potatoskunk
Master Corporal
There is a strong sense among FoE players that, when trading goods across ages, a fair trade is a 2:1 ratio.
I disagree. Strongly.
There have been attempts to calculate a fair ratio by the costs to produce goods in tiles, etc., but I disagree with those too. Those attempt to calculate the cost of producing goods and so will tend to approximate a fair price based on supply, but they completely ignore the demand side of the equation. And even the supply side is hard to calculate, since a lot of goods are not produced by goods buildings.
Let's go back to economics 101:
* Prices are set by supply and demand.
* An efficient market is one in which all agents are maximising their utility subject to their budget constraints and all markets clear.
* A fair trade is one in which a willing buyer and a willing seller agree on a price that they think makes them both better off.
* Price floors cause surpluses as people produce extra goods they end up being unable to sell.
* Price ceilings cause shortages as people won't produce goods they can't sell at a profit.
Now let's apply those economic principles to FoE:
What do you see when you look in guild trade threads and in available trades on the market?
What I see, over and over again, is a large number of people attempting to trade down at a 2:1 ratio - and the trade sits for days with no takers unless a fellow guild member grabs it to be nice. Someone attempting to trade up, on the other hand, at a 1:2 ratio, gets their trade snapped up instantly. Everyone wants to trade down, and hardly anyone wants to trade up. We have price controls imposed not by the game design, but by culture and player assumptions. Markets are not clearing; we have people wanting to make a trade that are unable to do so because there's nobody willing to make a trade the other direction.
This should tell us that, at the 2:1 price, the demand for lower-age goods is greater than the supply. Everyone wants lower-age goods, but nobody can sell lower-age goods at a good enough price to be worth producing more of them.
We have a price floor, in that it's assumed you won't trade down at a lower ratio than 2:1. We have a price ceiling, in that you can't trade up at a higher ratio than 1:2 without someone complaining about unfair trades. As a result, we have a surplus of higher-age goods and a shortage of lower-age goods.
IA goods are not worth twice as much as BA goods. EMA goods are not worth twice as much as IA goods. HMA goods are not worth twice as much as EMA goods. But the 2:1 assumption makes people think that they are.
My guess is that a truly fair price will tend to bounce around between 1.3:1 and 1.7:1 for trades across ages, depending on temporary localised spikes in demand for one good or another. A truly fair price for trades within a particular age will probably tend to bounce around between 0.8:1 and 1.2:1, again depending on temporary localised spikes in demand for one good or another.
Let's abandon the 2:1 ratio. Abandon any idea of a fixed ratio and allow the price to float freely according to supply and demand.
How would this work?
Let's say you have some Copper, an EMA good, and want to trade down to Iron, and IA good. Right now you just put it up at a 2:1 ratio and hope somebody takes it.
What if, instead, you looked in the market to see what other trades were out there? You could offer your trade at a comparable ratio to the others currently on the market, and you would know you were offering a competitive price. Maybe there are a bunch of trades available at a 1.5:1 ration, and you could put yours at the same rate.
If you're not in a hurry and are prepared to wait for a better price, you could offer a higher ratio; if the current ratio is 1.5:1, maybe you would put yours up at 1.6:1. There would be no guarantee that your trade would get taken, but if there was a future spike in demand for copper (and I would expect the price to bounce around quite a bit within a reasonable range), all the 1.5:1 trades would get taken and people would start taking 1.6:1 trades, and your trade would get taken too. You might have to wait a few days, and there's no guarantee it would get taken before it expired, but if you're prepared to wait you might get a better price.
Or, if you were in a hurry, you could offer a lower ratio and it would get grabbed quickly by someone who wanted the low price. If the current going rate is 1.5:1, you could put your trade up at 1.4:1, and it wouldn't take long for someone to snap it up.
You could also look to see what trades there are currently in the market offering Iron for Copper. If the best trade is at a 1.5:1 ratio, you might simply take that instead of putting up your own trade. Or if the best is at 1.7:1, you would have to decide if it's worth it to pay that price to get the Iron immediately.
On the Iron/Copper situation, I would expect a common scenario would be to have multiple people trying to trade Iron for Copper at ratios varying from 1:1.3 to 1:1.5, and multiple people trying to trade Copper for Iron at ratios varying from 1.5:1 to 1.7:1. For those versed in economics, the difference between the best Iron:Copper ratio and the best Copper:Iron ratio would be the bid-ask spread.
What would we lose?
* We would lose the simplicity of the easy 2:1 price - but looking at the open trades on the market to see what other trades are available is pretty quick and easy too.
* People in later ages producing late-age goods would no longer be able to exploit lower-age guild members by insisting on an unfair 2:1 ratio, and would have to take the current market price, which might be more like 1.5:1. They may not think of it as exploiting lower-age guild members and it's usually not intended that way, but that is the effect. Lower-level players are being pushed into unfair trades because of a cultural assumption that this arbitrary 2:1 price is "fair" when it's anything but.
What would we gain?
* Trades would actually get taken more quickly. It would be as quick and easy to trade goods down an age as it is to trade them up. Any competitive trade would probably get taken within hours or minutes, rather than days. You wouldn't need to rely on a fellow guild-mate willing to pick up your trade at their own expense.
* There would also tend to be trades that you could take immediately if you were desperate to get the trade executed immediately; you might have to pay a bit of a premium price to get an immediate trade, but the possibility would usually be there.
* If there's a shortage of a particular good, someone would ramp up production to take advantage of the high prices, or someone sitting on a surplus would have an incentive to sell it off.
* We wouldn't have to try to calculate what a fair trade is based on the cost of production, etc. You could simply look in the market to see the current going rate. The price would float based on supply and demand.
What about selling late-age goods for FPs?
This would not change.
If a typical cross-age trade goes for about 1.5:1, rather than 2:1, trading up across multiple ages to get high-level goods is still ridiculously expensive - trading up just four ages would be roughly a 5:1 ratio, and trading up six ages would be roughly 11:1. So if someone wants a couple thousand late-age goods to build a GB, it would cost them potentially tens of thousands of goods of their age to trade up to that level.
As a result, there will still be a market for those who want to sell late-age goods for FPs. The market might shrink slightly, but not significantly.
How would we make this happen?
There would not need to be any functional change in the game. Nothing in the game mandates the 2:1 ratio. We would just need to change the culture.
If you're trying to trade down and it's taking a long time, look at the market and just beat the current best offer. If the current best offer is 2:1, trying putting your trades at a 1.9:1 ratio or maybe 1.95:1 instead of 2:1. Encourage others to do the same; direct them to this post if needed. You'll find those 1.9:1 trades get taken up more quickly than the 2:1 trades.
If it starts to catch on, any time you want a trade to execute quickly, you can just look at the market and beat the current best offer - or look to see if there's an offer the other way that's at a price you're willing to pay.
If enough people start to appreciate the concept of truly fair trades based on supply and demand, everyone will benefit. You'll be able to trade goods up and down quickly and easily at prices that float freely based on what people are willing to pay. Competitively-priced trades will execute in minutes or hours, rather than days, benefiting everyone.
I disagree. Strongly.
There have been attempts to calculate a fair ratio by the costs to produce goods in tiles, etc., but I disagree with those too. Those attempt to calculate the cost of producing goods and so will tend to approximate a fair price based on supply, but they completely ignore the demand side of the equation. And even the supply side is hard to calculate, since a lot of goods are not produced by goods buildings.
Let's go back to economics 101:
* Prices are set by supply and demand.
* An efficient market is one in which all agents are maximising their utility subject to their budget constraints and all markets clear.
* A fair trade is one in which a willing buyer and a willing seller agree on a price that they think makes them both better off.
* Price floors cause surpluses as people produce extra goods they end up being unable to sell.
* Price ceilings cause shortages as people won't produce goods they can't sell at a profit.
Now let's apply those economic principles to FoE:
What do you see when you look in guild trade threads and in available trades on the market?
What I see, over and over again, is a large number of people attempting to trade down at a 2:1 ratio - and the trade sits for days with no takers unless a fellow guild member grabs it to be nice. Someone attempting to trade up, on the other hand, at a 1:2 ratio, gets their trade snapped up instantly. Everyone wants to trade down, and hardly anyone wants to trade up. We have price controls imposed not by the game design, but by culture and player assumptions. Markets are not clearing; we have people wanting to make a trade that are unable to do so because there's nobody willing to make a trade the other direction.
This should tell us that, at the 2:1 price, the demand for lower-age goods is greater than the supply. Everyone wants lower-age goods, but nobody can sell lower-age goods at a good enough price to be worth producing more of them.
We have a price floor, in that it's assumed you won't trade down at a lower ratio than 2:1. We have a price ceiling, in that you can't trade up at a higher ratio than 1:2 without someone complaining about unfair trades. As a result, we have a surplus of higher-age goods and a shortage of lower-age goods.
IA goods are not worth twice as much as BA goods. EMA goods are not worth twice as much as IA goods. HMA goods are not worth twice as much as EMA goods. But the 2:1 assumption makes people think that they are.
My guess is that a truly fair price will tend to bounce around between 1.3:1 and 1.7:1 for trades across ages, depending on temporary localised spikes in demand for one good or another. A truly fair price for trades within a particular age will probably tend to bounce around between 0.8:1 and 1.2:1, again depending on temporary localised spikes in demand for one good or another.
Let's abandon the 2:1 ratio. Abandon any idea of a fixed ratio and allow the price to float freely according to supply and demand.
How would this work?
Let's say you have some Copper, an EMA good, and want to trade down to Iron, and IA good. Right now you just put it up at a 2:1 ratio and hope somebody takes it.
What if, instead, you looked in the market to see what other trades were out there? You could offer your trade at a comparable ratio to the others currently on the market, and you would know you were offering a competitive price. Maybe there are a bunch of trades available at a 1.5:1 ration, and you could put yours at the same rate.
If you're not in a hurry and are prepared to wait for a better price, you could offer a higher ratio; if the current ratio is 1.5:1, maybe you would put yours up at 1.6:1. There would be no guarantee that your trade would get taken, but if there was a future spike in demand for copper (and I would expect the price to bounce around quite a bit within a reasonable range), all the 1.5:1 trades would get taken and people would start taking 1.6:1 trades, and your trade would get taken too. You might have to wait a few days, and there's no guarantee it would get taken before it expired, but if you're prepared to wait you might get a better price.
Or, if you were in a hurry, you could offer a lower ratio and it would get grabbed quickly by someone who wanted the low price. If the current going rate is 1.5:1, you could put your trade up at 1.4:1, and it wouldn't take long for someone to snap it up.
You could also look to see what trades there are currently in the market offering Iron for Copper. If the best trade is at a 1.5:1 ratio, you might simply take that instead of putting up your own trade. Or if the best is at 1.7:1, you would have to decide if it's worth it to pay that price to get the Iron immediately.
On the Iron/Copper situation, I would expect a common scenario would be to have multiple people trying to trade Iron for Copper at ratios varying from 1:1.3 to 1:1.5, and multiple people trying to trade Copper for Iron at ratios varying from 1.5:1 to 1.7:1. For those versed in economics, the difference between the best Iron:Copper ratio and the best Copper:Iron ratio would be the bid-ask spread.
What would we lose?
* We would lose the simplicity of the easy 2:1 price - but looking at the open trades on the market to see what other trades are available is pretty quick and easy too.
* People in later ages producing late-age goods would no longer be able to exploit lower-age guild members by insisting on an unfair 2:1 ratio, and would have to take the current market price, which might be more like 1.5:1. They may not think of it as exploiting lower-age guild members and it's usually not intended that way, but that is the effect. Lower-level players are being pushed into unfair trades because of a cultural assumption that this arbitrary 2:1 price is "fair" when it's anything but.
What would we gain?
* Trades would actually get taken more quickly. It would be as quick and easy to trade goods down an age as it is to trade them up. Any competitive trade would probably get taken within hours or minutes, rather than days. You wouldn't need to rely on a fellow guild-mate willing to pick up your trade at their own expense.
* There would also tend to be trades that you could take immediately if you were desperate to get the trade executed immediately; you might have to pay a bit of a premium price to get an immediate trade, but the possibility would usually be there.
* If there's a shortage of a particular good, someone would ramp up production to take advantage of the high prices, or someone sitting on a surplus would have an incentive to sell it off.
* We wouldn't have to try to calculate what a fair trade is based on the cost of production, etc. You could simply look in the market to see the current going rate. The price would float based on supply and demand.
What about selling late-age goods for FPs?
This would not change.
If a typical cross-age trade goes for about 1.5:1, rather than 2:1, trading up across multiple ages to get high-level goods is still ridiculously expensive - trading up just four ages would be roughly a 5:1 ratio, and trading up six ages would be roughly 11:1. So if someone wants a couple thousand late-age goods to build a GB, it would cost them potentially tens of thousands of goods of their age to trade up to that level.
As a result, there will still be a market for those who want to sell late-age goods for FPs. The market might shrink slightly, but not significantly.
How would we make this happen?
There would not need to be any functional change in the game. Nothing in the game mandates the 2:1 ratio. We would just need to change the culture.
If you're trying to trade down and it's taking a long time, look at the market and just beat the current best offer. If the current best offer is 2:1, trying putting your trades at a 1.9:1 ratio or maybe 1.95:1 instead of 2:1. Encourage others to do the same; direct them to this post if needed. You'll find those 1.9:1 trades get taken up more quickly than the 2:1 trades.
If it starts to catch on, any time you want a trade to execute quickly, you can just look at the market and beat the current best offer - or look to see if there's an offer the other way that's at a price you're willing to pay.
If enough people start to appreciate the concept of truly fair trades based on supply and demand, everyone will benefit. You'll be able to trade goods up and down quickly and easily at prices that float freely based on what people are willing to pay. Competitively-priced trades will execute in minutes or hours, rather than days, benefiting everyone.