EVE Online – Price Precision

I was reading Wilhelm’s post the other day, CCP Takes Aim at Undercutters and Market Bots in New Eden, and I’ve spent a lot of time thinking about the price point changes. It seems like a very bizarre thing to do at first. As he pointed out, undercutters always gonna be undercutting. That’s how markets work. The smart marketeers only mark it down by one price increment or the least amount they think they need to sell. The amount of money given up to sell your item at one increment less is generally insignificant. Even more so for high price, low quantity items. This is literally how markets reach an equilibrium.

What CCP is/has done here changes things a little bit. Now someone trying to maximize profit by undercutting may pause to consider if it’s really worth losing that much money. They’re increasing the “opportunity cost” of undercutting the market. Instead of a price range that looks like ±10 ISK in the image Wilhelm used, that price would now be ±100,000 ISK. If I want to undercut the lowest existing market price, it’s going to cost me 10,000 instead of 0.01. They claim to be trying to force people to use a price-oriented strategy and make constant listing management less important.

[…] the optimal strategy [is] “Always create your orders at 0.01 ISK above/below the current best order, and always update your order ASAP by 0.01 ISK if it isn’t the highest buy or lowest sell.” Competition between traders comes down to who (or what) can micro-manage their orders for the longest period of time, rather than who is making the most intelligent pricing decisions. – Broker Relations

Given how much attention CPC pays to EVE’s economy, that noise reduction might make it easier to see what’s going on too.

Of course, that variation assumes people continue to undercut at a similar rate and increment count. There’s actually a slightly more sinister possibility as well that I hope they’ve considered. Those now higher downward undercuts, across the entire economy, could lead to deflation. If enough people continue to undercut, the large jump in price point downward could lower the average price per unit significantly. I don’t think it would be an issue long term, but until all the tertiary material markets catch up profit margins might get tight.

Of course, some of the other changes will help prevent that. The increase in listing and modification fees means that, theoretically, people will be less willing to alter their prices, so the average will move more slowly. In reality, I think it’s just another sales tax that will extract currency. If I’m already at the point that I felt my price needed to be modified I would go ahead and modify it. If that prevents me from making a profit I’ll take that into consideration selling it in the future. I would rather receive the new value slightly below profit than leave it sitting in a market I don’t think it will sell in. Broker’s fees are already the second-highest ISK sink in the game. With only 6% of listings being modified, it’s not going to jump into first, but it should have an interesting impact.

Of course, I could be crazy. I’m not extremely familiar with EVE or its economy. It was just an interesting explanation of how this change might work and what their intentions were. It looks like a pretty sound decision, as long as it goes the way they expect it too.

I’m sure I’ll take a stab at EVEs economy at some point. They practically hand me the data on a silver platter once a month. That data has actually been instrumental in some of my thoughts on the economies of MMOs in general.

Y’all take care, be nice to each other, and remember, undercutting is a normal and expected part of how markets work.

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