquence.