Economy. Comprehensive suggestions. GTN, credit flows, market participation, market regulation, etc.

[mCion]

Hello,

I do not opine here often, but I've been thinking about the economy for a long time. I personally like economics and game economics, as well as business and player experience. I will give my suggestions on how to encourage, guide, and maintain a healthy game economy, taking into account stakeholders (Bioware, EA, players). Many people will not like some suggestion because it carves into their little niche they like, but as a whole the following suggestions will improve the economy as a whole.

Markets, Regulation, Supply and Demand

Spoiler

Price points for items are set by Supply and Demand. Rampant Inflation, a black market, and low overall participation in any economy (real or digital) is a reflection of these two forces not being in balance. A healthy economy encourages participation, and satisfies all stakeholders and their individual and sometimes conflicting goals.

Bioware has already attempted to fix the economy by lowering the overall amount of credits injected into the economy. They did this by lowering the supply of credits by lowering Conquest credits on alts, hoping to lower demand of items, and hoping to lower the price points. This has partially worked, as overall credits injected into the game has lowered. However, this measure, while good, is clearly insufficient to tackle the challenges the market and economy face. Inflation of high demand items kept on rising. Bioware's measure was good, but insufficient. 

This is because the supply of Cartel Items drastically decreased. Bioware retired of the referral system (rightfully so), and the supply of CC decreased radically. Since the retirement of the referral system, inflation has been at the highest, because the Supply of Cartel Market items into the economy decreased dramatically.

No single suggestion will fix this economy, therefore, a conjunction of measured implemented in tandem is the only way to fix the economy and satisfy all stakeholder goals.

Stakeholders and their goals

Spoiler

EA - Make money, maximize returns, minimize costs.
BioWare - easy to implement and maintain systems to regulate, moderate, and control the economy, leading to increase participation of playerbase.
Players - Willingly participate in an encouraging and rewarding economy system

Current problems with economy

Spoiler

-Uncontrolled Inflation, meaning forever rising credit costs of rare and high demand items. Ever rising inflation makes it so only the super rich can access rare or high demand items, leaving a large portion of the playerbase out of reach for said items.
-Black market. This is the entire economy that happens outside of the GTN (spamming trade chat, trading items). This avoids the credit sink of the GTN tax, encourages trade chat spam, lowers the total amount of transactions and participants, etc. More importantly, it is difficult for BioWare to moderate or regulate the black market, leading to problem inflation listed above.

-Super rich individuals with hundreds of billions of credits. This feeds problems one and two as they outbid each other increasing prices on high demand items in the trade channels.

-Low participation of playerbase in economy in general, and near no participation in high end economy.

Solutions

-Increase GTN cap to 4 billion, allowing many high demand items sold in Trade chat to be publicly listed.

why?

Spoiler

-This will decrease the amount of Black Market transactions by allowing more postings of high demand items in the GTN.
-It will also increase the total amount of credits sunk with the GTN tax applying to many new transactions. 
-By posting prices publicly and for extended periods of time, prices naturally will decrease as sellers will try to outbid each other, and buyers will be able to choose from several sellers at once. 

-Increase GTN tax of high priced in a staggered manner. Numbers up for debate bur for example, items over 1 billion to 10% GTN tax, over 2 billion 15% GTN tax, over 3 billion 25%, and so on.

why?

Spoiler

This helps flatten the economy. This measure discourages extreme price hiking.
This also taxes more on the super rich, eventually lowering the super rich's exorbitant wealth, while still keeping their big wealth.

Doing so this will aid the inflation problem by lowering total amount of credits in circulation, and the overall player participation problem by encouraging price points where more players can participate in the economy.

-Restrict or limit player to player trading.

why?

Spoiler

This is needed ensure the success of other measures proposed here. This will NOT remove the Black Market (impossible to completely remove), but will make it harder to participate in the black market, thereby encouraging people to use the GTN. Black Market transactions will still continue, but with these measures, will be significantly less, since the GTN be an alternative to many black market transactions if the above suggestions are followed.

This can take many forms, including but not limited to:

-a cap on credits traded (1 billion per week, or 1 billion per transaction, or any other number and frequency)

-a limit, delay, restriction on items traded, especially Cartel Market Items. (can be that newly released Cartel Market items cannot be traded player to player for 1 month, or a max of 3 player to player Cartel Market trades per week, or any other form restriction on frequent Cartel Market trading. *note this cannot be extremely restrictive since some players trade/gift items to friends. Our target are frequent traders)

-Increase credits earned in game for lower level activities. Keep high level activities potential the same. Increase individual costs such as legacy unlocks, etc.

why?

Spoiler

The game was designed and created in a staggered approach over a decade. Economy followed this approach. This means that a new player can play from level 1-50, or 1-70 for an entire month doing quests and what not, and end the experience with a certain amount of credits (probably around 200k - a few million). These credits will be enough to unlock some perks in legacy, repair gear, purchase a stronghold, but will not be even close to healthily participating in the GTN economy, as the price for even basic armors are in the 10s of millions.

By increasing the amount of credits earned in low level questing, a new player at the end of their story, should have enough credits to begin to participate in the broader economy, get their toes wet so to speak. We want this to encourage players to participate in a healthy economy, doing more activities, questing more, thereby earning more credits and spending more time in the game/ subscribed. 

For this change to be controlled and meaningful, it means that single player credit sinks such as legacy unlocks will also need to increase. These purchases need to be meaningful, and cost the player.

There is a fine balance point when a player purchases something they worked for, where it was not extremely grindy but also not meaningless, that gives the player a sense of accomplishment. 

-Adjust cartel packs. Slightly lower price of Cartel Packs, or remove trash items (jawa junk) from pack contents.

why?

Spoiler

I hate to say this, because as a player and person I despise "loot boxes and mechanics", but I recognize that's the system we have, and that EA wants to maximize profits, and BioWare keep the lights on.

There is an important concept in Loot boxes and gambling in general. There is a very fine tuned equilibrium line of spending/reward/more spending. If the rewards are too low, then people's psyche do not reward the player, and the loot box opening and buying is less. I believe this equilibrium was pretty close to great when Cartel Packs were introduced by EA and Bioware, because, lets be honest, EA is king of lootboxes. I bet that when the Cartel Packs were introduced, the price was carefully set by EA and it worked great.

However, that fine tuned equilibrium has changed since EA introduced Cartel Packs, because the intrinsic value of a Cartel Pack as decreased over the years.

Cartel Packs were introduced a LONG time ago, and their price has never changed. However, the amount of possible items contained in a Cartel Pack has drastically increased since they were first introduced as new items, weapons, armors and decorations were designed and introduced. The introduction of these new items increase the overall pool of items Cartel Packs pull from, thereby decreasing the chance of the player getting the "item they wanted". This overall decreases the "value" of the Cartel Pack in the eyes of the player.

When this happens, not all potential players that would participate in loot mechanics chose to participate, because the balance and price point set originally by EA have shifted.  This causes an overall decrease in potential profits for EA. We want to encourage loot boxes and "gambling" (it hurts to say it). By making the Cartel Packs more slightly attractive than what they are now, and closer to what they were originally, players will feel encouraged to "buy just one more pack" mentality used in any loot box/casino, increasing EA profits.  
As EA earns more cash due to increased purchase of the "one more Cartel Pack" mentality, many items stay with a player, and others enter the economy, decreasing credit costs overall. 

-Adjust Cartel Market prices. Increase many costs, decrease few others.

why?

Spoiler

Right now it appears that Cartel Market items are all over the place. For example, some armors are less that 1000 CC, others are 1440 CC, and others are over 2000 CC. It may be time to adjust these values. EA will want to make these values just out of reach of the monthly CCs awarded to subscribers. For example, the 1440 CC cost hits this mark, because 2 months of subscription plus security key Cartel Coins is barely not enough to purchase it. However, many other items do not follow this principle. EA and Bioware would need to adjust the CC costs of these other times to follow this idea.

FINAL THOUGHTS ON SUPPLY AND DEMAND, AND MARKETS

Spoiler

When Supply and Demand are unbalanced, we see rampant inflation and black markets with lower legal market particiaption overall. This is what we have seen in the last two years or so. 

Easy one shot actions, and many suggested by players, will not work and aren't even on the table because they do not satisfy each stakeholder. For example it's been suggested to increase supply of Cartel Items would be to lower the price of all Cartel Items, HOWEVER, this does not meet EA's goals of maximizing profits, and not only will not happen, but SHOULD not happen (even though as a player it would be nice to have everything cheaper).

We need solutions that satisfy all stakeholders, while increasing supply, lowering demand on highly sought items, increase EA's profits, allow Bioware to control the market, and encourages players to participate and feel satisfied in being part of the market.

For example, My suggestion laid out above is the only way to increase supply of Cartel Market items via adjusting Cartel Packs satisfies all of the above. It increases EA profits, increases supply of Cartel Items in the economy, is controllable and adjustable by Bioware, and it should be easy to sell to EA because it's restoring the fine point of equilibrium originally set during the introduction of Cartel Packs by EA themselves. 

All of the above suggestions either encourage market participation, increases Bioware's control and moderation of the economy, reduces the likelihood of Black Market transactions, increase supply of Cartel Items on the market, lowers the overall amount of credits flowing in the system on high demand items, while empowering newer players to participate in the economy. All of the above suggestions allow Supply and Demand to stabilize in a moderate amount of time (months), while keeping all the stakeholder's goals satisfied, namely EA and maximizing profits, Bioware and control and moderation of the economy, and players with increase in participation in the economy. Some specific number will obviously need tuning and monitoring (like GTN tax), but that should be easier to do with Bioware's internal development tools that give them real game information and metrics.

 

Thanks for reading

-------------

my PvP 7.2 feedback https://forums.swtor.com/topic/926635-feedback-from-a-new-pvp-er-first-post/

Edited December 21, 2022 by mCion

[Lord_Janosch]

A well written post! Hope BiowarEA reads it

[SteveTheCynic]

17 hours ago, mCion said:

 

 

-Increase GTN tax of high priced in a staggered manner. Numbers up for debate bur for example, items over 1 billion to 10% GTN tax, over 2 billion 15% GTN tax, over 3 billion 25%, and so on.

Observation: make the bands behave like income tax bands do in all three of the countries where I've paid income tax.  Example, with your example figures taken for simplicity:

• 8% on the first billion
• 10% on the amount in the second billion that's above one billion.  (So on 1.5B, the tax is 8% of one billion plus 10% of 0.5 billion.)
• 15% on the amount in the third billion that's above two billion.  (So on 2.6B, the tax is 8% of one billion plus 10% of one billion plus 15% of 0.6 billion.)
• 25% on the part that's above three billion.

Why?

Well, because if you switch the whole amount to the higher rate, you get "dead zones" where nobody smart will place an asking price because the after-tax price would be lower than just above or just below the dead zone.  That's not a good idea, since sellers are liable to want to make a bit more rather than a bit less, so overall it causes asking prices to go up.

17 hours ago, mCion said:

-Restrict or limit player to player trading.

Or just tax it on the same basis, subject to a relatively low "zero rated" band (up to a million or so, no more than that) that's not present in the GTN tax, to simplify giving gifts to newbies.

17 hours ago, mCion said:

 

-Adjust cartel packs. Slightly lower price of Cartel Packs, or remove trash items (jawa junk) from pack contents.

I have a different idea on this.  See below.

17 hours ago, mCion said:

However, that fine tuned equilibrium has changed since EA introduced Cartel Packs, because the intrinsic value of a Cartel Pack as decreased over the years.

Cartel Packs were introduced a LONG time ago, and their price has never changed. However, the amount of possible items contained in a Cartel Pack has drastically increased since they were first introduced as new items, weapons, armors and decorations were designed and introduced. The introduction of these new items increase the overall pool of items Cartel Packs pull from, thereby decreasing the chance of the player getting the "item they wanted". This overall decreases the "value" of the Cartel Pack in the eyes of the player.

Your description of the history of CM packs is a little off.  They were relatively stable for a long while, with each generation of pack working in the same way - a new list of items for the new pack, with some from previous packs in the same generation.

After a while, they introduced the "Platinum Pack" as a single-instance bonus in Hypercrates.  It guaranteed a gold-rarity item (this was before platinum-rarity existed).  It attracted complaints because it didn't give the specific gold-rarity item the player wanted...

Then they added the Chance Cubes, which were a bit like the current generation of packs in that they could contain anything from the market, although if memory serves they dropped only bronze items, while the main packs dropped new silver and gold items.

Then they introduced the Ultimate pack series that did away with the Platinum Pack and the Chance Cubes, and made the whole pack into a founr-item Chance Cube, and that is the point at which the "drastic" increase happened.

But anyway, back to my idea...

Go back to old-style packs, with all rarities in the pack and a chance for an all-items Chance Cube and definitely a Platinum Pack that grants a gold- or platinum-rarity item.

17 hours ago, mCion said:

-Adjust Cartel Market prices. Increase many costs, decrease few others.

why?

Right now it appears that Cartel Market items are all over the place. For example, some armors are less that 1000 CC, others are 1440 CC, and others are over 2000 CC. It may be time to adjust these values. EA will want to make these values just out of reach of the monthly CCs awarded to subscribers. For example, the 1440 CC cost hits this mark, because 2 months of subscription plus security key Cartel Coins is barely not enough to purchase it. However, many other items do not follow this principle. EA and Bioware would need to adjust the CC costs of these other times to follow this idea.

There's an unjustified assumption about what economists call "elasticity of demand" regarding CM items.  This is defined as the reaction of the quantity demanded to small changes in the price.  (Note: "quantity demanded" is not the same as "demand".  "Demand" describes the relationship between the price and the quantity demanded = the quantity that buyers are willing to buy at that price.)

The cost of selling an additional copy of an armour set is essentially zero, so the "neutral" elasticity of demand, in terms of net CC income for the studio, is the one where if they halve the price, they sell twice as many.  If that's the elasticity, it matters not at all (initially) what price they set, so they might as well benefit from the effects on supplies into the P2P economy.  If it's more elastic, they (initially) sell three times as many, say, by halving the price, and it's (initially) in their interest to lower the price.  If it's less elastic, they (initially) sell 1.5 times as many, and it's in their interest to *raise* the price.

Those "(initially)" are in there because there are also questions of market saturation to take account of.  When everyone's bought XoXaan's set, say, there's only a trickle of new sales possible.  Lowering the prices will cause them to reach that point sooner.

Do you have any firm data on the elasticity of demand for CM items?

EDIT: left out one point: the *total* saturation point for a specific CM item involves them selling *many* thousands of copies of that item, one for each active player...  A specific price point will have its own saturation point that's long before that total point, but still thousands rather than tens, unless they put prices way up.

Edited December 22, 2022 by SteveTheCynic

[microstyles]

23 hours ago, mCion said:

Increase GTN tax of high priced in a staggered manner. Numbers up for debate bur for example, items over 1 billion to 10% GTN tax, over 2 billion 15% GTN tax, over 3 billion 25%, and so on.

why?

  Hide contents

This helps flatten the economy. This measure discourages extreme price hiking.
This also taxes more on the super rich, eventually lowering the super rich's exorbitant wealth, while still keeping their big wealth.

Doing so this will aid the inflation problem by lowering total amount of credits in circulation, and the overall player participation problem by encouraging price points where more players can participate in the economy.

I'm not sure why everyone seems to think that higher priced items should be taxed higher. A % tax already scales with price. 

Regardless of that, I don't think the progressive tax would do anything to discourage price hiking. Nobody is going to sell things for less just because they get taxed more. They still make more money for charging more, they'll just end up with less money at the end of the day with your proposed change.

Severe taxes like this could also discourage trade of high value items. If I'm selling an item I value at 4b and buyers value at 4b, we have to take a 1b hit between us in order to make that transaction with the numbers you gave. We very reasonably might not be willing to do that.

Your overall assessment is more realistic than most I see around here though. Raising the GTN cap would help dramatically even without any other changes I think.