   Economy Issue
  HiI'm trying to get my head around an economy issue. Say I have Resource A that can be mined, Mineral A that can be obtained by refining Resource A, and Item A that can be made from Mineral A.Item A's price = Mineral A's price + labour + profit.Mineral A's price = Resource A's price + labour + profit.Resource A's price = ?I assume Resource A's price is related to its abundance and time to mine, but I'm having a hard time coming up with a relationship for it. I would rather not have some hard-coded 'base price' for resources.Any ideas on how to calculate Resource A's price?Thanks & RegardselFarto[Edited by - elFarto on May 15, 2009 8:49:59 AM]
  The price for Resource A would be determined by the abundance and the time it takes to mine it. These 2 factors should not be constants if you ask me.If it is for a MMO, Resource A could be turned into a parameter for power by limiting the players access to it as the sources dry out, or it could be made a niche production with a very high price if it suddenly took longer to mine(because players would have to dig deeper or something).As I see it that is actually also the only 2 parameters that control the price of the resource. Possibly you could have it in a dangerous area only, that would alter the price as well.In MMOs this is actually often missing and suddenly gold turns into nothing because of the abundance of it. This is usually solved by the Dev team by introducing new a better materials... but it only takes time before the same problem arises. I think you would be better off if you had the availability of the resource either dynamically calculated on the background of certain parameters or adjusted manually if that is an option(You're the server admin of the MMO)   ;  The cost of the resource is its abundance in supply plus its extraction factor.  The abundance in supply is how much of the raw resource is currently floating around.  Actors will often build up little caches of the resource to hold during times of glut to be sold during times of scarcity.  The extraction factor is more than the time it takes to extract (or 'create') new raw material.  Think of it more as the cost to extract the material.  The danger of extraction, the time investment, the material investment (maybe you can only extract with a gold-plated axe and a diamond-tipped drill?), the abundance of extraction sites, etc.Going into such detail may be too much unnecessary work for a game, though.  If you want a general way to calculate the base cost of a resource, give the extraction factor some generic value.  I suggest giving the resource with the most abundant extraction sites a base value of 1 for extraction, since that will likely be the easiest resource to extract.  Then apply some metric, appropriate for your game environment, to adjust the extraction value of difference resources based on the abundance of their sites and the danger of those sites compared to the base resource.  Then your actual resource cost can fluctuate based on your relatively fixed extraction values in addition to the amount of extracted resource in play.  This should give a decent approximation and feel of a 'real' economy.   ;Quote:Item A's price = Mineral A's price + labour + profit.Mineral A's price = Resource A's price + labour + profit.Resource A's price = ?Although price might be calculated like this, value isn't, and this is where you are having problems.Value is not the same as price.In your calculations, the price of Resource A = labour + profit.However, this will not make your economy the same as a real economy.What you need to look at is the Value of the Item, that is how much it can do for the owner.For instance, a piece of food is valuable because it allows one to live.Think about this:Of what value is a glass of water to a drowning man? Of what value is that same glass of water to a man dyeing of thirst?In a real economy, each party trades something of equal or lesser value than what they are receiving, but because each person values the items differently you can get a net increase in value for both parties.Lets take something with which you would be familiar with: buying a computer game.To buy a computer game, you have to give the shop attendant some money, and they give you the game.If you have lots of money, then the value of the money you hand over is not all that great, but if you don't have much money, then the value of that money is all that much greater. However, that game can give you fun and quality of life. This is valuable to you.For the shop, that money will allow them to pay their staff, and buy their stock. As buying stock is necessary for that shop to continue to function, then the money you hand over will always be very valuable to that store. However, as they have multiple copies of any game, and can order more copies in, the value of any particular game is not much beyond the amount of money needed to order in new stock and pay their staff.If the value of the money you hand over to the store is less than or equal to your value of the game, then you will be willing to make that exchange and buy the game. If the store values the money you would hand over for the game more than they value the game, then they will be willing to exchange and sell you the game.When you understand this, much of economics will make sense.So, how can we apply this to a game, and in particular your game?First of all, think of the value that having the ore, resource and item would give that good's owner? This will usually be in terms of the potential value to other would-be owners.If an item is valuable to buyers and the demand is high, then it will be able to be sold for a lot of money. If an item is not in demand, then it will not usually be sold for a lot of money (actually there is more ways to generate value on an item beyond supply and demand - aka scarcity - and this would allow you to create a post scarcity economy). However, there is still the costs associated with its production (labour). Labour itself can be seen as something given in trade.You have to work out what each owner values the goods they are trying to purchase and the value of their money (not the numerical value of the money, but of what value that amount of money is to them). Then find a place where the values for both parties (buyer and seller) meet and this will be the price for the good at that point in the supply/manufacturing chain.Purchase Price + Labour + Operating costs is a good base level for the value of a good. However there is an unknown value associated with the end product (the Item) and this will need to be set by you, or by your program analysing the demand for the item (if you want to make it dynamic).We can use an average between two values as a simple approximation to how a negotiation between values for the two parties. This gives us these equations:Item A's Value = (Value to End User + (Mineral A's Value + Labour + Operating Costs)) / 2 Mineral A's Value = (Item A's Value + (Resource A's Value + Labour + Operating Costs)) / 2Resource A's Value = (Mineral A's Value + (Production Value + Labour + Operating Costs)) / 2   ;  Thank you Edtharan, that's a very informative post. I guess the main problem I'm having is attempting to get my NPC's to know what a 'fair' price is for an item.Thanks & RegardselFarto   ;Quote:Original post by elFartoThank you Edtharan, that's a very informative post. I guess the main problem I'm having is attempting to get my NPC's to know what a 'fair' price is for an item.That is the big one in real economies too.In the real world, competition tends to set these prices. If Company X sells a product for $100 and Company Z sells the same product for $99, then people will prefer Company Z's product, as it is cheaper.Although, in the real world there are other ways to allow two companies to sell similar products at slightly different prices as the specific features one person desires will differ from other people. However, the basic functionality of a product can be comparable, you then need to calculate what value people place of the differences in features.As far as including this in games go, you really only need to concentrate on the basic features and treat all products of a given type as identical (so a TV produced by one company is the same as a TV produced by another company - where as in the real world they would have differences in features that would allow a difference in value to be set).So, if you treat all parts of the production chain as having two sources that are competing (however, you might not have these in the game, these are just hypothetical competing companies), then allow them to keep trying to sell at a lower price than the other.This should continue until neither company can sell at a lower price and keep operating. This then sets your "Fair" price (and if you want you can raise it to allow for "growth" of the selling company - probably around 25% to 50%).Do this, starting from the supply end of the production chain and proceed to the end user price.   ;  Coming from the other end  -- what is the utility value of Mineral A ??If only Item A can be made from it and not items B C D E...  ???What use (need) is there for Item A (and any others made from that mineral), is it crucial or optional, does it never wear out so that a market gets saturated ???Can any items put to the same use be made from something else (Mineral Z) whichmay or may not be abundant itself (alternatives for the need...)   ;Quote:Original post by elFartoThank you Edtharan, that's a very informative post. I guess the main problem I'm having is attempting to get my NPC's to know what a 'fair' price is for an item.One way to measure the value of a thing in the video game world is in labor. How much time would a player have to spend to get the thing? Maybe the player has to do a little  mining or hunting trip that takes ten minutes. What else could the player have done/got in-game for that ten minutes?   