announcerharris Posted December 23, 2012 Share Posted December 23, 2012 (edited) Alert: nerd post incoming. A little thinking about economics and prices on the Cartel Market. TL;DR - Bioware would make more money off of Cartel Market items if they decreased their prices. Though they would earn less revenue from each customer, the increase in items sold would outweigh this and lead to more money being collected overall. Explanation below... Imagine a graph with a downward-sloping line on it - the demand curve for Cartel Market items (just assume for a moment that they're all the same). Every point on this graph represents how many items (represented on the X axis) will be bought at every price (represented on the Y axis). Also imagine, from any given point on the line, horizontal and vertical lines extending outwards, and the rectangle formed by the intersection of these lines with X and Y axes of the graph. The area of this rectangle represents Bioware's revenue from the Cartel Market (price of the items x # of items sold). Because these items are luxuries, both in the game and in real-life, the demand for these cartel market items is elastic - meaning that percent change of how many items are sold is greater than the percent change in price, and that Bioware will collect more revenue at lower prices. The line described above has a slope of of less than 1 (absolute value), so dropping the price increases the quantity sold enough to make that revenue rectangle bigger and bigger as the price gets lower and lower. Since it costs next to nothing to "produce" more of every given item, Bioware would actually increase their profits by lowering prices. A win for the company, and a win for us players. Ya dig? (Edited title to better reflect the discussion in the thread) Edited December 23, 2012 by announcerharris Link to comment Share on other sites More sharing options...
Alec_Fortescue Posted December 23, 2012 Share Posted December 23, 2012 I don't dig but I think they should lower the prices Link to comment Share on other sites More sharing options...
announcerharris Posted December 23, 2012 Author Share Posted December 23, 2012 (edited) I don't dig but I think they should lower the prices Think of it this way: if they dropped the price of the Valiant Jedi set (for example) in half, enough additional people would buy it that Bioware would actually make more money. Edited December 23, 2012 by announcerharris Link to comment Share on other sites More sharing options...
Glorthox Posted December 23, 2012 Share Posted December 23, 2012 I think all the cartel packs need to lowered, especially if active subscribers are only seeing 500 coins a month. 1 cartel pack that 9 times out of 10 will only yield junk just isn't cost effective. Maybe 5500 cartel coins for 20 bucks would sound better and most would flock on that. Link to comment Share on other sites More sharing options...
mothear Posted December 23, 2012 Share Posted December 23, 2012 Think of it this way: if they dropped the price of the Valiant Jedi set (for example) in half, enough additional people would buy it that Bioware would actually make more money. As you seem to be talking like an econonist then you will know all about saturation points within the supply/demand curve. No doubt BW as we speak will be plotting the graph you speak of and will price their 'stuff' accordingly - note they give offers every week to provide price point stats. Link to comment Share on other sites More sharing options...
announcerharris Posted December 23, 2012 Author Share Posted December 23, 2012 (edited) As you seem to be talking like an econonist then you will know all about saturation points within the supply/demand curve. No doubt BW as we speak will be plotting the graph you speak of and will price their 'stuff' accordingly - note they give offers every week to provide price point stats. It just seems so far that they're only dropping prices on the ugliest armors. It's not that those aren't selling because the market's saturated; those aren't selling because they look bad or are just re-skins of commonly available gear. But you're right; I'm sure BW has far more information than I do, and I'm 100% an amateur economist - new hobby . Edited December 23, 2012 by announcerharris Link to comment Share on other sites More sharing options...
Frozenshiva Posted December 23, 2012 Share Posted December 23, 2012 That's a load of bull. Sure it's good for the players, but what you're saying isn't going to work like you think it would. A basic example on your costume price. If they would reduce the price to half, subscribers with a key attached can pretty much get one set per month for free. That's not more revenue income, that's lost revenue. And it would be even more revenue lost in the long run in cartel coins purchases. The price isn't EVER a problem when it comes to these kind of things. It's generally accepted that lowering prices more than a certain percent will yield revenue loss. Believe it or not , reducing prices only brings in a small number of people to pay. For the most part people that didn't pay previous to the reduction, won't pay after either. Look at some of the P2W games out there like some of the the 91 games (conquer/zero) or some of the Nexon games (like Atlantica) the prices are sky-high paying as much as 10$ for a lottery box that more often than not yields crap. You'll see the in-game market flooded with the good stuff despite all that. Sure I'd love prices to be lower, but unless there's a good reason and a good model that can effectively allow for revenue despite those losses, i don't see that happening. Obviously i don't see them going down that route, it's a model that doesn't completely fit in this environment, and i hope to god they don't come up with any stupid ideas to implement that here, but the truth is, in cash-shop games, and more so P2W games, a handful of players will bring in more revenue than the rest of the entire server. It's not unheard of in some of those games for people to spend anywhere from 250 to 500 euro's a month. That's 1 person paying the "sub" for 20-40 people. If you offer as little as 10% off an item, if it's a very demanding one (like boxes are atm for ex) you'd have to have at least 10 people buy one during that time to break even with the loss of that one person above. Obviously i can't bring in exact numbers of how many high spenders are in the game, but it's safe to say some of them are spending a lot. In general if the number of high payers is large enough you'd need anywhere from 2-10 (or more depending on how large the discount is) times more sales to break even. Link to comment Share on other sites More sharing options...
Exilim Posted December 23, 2012 Share Posted December 23, 2012 That's a load of bull. Sure it's good for the players, but what you're saying isn't going to work like you think it would. A basic example on your costume price. If they would reduce the price to half, subscribers with a key attached can pretty much get one set per month for free. That's not more revenue income, that's lost revenue. And it would be even more revenue lost in the long run in cartel coins purchases. The target for this is the F2P players, not subscribers. They are already getting steady cashflow from subscribers. Now find a way to get that from people who want to play a free game? Tempt them with neat stuff for only a few bucks at the time. Make them buy $10 worth of cartel coins each transaction instead of spend the few bucks worth that they need only for a single item. So now you get $10 of income from someone who saw a cheap cool looking piece of armor on the cartel market. Link to comment Share on other sites More sharing options...
Frozenshiva Posted December 23, 2012 Share Posted December 23, 2012 The target for this is the F2P players, not subscribers. They are already getting steady cashflow from subscribers. Now find a way to get that from people who want to play a free game? Tempt them with neat stuff for only a few bucks at the time. Make them buy $10 worth of cartel coins each transaction instead of spend the few bucks worth that they need only for a single item. So now you get $10 of income from someone who saw a cheap cool looking piece of armor on the cartel market. The way the current system is set up, your only target are the subscribers. Any F2P person that wants to invest any dime in this game will have to sooner or later invest in a subscription due to the credit cap. Link to comment Share on other sites More sharing options...
announcerharris Posted December 23, 2012 Author Share Posted December 23, 2012 (edited) The way the current system is set up, your only target are the subscribers. Any F2P person that wants to invest any dime in this game will have to sooner or later invest in a subscription due to the credit cap. I disagree. Obviously this is just speculation, but based on my conversations with other players, I think most subscribers are buying what they want from the Cartel Market with either their monthly allowance or in-game credits. So if you drop the price in half, sure, more subs will use their coins, but that's instead of using in-game credits. I don't think there are many subs who are loading up on Cartel Coins in addition to paying their monthly sub fee. On the other hand, consider F2P Joe. Joe wants that Valiant Jedi armor, but at 1440 coins, he's got to buy the $20 pack, and that's a significant purchase when we're considering someone who is F2P. Drop the price of the armor set to 1050, and now F2P Joe can buy the $10 pack and get that armor. Again, at the price that set is going for in terms of in-game credits, most subscribers could probably afford it using credits instead of coins anyways. I don't see a huge loss in revenue from that segment. Edited December 23, 2012 by announcerharris Link to comment Share on other sites More sharing options...
Zekim Posted December 23, 2012 Share Posted December 23, 2012 Alert: nerd post incoming. A little thinking about economics and prices on the Cartel Market. TL;DR - Bioware would make more money off of Cartel Market items if they decreased their prices. Though they would earn less revenue from each customer, the increase in items sold would outweigh this and lead to more money being collected overall. Explanation below... Imagine a graph with a downward-sloping line on it - the demand curve for Cartel Market items (just assume for a moment that they're all the same). Every point on this graph represents how many items (represented on the X axis) will be bought at every price (represented on the Y axis). Also imagine, from any given point on the line, horizontal and vertical lines extending outwards, and the rectangle formed by the intersection of these lines with X and Y axes of the graph. The area of this rectangle represents Bioware's revenue from the Cartel Market (price of the items x # of items sold). Because these items are luxuries, both in the game and in real-life, the demand for these cartel market items is elastic - meaning that percent change of how many items are sold is greater than the percent change in price, and that Bioware will collect more revenue at lower prices. The line described above has a slope of of less than 1 (absolute value), so dropping the price increases the quantity sold enough to make that revenue rectangle bigger and bigger as the price gets lower and lower. Since it costs next to nothing to "produce" more of every given item, Bioware would actually increase their profits by lowering prices. A win for the company, and a win for us players. Ya dig? STOP!!! I just finished micro and macro economics. No more. lol Link to comment Share on other sites More sharing options...
Exilim Posted December 23, 2012 Share Posted December 23, 2012 STOP!!! I just finished micro and macro economics. No more. lol Dude check out these curves!! Mmmmm mmm Link to comment Share on other sites More sharing options...
Zekim Posted December 23, 2012 Share Posted December 23, 2012 Dude check out these curves!! Mmmmm mmm lol. you are sick!!! Link to comment Share on other sites More sharing options...
announcerharris Posted December 23, 2012 Author Share Posted December 23, 2012 Dude check out these curves!! Mmmmm mmm So hawt. Link to comment Share on other sites More sharing options...
Exilim Posted December 23, 2012 Share Posted December 23, 2012 Plz no ban. Link to comment Share on other sites More sharing options...
LUCASCASADEIS Posted December 23, 2012 Share Posted December 23, 2012 i think they could do this with the F2P restriccions, because more people would come to the game Link to comment Share on other sites More sharing options...
Frozenshiva Posted December 23, 2012 Share Posted December 23, 2012 I disagree. Obviously this is just speculation, but based on my conversations with other players, I think most subscribers are buying what they want from the Cartel Market with either their monthly allowance or in-game credits. So if you drop the price in half, sure, more subs will use their coins, but that's instead of using in-game credits. I don't think there are many subs who are loading up on Cartel Coins in addition to paying their monthly sub fee. On the other hand, consider F2P Joe. Joe wants that Valiant Jedi armor, but at 1440 coins, he's got to buy the $20 pack, and that's a significant purchase when we're considering someone who is F2P. Drop the price of the armor set to 1050, and now F2P Joe can buy the $10 pack and get that armor. Again, at the price that set is going for in terms of in-game credits, most subscribers could probably afford it using credits instead of coins anyways. I don't see a huge loss in revenue from that segment. The problem with what you're saying is two-fold. If prices drop too much, more people will afford them and even more items will appear on the GTN. This leads to supply being higher than demand even more so than is the case currently. The second issue is that it will break economy even further. With the limitation on credits you already see a lot of items being sold for close to nothing on the GTN.What happens when the market has several times more items on the market. 1. People will either sell the stuff at close to no money (we already hear about ppl vendoring some of the cartel stuff due to oversaturation). 2. People stop buying cartel stuff alltogether since it is no longer a worthy investment. Your idea only covers short-term investment which will likely be higher indeed. But then we run into an issue where even more stuff will pop on the CM instead of in-game in order to balance the revenue out in the long-run. Link to comment Share on other sites More sharing options...
Orlesian Posted December 23, 2012 Share Posted December 23, 2012 (edited) A suggestion would be to go the way TSW does now, if you subscribe you get 10% off on the items in the store. Edited December 23, 2012 by Orlesian Link to comment Share on other sites More sharing options...
JidaiDerriphan Posted December 23, 2012 Share Posted December 23, 2012 You have remember that when it comes to Cartel Coins, EAware is a Monopoly. A firm with monopoly power setting prices will typically set price at the profit maximizing level.The most profitable price that they can set (what will become the monopoly price) is where the optimum output level (where marginal cost (MC) equals marginal revenue (MR) meets the demand curve.Under normal market conditions for a monopolist, this price will be higher than the marginal cost of producing the product, thereby indicating the price paid by the consumer, which is equal to the marginal benefit for the consumer, is above the firm's marginal cost. In other words higher cost to consumer, low output from producer, more profits. That's intro microeconomics... Link to comment Share on other sites More sharing options...
Exilim Posted December 23, 2012 Share Posted December 23, 2012 The problem with what you're saying is two-fold. If prices drop too much, more people will afford them and even more items will appear on the GTN. This leads to supply being higher than demand even more so than is the case currently. The second issue is that it will break economy even further. With the limitation on credits you already see a lot of items being sold for close to nothing on the GTN.What happens when the market has several times more items on the market. 1. People will either sell the stuff at close to no money (we already hear about ppl vendoring some of the cartel stuff due to oversaturation). 2. People stop buying cartel stuff alltogether since it is no longer a worthy investment. Your idea only covers short-term investment which will likely be higher indeed. But then we run into an issue where even more stuff will pop on the CM instead of in-game in order to balance the revenue out in the long-run. Well here's your curve. Disregard the values they are not relevant. I'm sure many people would agree they are pretty high up on the curve(price). If they lower the price they will increase demand make more sells, yes. That doesn't mean they swing all the way down though, there is a middle point where everyone is happy and maximizing gains. Also the solution to your dilemma where people stop buying the stuff is to release the next greatest shinies for people to buy. iSaber 5 baby get in line now! Obviously though it is not as easy to find the appropriate price points as it is just to say lower price more sales, higher price less sales. They are probably in constant evaluation of this; obviously you do not start prices too low and then raise them up. Talk about rage. Start with prices higher and see how things go. Then oh well 10% cut here 10% sale there. The prices will continue to go down I think, and they will probably see higher gains because of that. Link to comment Share on other sites More sharing options...
Khalhazar Posted December 23, 2012 Share Posted December 23, 2012 Another factor is: can you attract and retain F2P players? Bioware will have a better idea than us about that, but the restrictions are _awfully_ severe. They appear to be designed to encourage people to *subscribe*, not *buy coins*. Is that the most profitable goal? There are other F2P models that are rather loved by players that still increased company profits: LOTRO stands out, for instance. TLDR: There's more going on here than the supply/demand curve, but the meta-arguments support a less restrictive model as well. Link to comment Share on other sites More sharing options...
announcerharris Posted December 23, 2012 Author Share Posted December 23, 2012 (edited) You have remember that when it comes to Cartel Coins, EAware is a Monopoly. A firm with monopoly power setting prices will typically set price at the profit maximizing level.The most profitable price that they can set (what will become the monopoly price) is where the optimum output level (where marginal cost (MC) equals marginal revenue (MR) meets the demand curve.Under normal market conditions for a monopolist, this price will be higher than the marginal cost of producing the product, thereby indicating the price paid by the consumer, which is equal to the marginal benefit for the consumer, is above the firm's marginal cost. In other words higher cost to consumer, low output from producer, more profits. That's intro microeconomics... Sweet copy/paste job bro - see 4th paragraph: http://en.wikipedia.org/wiki/Monopoly_profit#Monopoly_Profit_-_Basic_Definition That's intro getting owned on a forum. Also, marginal cost is zero, so maximizing revenue maximizes profit. Edited December 23, 2012 by announcerharris Link to comment Share on other sites More sharing options...
Slimrock Posted December 23, 2012 Share Posted December 23, 2012 (edited) Another thing to consider is what lowering the prices of items (especially armor) does to the item's appeal. If prices are significantly lowered, every person you run past on the fleet is going to be wearing the most recent addition to the Cartel Market. That would ruin it for me and I'd lose all desire to spend my balance of Cartel Coins on these items. I don't think I'm alone in that. So, there really is a balance to be considered here. Lowering the prices enough that the masses can afford the sexiest items might be counterproductive. Sounds elitist, but it's something to consider. Edited December 23, 2012 by Slimrock Link to comment Share on other sites More sharing options...
Frozenshiva Posted December 23, 2012 Share Posted December 23, 2012 Another thing to consider is what lowering the prices of items (especially armor) does to the item's appeal. If prices are significantly lowered, every person you run past on the fleet is going to be wearing the most recent addition to the Cartel Market. That would ruin it for me and I'd lose all desire to spend my balance of Cartel Coins on these items. I don't think I'm alone in that. So, there really is a balance to be considered here. Lowering the prices enough that the masses can afford the sexiest items might be counterproductive. Sounds elitist, but it's something to consider. Sounds elitist or not, it's the truth. Humans are known to always look up to that which they cannot achieve or do not have/own. I'm pretty sure the Aston Martin or the newest model of god knows what car would loose it's value both as an item as well as price if everyone could get it. Exclusivity has its place in our society, hate it or not it's here to stay. Link to comment Share on other sites More sharing options...
Vandicus Posted December 23, 2012 Share Posted December 23, 2012 No demand curve is entirely elastic. You are assuming that the price is set on the elastic portion of the demand curve. Link to comment Share on other sites More sharing options...
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