Applied Economics – MMO Crafting, Pricing, and Opportunity Costs

I have long been a rather simple user of the match (or slightly undercut) the lowest market price method of pricing my goods for sale in MMOs. This doesn’t mean taking a loss, generally, as I typically gather all my own materials. My cost is in terms of time, and I try not to think too long or hard about how much my “gaming time” is worth in a monetary sense. That is not it’s purpose and would probably suck the life out of it.

Enter Star Wars Galaxies. My primary goal was to goof off with space and/or shipwright. While I have busied myself with a number of other things, I finally got around to building some ship blueprint for sale. It’s a very small market, as they do not need to be acquired or replaced often. At least in my experience, there are few competitors on the bazaar terminal or vendor searches to provide any guideline for how to price my goods.

This led me to opportunity cost as a pricing method. The opportunity cost is the next most useful, next most profitable in this case, thing that we can do with a given resource. When I consider the resource-heavy ship blueprints, then, it makes not sense to price the ship below the market rate of the materials used. Otherwise it would be more profitable to simply sell the materials and a call it a day.

So I created a quick spreadsheet that can calculate the material value of a ship based on the market price of each component.

Now, the scary thing is that this is significantly higher than the only other seller I came across, who was selling them for mostly 60-90k/ea with no real allowance made for increased material usage. I would say theirs are priced in the 1.5-2 credits/resource unit while mine, well, obvious are not. I was using fairly good resources to build mine.

Still, it does not matter how well thought out the price is if the market will not bear those prices. It may be that the demand is so low that selling the resources will always be a more profitable venture. Of course, the resources themselves cost me far less than that to collect, so it’s at least still profitable. Just not as profitable as selling the materials it is made from.

Still, somebody has to do it. Working at a restaurant may not be the most profitable way for someone to sell their time, but if we wish to eat there someone must provide that service. We also get into that wibbly-wobbly grey area that is the utility value of enjoying what you’re doing, or other non-monetary utility values that are harder to price.

I just thought it was an interesting exercise to try pricing goods using a method other than going market rate. It’s an interesting way of considering my options, at least.

Y’all take care, and remember that profit is only part of utility value, not the sole indicator.

2 thoughts on “Applied Economics – MMO Crafting, Pricing, and Opportunity Costs

  1. I do a lot of trading in most MMORPGs I play regularly but I very rarely gather or make things specifically to sell. Most things I sell were either made in the process of raising crafting skills, in which case whatever I get is just defraying my costs, or, much more commonly, were incidental acquisitions received as a result of normal play (i.e. drops I got when levelling), meaning that anything I get for them above vendor price is pure profit.

    It’s free money, in fact. There’s no cost involved for the simple reason that we all will and do level up on mobs that drop nothing at all. The time spent goes to pay for the xp gained. Anything on top of that is outside the equation altogether.

    That’s also why I always undercut, often heavily. My baseline – the opportunity cost if you like- is what an NPC vendor would pay. So long as I get more than that, I’m happy. I never undercut by a per cent or two; I usually come in at 10-20% below the lowest seller, often 25-50%. If I have a stack of mats, enough to compete significantly with other traders, I like to come in low enough it makes sense for those traders to buy me out to resell. That always makes me happy.

    I also really love getting into trade wars with other vendors to see who’s prepared to go the lowest. It’s like a game of chicken, although vendor cost does tend to put a floor on the game. Usually someone cracks before then, though, or a lucky punter spots a bargain and cleans one or both of us out.

    In the end it’s play money in a video game so none of it matters – at least not so long as you’re having fun. After all, the opportunity cost of playing a video game is how much fun you could have doing something else, not how much gold you could have made playing another way.

    Liked by 1 person

    1. I’ve actually gotten to the point where I don’t even like to undercut by one or two cents, I usually just match the lowest, provided I think it’s a reasonable price. You’re far more into the pvp side of economic activity than I am. I just enjoy crafting and the market is a good way to dispose of those goods, hopefully at a profit.

      I also agree that it’s all play money and in good fun. I derive a great amount of amusement from poking these markets in ways that don’t incur a significant real-world cost. Seeing how the market responds to novel information is part of my entertainment value. To that end, either of our methods are something I would find entertaining.

      For whatever it’s worth, I did sell one of the dozen or so ships that I listed yesterday. One of the less expensive ones, but a sale is a sale. Probably make two more and increase the price to see if it keep happening.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s