In Defense of Ticket/Product Scalpers

This is one of those moments where I realize I’ve come to a conclusion even I think is slightly off the rails. People snatching up high demand items and reselling them at much higher prices are widely disliked, especially by those who would be the ordinary consumer of said product. While I think I was already halfway to my conclusion, the item that brought it to mind and forced me to process it was a recent episode of the Paint Bravely podcast. (2hr runtime)

In a relatively capitalist society, there will always be individuals who exploit a product with high demand and low supply. Like it or not, that isn’t a bug but a feature. It’s quite similar to the buy low/sell high seen in traditional arbitrage, though not without risk.

The mystery I really keep coming back to is why the opportunity exists at all. It means that the company producing the product could extract additional sales or value and either doesn’t see it or deliberately chooses not to. I’m willing to allow for the former case to happen, but suspect it to be rare. Corporations that cannot accurately gauge demand for their product typically don’t fare well in the long run.

This leaves us with the assumption that most of them are knowingly shorting supply. That for logistical or strategic reasons they are going to market with a product understanding or hoping that supply will be insufficient. This is especially true in a somewhat hype-driven market where demand has been intentionally pumped up ahead of launch.

There are plenty of good logistical reasons why you would want to do this. I’ve always heard that margins on major gaming hardware are extremely narrow. That’s a situation where you would want to be extremely careful not to over-produce. It may also simply be that we’re operating in an environment where component availability necessarily throttles production. Many of the manufacturers in my area are running non-stop overtime struggling to keep up with unheard of levels of demand.

I struggled for a while to grasp any good strategic reasons to do this though. Why would any company intentionally pass up first day/week/month/quarter sales for a major product? I feel it’s a bit of a stretch, but keeping the product slightly hard to obtain gives it the appearance of being “hot” or desirable. Does this lead to an increase in sales? It’s hard to say. Logically it shouldn’t. In the economic sense it would simply lead to a higher price, which the company cannot ask without losing face. Those with the proper foresight and capital, however, can exploit the difference between the MSRP and the true price and extract the value that the corporation cannot.

In the end, I have a hard time saying that there are really any “bad guys” here. I think that by and large the companies would do their best to maximize unit sales and for logistical or financial reasons cannot reach true demand. The scalpers are simply evidence that supply and demand theory is “working as intended.”

However, for those that would see them fail, the only real option is simply patience. You must wait until the supply catches up or otherwise be lucky enough to catch one available at MSRP. They only succeed because a small portion of the market is willing to bear the much higher cost. Especially around the gifting season. The emotional weight of giving others, especially the young ones, that thing they want seems to carry a fairly thick wallet.

Either way, I’ll go practice my necromancy somewhere else for a while. Y’all take care.

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.

Mixer, Free Markets, and Monopolies

While I continue to reflect on the ideas and suggestions of Milton Friedman’s Capitalism and Freedom, I cannot help but look at the showdown/sale of Mixer in that context. If there were to be a nutshell version of the book, it would be an argument that less government regulation and more free market leads to more efficient outcomes.

He is, however, notably opposed to monopolies as a violation of freedom by way of reducing available choices. This is, effectively, what the shutdown of Mixer represents. It is noticeable blow to the choices of both content creators and viewers because there are few other choices. As pointed out by Belghast, the difficulty of transferring viewers from one platform to another is going to directly harm the creators that used Mixer. I would almost venture to say that most of them must likely return to Twitch if they wish to retain as many viewers as possible.

What struck me about all this is that it seems to be a situation in which the “free market” is consolidating power and working against competition rather than toward it. Of course, let’s be honest, I hardly considered Facebook a serious player in this game. Facebook plus Mixer is hardly a monopoly, it represents the loss of options for users.

All things considered, it seemed unusual to me that the move didn’t require review by the Department of Justice, as most of these large mergers and acquisitions tend to. Upon looking into it, I was a bit surprised to learn that the review process only applies to transactions valued greater than 96M$. The numbers I’m seeing for Mixer are… less than that. This means it doesn’t need review, apparently.

What bothered me most about this was that it almost seems that a giant corporation such as Facebook could, in theory, run around eating up all sort of smaller companies to maintain a more monopolistic position, so long as they got them while they were still below the limit.

I think in the real world someone would eventually file an anti-trust suit, and if you managed to fly in low and get a nice initial public offering you could go public with enough value to exceed the limit. That, and a corporation cannot easily force you to sell something. You could just refuse to sell. At least until they made an offer to your liking.

It was just a thought and an observation though. I have no dog in this fight. I do you Twitch, but only rarely. This is usually because developers and publishers have developed a habit for not showing enough gameplay footage to get an idea of how a game plays. A live stream gives me a much better idea of gameplay and flow.

Y’all take care. I’m going to go stare at the wall and think about this a bit more.

Reflection – Milton Friedman’s Capitalism and Freedom

Some time back I came across a “Summer Reading List” on Greg Mankiw’s blog. I figured since I wasn’t originally taking classes during the summer I figured I would put my money where my mouth was and actually acquire some of these recommendations and begin reading them. After all, he’s the one with a Ph.D., so I figured his choices were likely wiser than mine. The fact that I had previously read and enjoyed one of the titles on the list also helped.

The title I started with is the subject of this post, Capitalism and Freedom by Milton Friedman. Now, to be fair, I haven’t actually finished the book yet. I’m somewhere around 2/3 of the way through it. I have discussed various sections with my coworker as I have gone through it, and for time and readability do not intend to repeat that commentary here. Instead, this is a more of a general impression and commentary on a specific section.

First, I would like to point out that this book was originally published in the 1960s. Taken in context, I feel this works in the book’s favor by offering a contrast between where we were and where we are. Some things have certainly changed, though not always in the direction our author would have preferred.

It has a perspective that most people would currently describe as libertarian, I think. There’s a tendency toward small government and a free market with minimal regulation. He often uses the word “liberal” to describe this position, not to be confused with the modern political thought of the same name.

While I do not always agree with his points, they are at least well reasoned and argued. My disagreements tend to be in the form of “Yes, but” style statements, and most of them stem from the fact that I place a higher social cost on human suffering than he does.

While somewhat out of context, there are certain statements I find extraordinarily relevant to the situation in the US. “Mistakes, excusable or not, cannot be avoided in a system which disperses responsibility yet gives a few men great power, and which thereby makes important policy actions highly dependent on accidents of personality.” (pg. 50) He was largely speaking of the Federal Reserve and central banking system, but I feel this applies equally well to both political leadership and law enforcement. I also feel that the phrase “Mistakes […] cannot be avoided” is generally true regardless of what other conditions are imposed.

I find my thoughts dwell rather long on the section regarding government subsidization of higher education. By default, he is opposed to such programs as necessarily inefficient. The taxpayer bears the burden of cost while the individual reaps the reward of increased personal income. That point, in itself, is valid. Especially in a case like mine where a federal grant is covering the costs I’m currently incurring. In fact, it’s the only thing enabling this adventure at all, and I do often feel some measure of guilt about this.

As a result, though, what I lack in financial investment I try to make up with time and effort. It seems the least I could do. The biggest problem is that it seems nearly impossible to accurately assess inherent human potential. If you were to take only my past history in education, it would paint a quite different picture of my potential than my current record does. This suggests that past performance is not always the best indicator, though how recently past may be a factor also.

Things that really rub me the wrong way are “the reluctance to think of investment in human beings as strictly comparable to investment in physical assets.” With all due respect, Dr. Friedman, we cannot accurately assess the unrealized potential of humans quite the same way we can with physical assets. Physical assets do not live, do not suffer, do not innovate. While I understand the underlying logic, any attempt to seriously compare living things with inanimate objects is… inhumane. Does this mean we should run full tilt into free college for everyone? Probably not.

In his defense, he does go on to describe a form of government revenue sharing, a trend that has only recently begun to make headway in the private lending sector. In exchange for financing the education, the educated promises a certain percentage of future income instead of a standard loan payment. It only took, y’know, 60 years. I think that would be a fair modification to the government grant as well, though many people today would be willing to allow the government that far into “their business.”

I have yet to read the sections that will be of greatest interest to me, though, so expect to hear about this book again. The next section is about discrimination which is quite a prescient topic, to say the least.

I am well beyond my standard length, though, so y’all take care.

Black Box Pricing – WoW Tokens

I’d been thinking a bit about the WoW tokens and their pricing for a minute when Wilhelm posted about them, WoW Tokens Five Years Later. I had intended to write a nearly clueless analysis of the pricing, but paused long enough to do just some basic reading and have come to the conclusion that I don’t know how useful it is as an indicator.

This probably isn’t really news to anyone else, as I’m the one late to the party here.

The WoW token is such a strange form of currency. It has only one purpose, which is determined by how you choose to purchase it. Pay real money, you can only “sell” it for gold. Buy it with gold, and it can only become subscription time. No resale, no profiting from speculation. You don’t “invest” in WoW tokens, you consume them.

As a way of manipulating currency levels, it’s quite impressive. Its utility, though, is derived from the same feature that makes is rather unhelpful to me, its pricing. Now, I could be wrong, but as I understand it, the people buying and selling these things don’t get to decide how much they buy or sell for. That number is dictate by Blizzard, who claims it’s “algorithmic” and based on supply/demand. In other words, Blizzard can manipulate the price as they see fit and would like us to believe it’s all player-driven.

Perhaps I’m being overly cynical here. It quite possible that Blizzard set this thing up and takes a fairly hands off approach. The fact that “legal” WoW gold is a little cheaper than “illegal” WoW gold is likely not due to an accident, though, and would likely require Blizzard to monitor and change the algorithm regularly. Otherwise, any gold seller with two brain cells to rub together would be at least matching the official price. Alternatively, it’s possible that they’re actually buying gold via tokens and reselling it with a markup. I’m sure they could con enough people into buying that it’s worth their time.

Still, there’s the big question. When I look at the graph in Wilhelm’s post, how can I be certain that any one price change is a supply/demand change instead of an algorithmm change? I don’t know if we have visible (or accurate) numbers on how many tokens are being bought and by what means. If not, some sort of polling would probably have to be done on a regular basis to establish the player activity. Then you could compare the poll data to the price data to see how/if they’re correlated.

Part of me wants to do that, but most of me says it’s not worth the effort. Does it really matter how/why the price changes? The people buying and selling will adjust their behavior to the price, regardless of what drives the price. Still, I would like to begin tracking non-token goods on Classic just so I can see what happens when the Token is introduced there. What is the overall economic impact of token v. non-token economies, which seems more efficient, and what costs and benefits does it involve?

So many questions…

Y’all take care. Onwards and upwards.

blapril-2020-200Hey, it’s Blapril time! The goal is to simply promote and stimulate the blogging community by encouraging people of all skill levels and backgrounds to post. The official post can be found here and it’s never too late to start.

FFXIV – Patch-driven Price Cycle?

No data this time, just some thoughts on what I’ve observed as I collected my data. Specifically, the prices of grade 7 and 8 Savage Aim and Heavens’ Eye materia.

Up until recently, I’ve watched as the price of these specific materias slowly slid downward. Very slowly, but notably so. By the end of last week it was easy to find the 7s below 1k/ea and the 8s could usually be found as low as 15k/ea. When I started it was closer to 5k and 25k, respectively, so that’s a pretty notable decline over about a month’s time.

Over the course of the weekend, I noticed a server here and there would experience a sharp rise in price, especially the 7s. As of last night, prices were largely 5k/ea for the 7s on all servers and around 20k/ea for the 8s. I’m assuming since a new patch just dropped, a major equipment update/grind patch at that, people are coming back and/or preparing to upgrade. Economically this would be a surge in demand which should push the price up, so the change I’m seeing at least makes sense.

What practical value does this have? Well, if you were attempting to make money, I would suggest buying about a week before a major patch. Especially for things like materia that are largely disposable and tied to the equipment upgrade cycle. I would caution against dumping it all at once, but you don’t want to hold onto it all that long either or you’ll be “stuck with it” until the next major patch.

Just a thought, not something I intend to act upon personally. I’ve been considering the details of taking the next stage of this further afield and including additional games to see if some of the things I see here can be generalized. I’m not sure all of them will, FFXIV has a pretty consistent patch schedule. Loathe as I am to admit it, WoW should be on the shortlist of places to look. I would especially like to look at data for things like the WoW token, lockbox keys, plex, that sort of thing. I don’t have a good analog for those in FFXIV and I think other researchers and non-gamers may find its more business-oriented implications more interesting.

My problem with most other games is that lack the same level of expertise I use to identify the important goods of FFXIV. It’s only because of my time raiding and doing end-game grind that I’m able to discern which items are important. While I’m confident that I could assimilate approximate knowledge of these things by reading up on a given game’s raid meta, there would be… limitations.

What I’m seeing suggests to me a sort of population/price cycle that’s likely tied to FFXIV’s patch cycle. This will actually go into my notes as a specific item of interest that I need to test later. I’m not really that surprised, I guess. It makes sense that this should occur.

I’m wondering to what degree the content/patch “heartbeat” helps regulate and/or (de)stabilize the market.

Anyway, that’s enough musing for today, I think. Y’all take care, and beware of financial and investment advice from strangers. Virtual or otherwise.

blapril-2020-200Hey, it’s Blapril time! The goal is to simply promote and stimulate the blogging community by encouraging people of all skill levels and backgrounds to post. The official post can be found here and it’s never too late to start.

Research – Virtual Good Volatility?

I’ve spent a fair amount of time lately considering exactly what it is I would like to get from my data. What questions do I wish to answer and how exactly should I structure that… query. In the meantime, I’ve been working on different ways to sort and recombine data.

primal iron
NQ Iron Ore daily for the entire data center.

I just realized that I’m quickly approaching the one month mark, my original intended stopping point. I’m… not sure I’m ready to stop. Logically I have to stop eventually, but the longer I collect data the more likely it is that inflation and arbitrage will become detectable.

The mean price for that specific iron ore data is 141 Gil/unit with a standard deviation of 44 Gil. Even if inflation was absurd, say 10%, that would only be a 14 gil increase. That kind of number is easily lost within the volatility, and I’m pretty confident it’s not anyway near that high. At a glance, Iron looks more deflated over this time period than anything else. That’s assuming it’s even fair to lump an entire data center together like that. I’m not sure it is for Iron but I’m not certain exactly how to test that.

savage aim 8
Savage Aim 8 for Primal Data Center

I suspect it’s more helpful to combine items like materia that I know to experience some level of arbitrage. (M=32162, Std.D=2793) It also has a much more reasonable standard deviation than Iron Ore. Iron’s is 31% of the mean while Savage Aim 8 is closer to 9%. Is that even a reasonable way to measure volatility? Is it a good indicator of arbitrage? Must think about this.

That said, I need to double-check those prices at some point. If you randomly asked me what the typical buying price was, I’d say 15k-25k. I think that’s because I usually only see the ten lowest price listings, but I’d like to confirm a few manually just to be sure.

Okay, well, I’ve written and deleted several different paragraphs at this point, so I believe I’m done for now. It is my intention to write a post about The Outer Worlds tomorrow. I can’t tell if its particular brand of corporate dystopia is appropriate, timely, or offensive at the moment. Maybe all of the above, but it certainly isn’t helping my mood.

Y’all stay safe and take care. It’s not the best choice, it’s Spacer’s Choice.

Viral Unemployment

The latest unemployment numbers for the US have just come out, and new claims are 281k. [DoL] This is up by 70k compared to last week, something to the tune of a 33% increase. To be fair, this is expected. When you begin shutting down entire sectors of the economy you end up with a bunch of displaced workers.

There was a time, twelve years, three months, and nineteen days ago that I myself was part of a mass layoff. It took about a year but to quote the business “everyone who wanted to return has come back.” As they needed additional people to cover natural attrition they called people and offered them the chance to return. The layoff was effective Jan 1st and I believe the first group came back in early to mid-March. Right about now in relation to the beginning of the year, though it feels quite a bit longer in the moment.

It’s hard to say, amidst the uncertainty, how quickly those jobs are going to come back to the industries affected this time. I have… no good way to speculate on that. If things have settled by “vacation season” then it might not be too bad. For travel, lodging, and food service, anyway. There is a “continued unemployment” metric, but it has an extra week of lag time.

But right now, there are at least 281k people without a job who had one last week. For perspective, Bloomberg says “During the worst week of the Great Recession, the last week of March 2009, claims reached 665,000.” [link] I would like to point out that this “worst week” was around the same time my own employer began bringing people back. Different strokes and all that. On the bright side, we’re not there, so that’s good. I suspect it’s going to stay high for several weeks though. Manufacturing, at least, seems disinclined to slow any more than it must. To their credit, people don’t stop buying entirely and today’s “lean” supply chains try not to hold a lot of extra inventory.

Of course, this isn’t what I intended to write about today, but it’s on my mind and needs processing. I fear it is much more… real… than what I want to write about, but also more important.

As it stands right now, I’m still working in the foreseeable future. Not from home, but in the same environment I share with a couple thousand other people. I do not believe this is a wise choice, but my direct coworker is at greater risk than I am, so here we are. I highly suspect they will end up shutting down entirely, but that’s only because they’ve already done more than I thought they would. At the very least, a week from now when people start popping up symptomatic they won’t be able to locate enough “unexposed” workers to sustain production. A single parts handler could easily expose half a line or more plus all the other parts handlers.

I cannot help but feel that continued production is… irresponsible.

Time will tell, I suppose. I’ll be back tomorrow(ish) with something research-related, and I’ve got some actual gaming-related stuff in the works too.

Y’all take care and stay safe out there.

FFXIV – Actual Data and Wild Speculation

Since I’ve spent so much time lately writing about my research project, I felt it was time to actually share some of the results.

lamia iron

Most of it is of little practical value. The iron was included more for the sake of being thorough and making sure I have a way to confirm things are or aren’t the same as last time. The thing that stands out the most to me is how much higher the quantity supplied is now. My previous data had a total daily supply of around 1500 units and the average here is closer to 2600 units. Of course, there’s the 7th with a rather wild 8,406 units. The market concentration (HHI) is consistent with what I saw before. We can also ignore the elasticity here. I would need a Sig below .05 to have anything useful. I’m a little disappointed, but life goes on.

behemoth iron

Behemoth is a little more exciting, but not much. The price is much higher now than it was before. My two prior data points put the average unit price around 75-85 gil. The total quantity supplied is also significantly lower. Last time it was around 6000-9000 units v. the average here of around 2000. Taken together I suppose it makes sense. A decrease in quantity supplied should lead to a higher price, assuming we’re around the equilibrium. Also an increase in concentration, though not by a lot.

lamia hq gold

For something slightly more interesting, there’s high-quality gold ore from lamia. Fairly stable concentration compared to iron. However, what got my attention was the elasticity that not only got three significant results but results that were fairly similar. Now, elasticity is telling us the percentage change in quantity with regard to price. Since this is supply data, what people are attempting to sell, it should be positive. I saw this once before when I had my terms backward in the formula, but I’ve double and triple checked it and that’s not the case.

So, the question becomes why? What could possibly be occurring in this market to create a negative relationship? That is, when the price is high people actually list fewer units, and when the price is low people list more units.

At the moment, I’m wondering if this is a result of undercutting. What would it look like if the people listing new material were actively and significantly posting below the current asking price? In particular, what if you have a few major suppliers doing this so that any time a notable increase in quantity occurs it drives the average price down?

Of course, I would have to go take a closer look at the day to day happenings in the market. Might be worthwhile to add the daily deltas for quantity and sellers.

While the data is over here doing its own thing, it seems that the world has gotten quite hairy. Y’all take care, be safe, and wash your hands. Have a bonus Materia table:

lamia savaa8

Data Analysis – Curious Case of Price and Quantity Changes

The realities of working with real data are rather unique and intriguing. I find no end of strange unforeseen quirks that I’m never entirely certain how to handle. I’m working through the nuts and bolts of importing and processing my market data for FFXIV. As a side note, I must admit I underestimated R.

So, big data plan aside, I was attempting to consolidate 13 days of market data into a single data set. While most of the shenanigans revolved around navigating the ins and outs of data structure manipulation. I was, however, victorious! Kinda.

lamia price change
Forgot to include headers. That’s server, HQ, unit price, retainer name, city-state, and total quantity for that unique combination, respectively.

I ended up with some interesting entries like this one. My current sorting method considers these two separate entries because the price is different. In reality, it’s the same 205 units from two different time periods. The seller just dropped the price at some point. If I were to consider the entire collection as a whole data set what should be done with this? Which is more accurate, the higher listing or the lower listing? Both represent a legitimate attempt to sell goods. In reality, I don’t plan to treat all days combined as a single data set.

I’m going to run the stats on a per-day basis. Daily average unit price, total quantity, concentration, and elasticity for each good/server combination. That should allow me to see how these things are generally behaving over time and support good v. good and server v. server comparisons between data sets.

Elasticity is the odd man out though. Since it will be obtained using regression in the first place, I have to consider the value of retaining insignificant results in the data set. I could be off base here, but I believe that insignificant in the statistical sense simply indicates that there isn’t a clear relationship between Q and P. Might be worthwhile to compare the result of significant only v. all values just to see what there is to see.

Anyway, I’m off track. Having the same set of goods listed multiple times so that 205 units show up in the result as 410 units was not the only instance of something like this occurring.

lamia quantity change

I picked this example out as well, for that reason. I actually went and looked over the day-by-day data to see what was going on. A seller (not the same one as the other picture) initially posted 3 listings of 8 units each, a total of 24 units, at 210 gil. The very next day, they appear to have reduced the unit price to 147 gil. However, the goods sat there at that price for a couple of days before someone bought only a single 8 unit lot, which generated that 16 unit entry. It sat there for another day or two then someone bought another 8 unit lot, giving us the last entry, which also eventually sold.

So now I have 24 units that would become 72, 24 at 210 and 48 at 147.

I’m going to abandon that specific avenue of consolidation for now. I think if I date-stamped the records I could probably pull out the initial listing quantity and the final unit price, which would accurately read 24 units at 147 gil.

I would rather invest my time in the “original” plan first then follow up with this if I feel it needs doing.

Y’all take care, and remember to go check all your listing prices. You never know when your change might be the one that generates a blog post.