Recently I came across a post about an generative AI based RPG where the player is suppose to defeat a mafia boss, but the player ended up starving the mafia to death by breaking down their source of income. Shops under their name, individual service spots...eventually the mafia ran broke, can't pay for their pawns or even maintain their weapon, so it ended up dissolving.
While the developer responded by mentioning an underlying logic of the NPCs: it takes money to do anything. Nothing can be done without money, and hence the dissolution of the faction. This is not completely wrong but people are expecting mafia to give a mafia response, by securing their income by all necessary means. The question is, suppose we still managed to starve out the mafia despite all possible retaliation taken by the mafia, does that count as a stage clear? Does that count as a viable approach to clear the stage?
Well, I have not invest time into the game but I have a very similar question. When we allow a proper market in a game, how far can we understand virtual economy using knowledge from the real world? Are players really taking the market seriously to the point the invisible hand is working? Can we understand in-game competition as a competition of numbers, and to some extent a competition in the economy? I do not plan to propose an answer here. Instead below we go through three different thoughts from the same game a proper market. Those who read my previous entries on (1) game taxation and (2) utility evaluation could probably guessed it. I am talking about the same game, so you may again take this entry as a sequel.
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A competition of production is a competition in sourcing materials
Consider a league based format inside the game where players produce products according to fixed recipe. Each recipe, depending on the difficulty rating, would register a score for the producer. At the end, participants are rewarded based on ranks (and ranks only, no score based rewards).
These produced items are usually have negative gross margin due to oversupply during league. On the other side since ranked reward has positive utility, the means the cost based consideration shifts a lot with the existence of the league. You no longer consider the profit solely by producing items, but also the expected ranking reward by participating the league.
I don't really like such design though, because that means the more your produce, the lower cost basis it comes due to better reward. One says it promotes competition, but to me a more healthy universal environment is equally important where lesser players could survive at least by taking role in any specific part of the game.
So, how do you win the league? Rather than trying to stay online 24/7 with all kinds of micromanagement, it's much easier to sweep material on the market to that other producers would produce at a deep loss. If league participants are here due to profit, then it's easier to drive them away by shutting profitability down.
This is even clearer think deeper about how you define 'winning' the league. Is it by ranking #1 or anywhere you think is high enough? Not always. If you define 'winning' by coming out of the league with the biggest net profit, then sweeping the market feels so natural as it lowers your cost and raises others' cost (at least it makes others' cost going up much quicker than yours).
Taxing near currency
This is something I have already discussed before, but finally the devs decided to take action. The background is simple: the monthly pass is a purchasable item in the game. It is also tradable meaning it has trading value circulating in the market. It also has low vendor value meaning it has low effective tax rate comparing to other means, since everything in private trade is 10% taxed by their vendor value. Recently whales flooded in along with huge amount of pass influx disrupting the market, so the dev finally takes the action many have asked over the year.
The dev plans to raise the vendor value of the pass, raising the effective tax rate of trading passes to somewhere non-zero.
First question. Do you think the market price of the pass to go up or down? (Public market is 12% taxed but only on the sell side.)
To me it's a no brainer, but apparently some still think it would go up because those who use the pass for private trading would shift the tax to the opposite side. Well, that's a very Trump idea but you are not Trump. Some obvious reasons the pass would go down are:
- There are alternatives as trading currency. If additional tax is imposed just on this item, there are certainly other choices with similar effect.
- Friction means it loses part of its utility, as well as part of its price.
- The whale at the end is what created oversupply and the downtrend is not going to change until that is resolved.
- The downtrend also means the value of investing in the long term is also popped, attracting further panic sell pressuring the price.
- ...
Beware that this is M1 in the money supply with gold being M0. What would happen in a virtual economy when M1 shrinks but not M0? Usually the answer would be 'the same': with lower money supply we would expect a deflation and bla bla bla...the difference here is, trades that utilize M1 seems to be isolated from trades that utilize M0. This is because the pass itself is quite expensive, and is mostly used in high roll trading only. Most primary resources and production are gold based and has a vendor price floor. Will we see a deflation under such circumstances?
My prediction is a no. I say this is a prediction more than on theory because it involves more than the demand and supply of a single item. This is now about the economy as a whole which is very hard to describe in full here.
In our case, most items are priced either to the vendoring price floor, or to a time-based valuation. If both items are obtained in about 1 hour of work, you would expect them to be priced similarly. This is due to free flow of occupation where players seek to maximize profit per hour, and at equilibrium the profit per hour across all actions should be similar unless you choose to work on something that is unwanted and can only be vendored. Even then, some items provides good profit per hour just by vendoring, and these 'inelastic demand' also provides the price floor of any time-base valuating rates.
At the end, price of items probably would stay, but deflation of the pass means whales must pay more to buy items they wanted. Very fair, win to the devs and f2p players, probably win to the whales too...
Taxing the backbone
Some advocates would suggest to take a step further. That is, to tax some even more essential part of the game economy.
Up to now, there are gold sinks everywhere but it is not very hard to avoid most of them. For trading tax, you can avoid by trading using the pass or just don't trade at all. For entry fees, you can avoid doing those activities too.
On top of that, one of the important gold sink is malfunctioning -- cost of battling. Most MMORPG prevents low level farming by (1) exp penalties (2) assurance of growing yield curve along level of farming zones. This this game however, multiple mechanics ensures consistent demand on lower farming items to the point where multiple lower items are more valuable despite having a lower vendor price floor. In that case, players simply keep fighting lower mobs with near zero battle cost.
Such a problem is kind of structural without a straightforward solution. We can however, look into the part of players that do not battle. What if we impose a tax on an essential node of production so that every producer is taxed even if they vendor everything?
Let's imagine an item called coal. Coal is required to craft food for battles, as well as doing forging and smelting. Without coal, productions are pretty much reduced to primary: instead of cooking you can only fish, instead of crafting with wood you can only chop trees. Coal is so essential that this is the easiest item that you can farm. On the other hand since it's so popular, it has maintained a high market price above the vendoring price floor.
Not only coal is a nice way to farm gold, it's also a good trading medium other than the pass. It's much more dividable and cheap with an effective tax rate of 2%, small enough to be tolerable. This is such big part of the game yet not sinking much gold.
Here is the nuclear bomb option: we can ban coal mining (existing coal is still tradable) and put coal into NPC shops, providing at a price of equal to or lower than current market price. In that way, we are draining much more gold every time a coal is used.
The reason why this is so destructive is because how much more gold is drained. Suppose a coal is priced at 5g on the market. A traded coal would cost 0.6g of tax at 12%. If it is bought from the NPC, 5g would be drained which is 7.5 folds higher.
In order to properly account the total money supply in the economy, we first want to properly define the money supply created by a single item to vendor. All intermediate products does not create money supply as long as they are not for vendoring, which is slightly different from the value added approach in GDP calculation. Now the formula is
ΔMS = Price - material cost from players x tax rate - material cost from NPC
And, the total change of money supply over a period of time is the sum of money supply created by all vendorable items produced minus all the gold consumed, upon M1 changes due to price variation and external source such as injection of monthly passes.
It is clear that when we ban coal mining and sell that in NPC shops, money supply created would shrink by price x (1 - tax rate) assuming price stays the same. Consider how vital coal is in the economy, its affect in money supply would easily overwhelm any tax imposed on near currencies. It is so scary that the dev starts questioning so much about such approach.
But...is it that bad really?
Consider another approach of accounting money supply change. Total change of money supply is the sum of money supply change (created - destroyed) of each individuals. We know have a vast group of players, the coal miners, that do not create money supply at all. What are they going to do without being able to mine coals?
There are so many things to do in-game other than mining coals. Many of them are money creating. What we did actually liberated players to create more money supply! Primary production is often the part that creates the least profit, in real world as well as in this virtual economy. If we can do all the mining for them, they can be a real force in money creation. Of course, all these are guesses on paper, and we don't know unless we try that for real. If I have to make a guess the net effect is restrictive, but it is surely not as bad as some would imagine.
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Well, I guess this is why some MMORPG needs a dedicated position of in-game economist. It is not so easy for developers to understand the market as much as the players. But guess what? The game is always the developer's game. I guess it's fine for the dev to mess up the economy at the end of the day. As a player, I am happy to take all arbitrage whenever I find some.
