This is basically a extension based my last entry money market in virtual world.

As discussed last time the game that I recently playing, Fantasica has a very low demand on money and people trade using commodity or even work in a barter economy instead of using money. The phenomenon has raised my interest and we can investigate them a bit.

I. Advantage of commodity money over inconvertible money

In virtual world all money can be treated as just a simple statistic of a certain player, and you might say all of them are electronic money. To make our classification easier we treat the game like happening in the real world and using the terms "commodity money", "flat money", etc. We would refer the official currency of virtual world as inconertible money to produce a complete simulation.

Why people use commodity instead of money to trade? The instant advantage is that the commodity itself can be consumed whenever necessary, but if you hold inconvertible money it costs you a bit in buying necessary commodity (transaction cost). Of course, this reduces cost and simulates player's decision towards holding commodity instead of currency.

There's a pre-requisite for the system to work:

The commodity available, in terms of turnover/volume transacted should be highly homogenous. That is, most of the barter trading among goods involves the same commodity. Let's say the commodity traded very frequenctly be X. Under such condition the double-coincidence problem is loosened (because X is always preferred though not necessary the first choice as a medium of trade, or they always hold a demand on X). When players used to trade with X the demand on it eventually shift from a simple demand on a goods to a money demand --- they story wealth, as a standard of deferred payment, etc.

The pre-requsite discussed is pretty ridiculous in real world so in real world the history shifts from commodity money to inconvertible money. However in Fantasica this ridiculous condition is satisfied with the commodity 'Time Elixir' which eliminates the cooldown time between battle (having more battle earns you more). They can be bought with real currency and sometimes from quests. The cards trading are highly hetrogeneous but TE is very much dominating the transaction volume so it becomes the trading unit.

There's also an interesting point to note: even in real world, the commodity supply is not a constant. With expected nominal interest rate to increase people produce more (in short run), so MS in such a case is a upgoing slope instead of a vertical line.

## Friday 26 October 2012

## Wednesday 24 October 2012

### The money market in online games

Reference: my note on classical view of money

Recently I'm playing an android app called Fantasica, what interested me is not about the RPG system or something similar, but the trading system. Besides the basic trading unit (let's call it money), there are two commodities that requires money in the real world to acquire (may drop from quests occasionally as well). Interestingly the main transaction unit is the commodities instead of money, which violates the classical view of barter economy. How can this happen?

Before we solve the above problem just revise the problem that came up with barter economy:

1) Difficulty to quantitize its value because the value of a good is subjective, some goods like living things are hard to be divided

2) High transaction cost, low transacted quantity

3) Hard to meet double-coincidence of wants, that is, trader A wants trader B’s goods while trader B wants trader A’s goods. Also heterogeneity exist among goods, it may cause disagreement of the exchange.

4) No standard of deferred payment and low durability: goods depreciates time to time so the value of goods in future is less foreseeable.

Or course the transaction unit that we're interested does not construct a barter economy. They serves as medium of trade, standard of deferred statement, bla bla bla and it's a commodity money. However commodity money still contain some of the disadvantage stated above, like the difficulty in quantitizing its value.

And now what's the difference between virtual world's economy and that of in the real world?

Recently I'm playing an android app called Fantasica, what interested me is not about the RPG system or something similar, but the trading system. Besides the basic trading unit (let's call it money), there are two commodities that requires money in the real world to acquire (may drop from quests occasionally as well). Interestingly the main transaction unit is the commodities instead of money, which violates the classical view of barter economy. How can this happen?

Before we solve the above problem just revise the problem that came up with barter economy:

1) Difficulty to quantitize its value because the value of a good is subjective, some goods like living things are hard to be divided

2) High transaction cost, low transacted quantity

3) Hard to meet double-coincidence of wants, that is, trader A wants trader B’s goods while trader B wants trader A’s goods. Also heterogeneity exist among goods, it may cause disagreement of the exchange.

4) No standard of deferred payment and low durability: goods depreciates time to time so the value of goods in future is less foreseeable.

Or course the transaction unit that we're interested does not construct a barter economy. They serves as medium of trade, standard of deferred statement, bla bla bla and it's a commodity money. However commodity money still contain some of the disadvantage stated above, like the difficulty in quantitizing its value.

And now what's the difference between virtual world's economy and that of in the real world?

## Monday 15 October 2012

### Counting in combinatorics I - Review in basic arithmetics

*Counting is the action of finding the number of elements of a finite set of objects.*

Counting is perhaps described as a pre-math skill, but is consistantly used in numerous higher fields, like linear algebra, abstract algebra, and especially combinatorics --- fitting the definition above, combinatorics emphasizes the sample spaces and targetted set. In other words, number of combinations is simply the number of elements in the targeted set.

I. the basic implication of counting

Back to what you've learnt in the kindergarden, we are turning a "situation" into a specific number, which is an elemental quantification process. If '+' is representing 'an' apple then we count '+++' --- 'an apple and an apple and an apple' --- to 3.

Sometimes we will use the concept of steps to conduct the counting --- we start from '+' which is 1, two '+'s left means 2 steps forward which is 2, and 3. The 'step approach' develops as the principle of addition in such given situations.

What can be called a suprise is that what we've learnt in kindergarden has a high coincidence with vigoruously defined arithemetic system, which relies on the Peano's arithmeitc axioms.

Another approach for counting is by defining specific finite numbers. Instead of saying '+++' is 'one more than one plus one' we 'define' it to be 'three' --- this is particular effective for finite numbers, as well as for pre-education as they don't have the concept of addition.

In a formal way to describe the above approach, we say the 'situations' (number of '+', apples, whatever) is mapped to a sequence {1,2,3,4,.....}, which is the natrual numbers.

Mapping between different spaces is one of the most important idea in mathematics: geometry (inversion), linear algebra (linear transformation), algebra (functions), statistics (distribution transformation), etc. And we use mapping again in counting.

More precisely, combinatorics, the extension of counting.

II. Principle of counting

This time I didn't aim to introduce so advanced tricks to compute hard combinatorical problem, but I'm trying to provide alternatiive views for counting-based college combinatorics problems.

How do we count?

With finite and 'small' set of elements we can count it by 'definition' of specific numbers like above, but for harder problems we need an aloairthm for it.

Denote the count of a set A be . (If you know some set theory this shouldn't be something new to you.)

The two basic principle:

*.*

__Principle of addition (in combinatorics):__Why? We start to count from A, starting from

__zero__: 0, 1, 2, .... up to |A|. We can also count B, starting from zero again: 0, 1, 2,... up to |B|. Now, if we start to count B after A --- starting from |A|, we have |A|, |A|+1, |A|+2,... up to |A| + |B| which is our answer.

Formally, as elements repetition will be counted with its multiplicity, we assume all elements are distinct, then which leads to the above result.

I have to point out that the concept of zero appears quite frequently which is different from the natrual number system elementally ruled by the peano's axioms. This is an interesting problem to think with: As natrual numbers are used since the pre-historic era but the concept of zero appears very lately (later than negative numbers and fractions), why the concept of zero is so elemental in modern society? One of the reason is probably about the number bases creates a 'nothing' in a certain digit but the overall number represents something --- in ancient times they uses a blank to represent 'nothing' for that digit but that looks so odd and the concept of zero eventually appears.

*Definition.*We can 'multiply' sets (formally called cartesian product): If where A, B are sets, then C is also a set which includes:

*Example.*Denote the result of the first toss of a coin be and that for the second coin be the same. The result of tossing two coins is given by .

In basic arithmetic, multiplication is only a 'repetition' or 'short form' of addition (similarly, power or factorial is only a 'repetition' or 'short form' of multiplication.

Here's quite a famous quote from

*master rigorist*, Landau's

*Foundation of Analysis*:

'

*The preface for student...*

*4. The multiplication table will not occur in this book, not even the following theorem:*

*2*2 = 4*

*but I would recommend, as an exercise, define:*

*2 = 1+1*

*4 = ((1+1)+1)+1*

*then prove the theorem as an exercise...*

*The preface for scholar...*

*...I hope that I've written this book in such a way that a normal student can read it in two days. And then (since he already knows the formal rules from school) he may forget its contents.*"

(Interested reader should try to prove the above statement.)

Multiplication is not a necessary in arithmetic because there is addition. Similarly we transform the expression of multiplication into the basic way (addition) and our counting would work.

*.*

__Principle of multiplication (in combinatorics):__What does it imply? If A and B are sets with some elements, and C is the set of choice to choose one from A and one from B, then the resulting count is given by |A x B|.

Proof: left as exerise --- if you have no idea try to prove the theorem that Landau stated.

Up to now it seems that we are simply repeating what we're taught in schools, but starting from the basic, magic will happen soon.

## Friday 5 October 2012

### The journey of Tenhou

Considering that I recognize appropiate tactics since like a month ago (with 200 plays already accumulated), the recent result sounds really good here. Different from the Canton style or Taiwan style, the result from Japanese mahjong is accounted every 2 'rounds', the points calculation and yaku patterns promotes the defensive tactics to a very large extent. Like many sports, somehow you need some luck to allow you to score in the offending side, but defending is more about determination, alertness, calculation and skill, and most people treat the Japanese styled mahjong with the highest technical level about different styles of mahjong.

Raising the rank is quite time-consuming but sometimes through playing against the public you can really know your ability throughly.

Well... it's hard to talk about them in English...

I don't think I'm good enough to deal with tactics systemetically yet, but there's one point I would like to stress with:

As an echo with the passage I written about, different games has their own index of dependence on luck and randomness, but as long as they're not completely random (an example for completely random game would be the jackpot 777 machines in casino... that's why you should never play in casino but you'll always lose as your skill isn't helping you.), through a large enough number of plays the confidence interval of ability to play can stil be distingusihable among different players. Some of the games doesn't allow a large number of plays (at least at the competition level) but mahjong isn't one of them. Through a large number of play we can have a series of statistics to deal with. One of the most significant statistic is the percentage of ranking. In a 3 -players mahjong assuming complete randomness the expected result should be like :

1: 0.333, 2: 0.333, 3: 0.333

However, as you can see above the percentage of ranking really differs quite a lot. In private multiplayer room my percentage of 1st rank is almost 50% with a large enough plays (300). If you have studied some basic statistics you will know that a hypothesis testing --- chi square test here. You can actually work out yourself, but the about statistics is showing evidence that tactics is significant to your ranking.

Despite the statistical arguement, we can also use 'existance' to support our arguement inversely. As most players know, the overall ranking depends on the pts, and sometimes the pts you lose for 3rd is more than you earn per 1st. That is, to raise your rank you have to get 1st more than 3rd in a certain ratio --- under a completely random system this is possible but the iteration expectation length is much much longer than the entire situation. Mathematically if a point start at 0 at t = 0 and when t goes by 1 unit, the point goes left or right randomly. Then at t = k the expected maximum distance from origin is 1/sqrt(k). Similarly here: If you are going to get a net +10 ratio you expect to have 100 plays; but when the ratio of 1st:3rd is 4:3 (for most cases), the net difference required increases as number of games increases, and as a result the games required increases dramatically.

You can try this from the following Python code:

from random import random

def randomwalk(netdiff=10,trial=20,plus=1,minus=-1):

for i in range(trial):

x = 0

count = 0

while x < limit:

a = random()

if a < 0.5:

x += plus

else:

x += minus

count += 1

print count

randomwalk()

Now, try randomwalk(10,20,1,-4.0/3)? What will happen?

It shows that it's nearly impossible to raise the rank under completely random system, and that's why we need tactics, we need to defense to avoid getting the third, and this is how 'gambling' stuffs can be 'scientific'.

There are far more stuffs in mahjong involves statistical analysis or even probability calculation, and I think more of them will come soon.

Raising the rank is quite time-consuming but sometimes through playing against the public you can really know your ability throughly.

Well... it's hard to talk about them in English...

I don't think I'm good enough to deal with tactics systemetically yet, but there's one point I would like to stress with:

As an echo with the passage I written about, different games has their own index of dependence on luck and randomness, but as long as they're not completely random (an example for completely random game would be the jackpot 777 machines in casino... that's why you should never play in casino but you'll always lose as your skill isn't helping you.), through a large enough number of plays the confidence interval of ability to play can stil be distingusihable among different players. Some of the games doesn't allow a large number of plays (at least at the competition level) but mahjong isn't one of them. Through a large number of play we can have a series of statistics to deal with. One of the most significant statistic is the percentage of ranking. In a 3 -players mahjong assuming complete randomness the expected result should be like :

1: 0.333, 2: 0.333, 3: 0.333

However, as you can see above the percentage of ranking really differs quite a lot. In private multiplayer room my percentage of 1st rank is almost 50% with a large enough plays (300). If you have studied some basic statistics you will know that a hypothesis testing --- chi square test here. You can actually work out yourself, but the about statistics is showing evidence that tactics is significant to your ranking.

Despite the statistical arguement, we can also use 'existance' to support our arguement inversely. As most players know, the overall ranking depends on the pts, and sometimes the pts you lose for 3rd is more than you earn per 1st. That is, to raise your rank you have to get 1st more than 3rd in a certain ratio --- under a completely random system this is possible but the iteration expectation length is much much longer than the entire situation. Mathematically if a point start at 0 at t = 0 and when t goes by 1 unit, the point goes left or right randomly. Then at t = k the expected maximum distance from origin is 1/sqrt(k). Similarly here: If you are going to get a net +10 ratio you expect to have 100 plays; but when the ratio of 1st:3rd is 4:3 (for most cases), the net difference required increases as number of games increases, and as a result the games required increases dramatically.

You can try this from the following Python code:

from random import random

def randomwalk(netdiff=10,trial=20,plus=1,minus=-1):

for i in range(trial):

x = 0

count = 0

while x

if a < 0.5:

x += plus

else:

x += minus

count += 1

print count

randomwalk()

Now, try randomwalk(10,20,1,-4.0/3)? What will happen?

It shows that it's nearly impossible to raise the rank under completely random system, and that's why we need tactics, we need to defense to avoid getting the third, and this is how 'gambling' stuffs can be 'scientific'.

There are far more stuffs in mahjong involves statistical analysis or even probability calculation, and I think more of them will come soon.

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