How does it really work?

Entropia Universe Economy General Economy Discussion
21

[QUOTE=maniac]
:

In real economy, people pay more for less, and less for more.
Like, say, Costco Wholesale. They try to sell you more to get rid of their stock, so the price for more is less.

However, in PE it’s the opposite. People choose to pay more for more, and less for less. Why is that so?
[/QUOTE]

i see this remark/question quite often and noone seems to get it:

it is the same in PE as in Real Life - less for bulk and more for a single item. It is just the “item” definition is astray…

What do you think will happen if someone will try to sell 200modfaps?
the cost (per each in that bulk) will be considerably less then it is for a single modfap.

when people pay more for 1000 thin wool - they are not paying for a 1000 item, they are paying for 1 item that we can call “tailoring session”

so when you offer 1 thin wool, you actually offer 0.001 of the item

Do i make sence?

PS. for example when i go to sell 10 extra axes i offer them in bulk at TT + 50% of current “over TT”, because it is 10 items that can be used (productively) individually. Try to use 1 thin wool…

22

My Theory…

I’m brand new to Project Entropia, so what do I know? :confused: But, I’m playing specifically because I’m interested in the effects that the PE economy has on game play, so I’ve been thinking about this alot since I started. Here’s my theory:

MindArk makes it’s money in three (maybe four) ways:

  1. 7% service charge when you deposit or withdraw.
  2. They deposit the US dollars in an interest earning account.
  3. The occasional sale of virtual assets (e.g. Landgrab?)
  4. Possibly (but I doubt it), a small percentage on decay, etc.

Here’s why I believe this… If MindArk relies on almost exclusively on items 1-3, they’re able to build a closed system that runs little risk of bankruptcy and promotes a continously growing virtual economy.

There’s no doubt that they’re earning money on the 7% service fee on the deposits and withdrawls. Also, since they can’t really just go out and spend the dollars on deposit without running a serious risk of a “cash-out” epidemic, and a subsequent bankruptcy, they’d have to be fools to not have invested most of the real money in an interest bearing account. Depending on the amount of money on deposit, the interest could be seriously non-trivial. Think 4% annually on several million dollars. Players are provided interest free loans to MindArk while they play.

When MindArk determines that the virtual economy is sufficently robust to support it, I think that they occasionally drain money from the virtual economy by selling virtual assets (e.g. LandGrab). This may help fund the development of those features.

As for the fourth item (decay percentage), I doubt that MindArk is tapping it at all unless they need it to meet their operational expenses. If they are, it means that on average, every player is losing money by playing, and that leaves very little room for anyone to be profitable. They want to create the impression that you can play for free (or even make money) and that is very difficult if they’re fixing the odds too heavily. Not being dependent on this option also frees them completely from concerns about what players are actually doing in game.

If you assume that there is no MindArk profit on item 4, it leaves you with the following in-game economic model.

  1. There are one or more “loot-pools”. I suspect one for hunting, one for mining, and one for crafting.
  2. Purchases from TT terminals for ammo, bombs, etc. put money into the corresponding loot pool. Failed crafting attempts put money into the loot pool.
  3. Sales of items to TT terminals withdraws money from the loot pool, as do successful crafting attempts.

Basically, when you buy ammo/bombs or craft, you’re buying chances to win PEDs back out of the loot pool. Obviously, these chances are affected by skills, etc. etc.

There’s a number of nice features of this model. One is the “coincidence” that ammo, bombs, and repair are all unavailable from the crafting professions. It is self balancing, in that when more players buy ammo, more creature loot is generated. As more player buy bombs, more resource loot is generated, etc. MindArk has no real financial dependency on anything that happens in game. All they have to do is balance the books and try to make the game play as enjoyable as possible. They are slightly impacted by withdrawals (in the sense that it reduces their investment trust), but that’s largely offset by the fact that they earn another 7% service charge, and helps promote the impression that you can make money in game.

The model is not dependent on the continuous influx of new players (although that is always good). This is the primary reason I am suspect of models that assert MindArk is skimming the decay costs. Any model that requires new players to be viable will eventually collapse. I think they’re looking farther forward than that. The existing players can continue to “cycle” their PEDs back and forth indefinately without any serious economic consequences. There would be a rise in the skill levels required to be competive however…

There’s one other interesting observation if my model is correct. Specifically: It’s not about players versus MindArk in any sense. It’s always versus other players. If I buy 1000 rounds of ammo, 10 PEDs of creature loot is out there somewhere. The question becomes will I get it, or will someone else? From MindArk’s perspective, this is good, because it means that they do not have to adapt at all to changing levels of player competence in order to be profitable.

Anyway, that’s my theory. If you think this post was useful or interesting, please find me in game and answer some questions. I’m still trying to figure out if my margins are above or below average, etc. Basically, starting with 193 PEDs, I’ve mangaged in 3 days to convert it into about 177 PED (TT value) worth of resources and equipment. I’m about to grind most of into crafting skills. In the process, I’ve earned maybe 100 skill points in laser rifle, mining, computer, drilling, etc.

Dirk Starlight

2 Likes
23

Excellent observations there Dirk..especially the Player vs. Player lootpool theory.

That one has been floating around for a while now but since you’re new to PE it’s kind of cool that you picked up on it that quickly.

My biggest problem is figuring out what becomes of ammo misses and bombs/probes that disappear… :confused:

24

Just one thing. Over the years MA has stated repeatedly that they make thier money off of Decay solely.

DD
:evilking:

25

[QUOTE=Devil Doll]
Just one thing. Over the years MA has stated repeatedly that they make thier money off of Decay solely.

DD
:evilking:
[/QUOTE]

When i spoke with Marco at last years E3, i asked how they make money if its real life and he said Repairs (decay) and Ammo.

I had never heard of PE but spoke with them (all at the booth) for about 45 mins. I have a million questions to ask this year and i cant go!! :frowning: oh well.. next mayhaps.

Take that for whats its worth. But that was from the horses mouth.

Suicide

26

[QUOTE=Suicide]
When i spoke with Marco at last years E3, i asked how they make money if its real life and he said Repairs (decay) and Ammo.

Take that for whats its worth. But that was from the horses mouth.

Suicide
[/QUOTE]

Hmm. Well, I don’t have any reason to believe that he’d lie about it. That’s interesting though, because it would seem to have a lot of dependence on what the players actually do in game. Maybe it costs so much to provide the operational infrastructure that they have to tap the decay payments.

Thanks for the response, it certainly gives me reason to question my theory now.

Dirk Starlight

27

[QUOTE=DirkStarlight]
Hmm. Well, I don’t have any reason to believe that he’d lie about it. That’s interesting though, because it would seem to have a lot of dependence on what the players actually do in game. Maybe it costs so much to provide the operational infrastructure that they have to tap the decay payments.

Thanks for the response, it certainly gives me reason to question my theory now.

Dirk Starlight
[/QUOTE]

It probably wasnt a lie, but 2 things.

  1. Things change. They could have a whole other system now 1 year (exactly 1 year as of next week)

  2. It not something that they go into. evar. So is that the ONLY way they make money? Do they take 100% of those monies and deposit them into the bank? I dunno.

I think this is something that will will probably never know for sure.

Suicide

28

Couple of observations…

  1. PEDs don’t go in to the “loot pool” when ammo is purchased since the cells themselves have a constant value. They would only go in to a “loot pool” when they are used and hence expended or to use another term: decay.

  2. the interpretation of the (paraphrased) comment “we only make money off of decay” should really be thought long and hard about. we saw with that recent press release how MA can spin something to their favor (you know…the release about apartment sales and then in the next line stating they’ve made $XXX off of land sales…that was a huge spin job). what did marco mean when he said “make money”? revenue? income? opportunity? who knows…i don’t.

  3. regardless of the often referenced decay comment, there is no way in hell that MA doesn’t put the money we deposit in an interest bearing account.

29

[QUOTE=Marco|MindArk]
I see now how it can be miss-interpreted. To be more exact - it is the decay MA’s revenues come from.
[/QUOTE]

As for the money we deposit going into an interest bearing account. It is irrelevant to the discussion of how MA gets revenue as per the quote above.

DD
:evilking:

30

[QUOTE=Silo]

  1. regardless of the often referenced decay comment, there is no way in hell that MA doesn’t put the money we deposit in an interest bearing account.
    [/QUOTE]

I’d have to agree here tho with MA it’s only speculation. I mean,think about it,they’d have to be insane not to.

Maybe they may put a large percentage in and hold back the rest to cover withdrawls,capital improvements, etc.

The decay issue makes sense for operational costs only. Thats the other issue im confused about. When you use a weapon or item it decays,right? So it devalues itself over a period of time so that pec/peds go back to MA.

What happens to all the junk/stuff people have in storage or never use?

At some point there’d be ALOT of stuff floating around thats inert and doesn’t produce a dime.

31

[QUOTE=Devil Doll]
As for the money we deposit going into an interest bearing account. It is irrelevant to the discussion of how MA gets revenue as per the quote above.

DD
:evilking:
[/QUOTE]

where does the interest go then? i don’t see how that is irrelevant.

perhaps since it is interest it isn’t written in the books as revenue…?

also, where did that quote come from? it would be beneficial to see what he was commenting on.

32

[QUOTE=Darkscorp]
I’d have to agree here tho with MA it’s only speculation. I mean,think about it,they’d have to be insane not to.

Maybe they may put a large percentage in and hold back the rest to cover withdrawls,capital improvements, etc.

The decay issue makes sense for operational costs only. Thats the other issue im confused about. When you use a weapon or item it decays,right? So it devalues itself over a period of time so that pec/peds go back to MA.

What happens to all the junk/stuff people have in storage or never use?

At some point there’d be ALOT of stuff floating around thats inert and doesn’t produce a dime.
[/QUOTE]

hmm, you made me think of something very interesting. in my line of work i look at how much money a company would lose if they were unable to conduct business.

if MA’s only way of getting revenue is through decay, then if no one used anything for a solid day that decayed…i wonder how much they would lose.

most companies cannot withstand a lengthy outage before the go in the red and have to close the doors.

ah…got a phone call and lost my train of thought. oh well.

33

So if they put that money in an account that gains interest who’s to say that money is profit to MA. That money to me would just make MA able to actually pay out more then what was put in or equal with what decay is taken out. Although it still could keep it under.

But my point is that interest gained could possibily be going back to the players that withdrawl.

34

[QUOTE=Silo]
where does the interest go then? i don’t see how that is irrelevant.

perhaps since it is interest it isn’t written in the books as revenue…?

also, where did that quote come from? it would be beneficial to see what he was commenting on.
[/QUOTE]

It is irrelevant because, as you can see above, he stated that their revenues come from decay. The interest most likely accrues in the account and is a part of the so called “loot pool”.

Interest is income/revenue. If they kept it his above statement would be false.

The qoute is his response the question of whether the revenue is at the point of decay or repair.

Now, this all assumes that Marco is concerned enough and knowledgable enough (no offense meant) about the inner workings of how MA’s book swrok. Also, as others have stated, maybe things have changed.

This argument is age old btw :wink:

DD
:evilking:

35

[QUOTE=DirkStarlight]

MindArk makes it’s money in three (maybe four) ways:

  1. 7% service charge when you deposit or withdraw.
  2. They deposit the US dollars in an interest earning account.
  3. The occasional sale of virtual assets (e.g. Landgrab?)
  4. Possibly (but I doubt it), a small percentage on decay, etc.

[/quote]

  1. They have stated a couple times allready that the deposit and withdraw fees good to the companies that manage them, as you know no company works for free :silly2:
    And international bank transfers can be pretty expensive.

  2. That’s probably true :slight_smile:

  3. This is money doesn’t go to them, I see it as a huge economy (lootpool)boost

  4. They use a part of the decay indeed, that’s their income as DD pointed out. This is probably also why they put a good effort in making Melee hunting a popular and economic proffesion (steady income for them). You should know that a bit more than 1 year ago all noobs hunted without armor/faps, and melee was almost non excistant.

[QUOTE=DirkStarlight]

Here’s why I believe this… If MindArk relies on almost exclusively on items 1-3, they’re able to build a closed system that runs little risk of bankruptcy and promotes a continously growing virtual economy.

[/quote]

I think they’d run a bigger risk if they used that system instead of the decay system they use now, let me explain why:
By creating a closed system as you describe it, you totally rely on people depositing/withdrawing, meaning that if lot’s of people decide to not deposit for a while, you’ll loose your source of income.
While when they rely on a part of the decay even if a part of the population stops hunting, … the amount of decay will still be enough. Only if everyone stopped playing they’ll go bankrupt, but that’s not so strange :silly2:

So simply put, by relying on deposit fees you could get a working ingame economy, but they wouldn’t earn money.

[QUOTE=DirkStarlight]

If you assume that there is no MindArk profit on item 4, it leaves you with the following in-game economic model.

  1. There are one or more “loot-pools”. I suspect one for hunting, one for mining, and one for crafting.
  2. Purchases from TT terminals for ammo, bombs, etc. put money into the corresponding loot pool. Failed crafting attempts put money into the loot pool.
  3. Sales of items to TT terminals withdraws money from the loot pool, as do successful crafting attempts.

Basically, when you buy ammo/bombs or craft, you’re buying chances to win PEDs back out of the loot pool. Obviously, these chances are affected by skills, etc. etc.

[/QUOTE]

The ammo that goes into the lootpool can’t be correct.
Example:
There are 2 people in the universe, they both buy 10 ped ammo.
There now is 20 ped in the lootpool.
The first guy goes out hunting and gets lucky, he earns 15 ped on loots.
The 2nd guy decides not to go hunting and TT’s his ammo so he got 10 ped again.
Now there is 5 ped too much in the universe :silly2:
In my opining lootpool comes from:

  1. Ammo used
  2. Auction fee
  3. Selling of estates.
36

[QUOTE=Devil Doll]
As for the money we deposit going into an interest bearing account. It is irrelevant to the discussion of how MA gets revenue as per the quote above.

DD
:evilking:
[/QUOTE]

I sorry, but I don’t understand your comment at all. Are you saying that they don’t deposit the money in an interest bearing account? (I find that highly unlikely). Or are you saying that they don’t earn revenue from it?

It’s certainly possible that the interest is small compared to revenues generated from skimming the decay, but that hardly qualifies as “irrelevant” in my opinion. :slight_smile:

On other comments:

The word “decay” is also pretty vague. Personally, I put ammo and bombs in the exact same category as traditional decay (repairs). They all cause something with value to disappear from the world, possibly without enabling a withdrawal. Likewise, looting and mining cause something to appear in the world without a corresponding deposit. I think it’s self evident that these are connected, and that it is not possible for MindArk to be witholding all of the proceeds from the broader definition of decay.

Consequently, I don’t see any reason for MindArk to limit themselves to just tapping the “repairs”, so I presume that if they’re tapping into this aspect of the economy at all, it’s in a very general way rather than being limited to a specific type of transaction.

I’ve read at least one research paper that has talked about MindArk’s objectives, and it indicates that they are actively engaged in real world economics, not “game play” economics. They’re looking forward to the day when they can hold the premier position in a new Internet avatar-based shopping environment. I would describe it briefly as being the next “Mastercard” of a certain type of financial transaction. This is manifested very clearly (albeit rather laughably) in the opportunity to purchase a real world virus scanner for your computer from the TT terminal. If/when this aspect of the business begins to pickup, it will totally eclipse the “game play” revenues in no time. It also seems to have nothing to do with “decay”. :wise:

For those that are interested, check out: “Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier” by Edward Castronova. It’s where I first learned about Project Entropia, and it’s what inspired me to take a closer look (read “play”). My real interest is game design, game play and trying to build realistic virtual economies without having to resort to the measures that MindArk has taken.

Dirk Starlight

1 Like
37

[QUOTE=DirkStarlight]

The word “decay” is also pretty vague. Personally, I put ammo and bombs in the exact same category as traditional decay (repairs). They all cause something with value to disappear from the world

[/QUOTE]

The BIG difference between decay and buying ammo is that by decaying a weapon you make peds disapear, they’re gone and there is no way you can get them back.
By buying ammo only transfer some money into ammo, nothing actually happens, you only have ammo icons instead of gold icons on your screen.

1 Like
38

[QUOTE=Einstein]

The ammo that goes into the lootpool can’t be correct.
Example:
There are 2 people in the universe, they both buy 10 ped ammo.
There now is 20 ped in the lootpool.
The first guy goes out hunting and gets lucky, he earns 15 ped on loots.
The 2nd guy decides not to go hunting and TT’s his ammo so he got 10 ped again.
Now there is 5 ped too much in the universe :silly2:
In my opining lootpool comes from:

  1. Ammo used
  2. Auction fee
  3. Selling of estates.
    [/QUOTE]

Yes, I had actually thought about this before my original post, but found it too confusing to try to express in the larger context. You may very well be correct that the loot pool deposit occurs at the time of decay, ammo use, bomb use, etc. rather than at repair or purchase time. This seems consistent with the quote from Marco that was apparently in the context of differentiating between “decay” and “repair”. But the programmer in me says that it would be way more complicated to implement that way. Think about every time you fire your gun versus when you purchase 1000 ammo. It would not surprise me to find that for efficiency they keep a large available loot pool to absorb occasional ammo trade-ins. MindArk might just accept that “risk”. Of course such an algorithm could fail if everyone traded in their ammo all at once, but I think it’s more likely that 2nd guy later goes out and earns 5 PED worth of loot. Another possibility is that they keep a “reserve” for unused ammo, and simply decrement a counter each time someone fires, moving the money into the loot pool that way.

Good catch on the auction fees by the way! That’s certainly going somewhere, and doesn’t really fit very well with my model, since the input source isn’t clearly tied to hunting, mining, or crafting.

Dirk Starlight

1 Like
39

Interesting disussion,i think it would be to soon to give any response on my behalf because i havent bin playing very long and never thought of my own theory ,simply because i am too lazy and rather read other player’s theories… :smiley:

Think Einstein came closest to mine opinion so far…Make poverty history…

Peez…
Ciao a tutti.. :cool:

40

[QUOTE=Einstein]

  1. They have stated a couple times allready that the deposit and withdraw fees good to the companies that manage them, as you know no company works for free :silly2: And international bank transfers can be pretty expensive.

[/QUOTE]

I agree that they’ve got to be paying something for the processing, but I find it a little hard to believe that it’s 7%. It looks like 2.4% is a widely available Visa processing fee. I guess there could be another couple of percent for currency conversions as well. But for a business actively engaged in credit card transactions over the Internet, you’d hope that they could do better than I do when I go to a foreign country and withdraw funds from an ATM at a total service charge of about 3%. :slight_smile:

Dirk Starlight