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Dastardly Market Manipulation

Blogs > Birdie
Post a Reply
Birdie
Profile Blog Joined August 2007
New Zealand4438 Posts
Last Edited: 2015-02-19 12:57:20
February 19 2015 03:30 GMT
#1
Farmer's Market

[image loading]


'twas a brisk and bright day when old man Birdie, in his pre-senile indolence, noticed he had run out of hat-generators Charm of the Crucible Jewel prediction charms. Not to worry! The Steam community market had plenty of three cent items which could fuel my lucrative powers of prophecy, all I needed to do was buy ten of them and recycle them, forming yet another cornucopia of head coverings.

*Steam market*->OTA2 Items*->*Sort Ascending*

[image loading]


THE HORROR!

Only one item available for three cents?

+ Show Spoiler +
[image loading]


And upon attempting to purchase several of those three-cent bracers, I quickly discovered that there was only one of them available, and it had already been snapped up. What terrible disaster had struck the Steam market, ridding it of all items selling for peanuts?

A Visit to the Side Shop
It is here that we must reflect on the foolish nature of a digital marketplace. Ordinary markets are affected by what is a very simple concept: supply and demand. In short, as supply increases, demand decreases (and vice-versa). Everything is produced in varying and variable quantities, making both price, supply, and demand incessantly fluctuate. However, in a digital marketplace there is one amazing thing that changes everything: supply can be, in essence, unlimited! With the click of a button, the person who controls the marketplace can simply flood the market with an item and immediately reduce the demand on that item (by increasing the supply).

This is made evident in the Steam community marketplace. At one stage the Arcs of Manta pack for Anti Mage were priced at the wallet-paining value of approximately $17. Then along came an event which made a unavailable treasure chests available for purchase on a particular day. One of those chests contained the Arcs of Manta. Immediately after that chest day came along, the Arcs of Manta pack on the market dropped in price, falling to $4.53. The supply had been created by the click of a button, reducing the price to an all-time low.

One of the ways in which digital marketplaces have coped with this problem is with what is known as a sink, or gold sink. The idea is that you have some method of completely removing items from the marketplace, thus keeping the supply at a manageable level. As people are usually unhappy if you simply delete their items, the typical way is to have some reimbursement for deleting your items.

In essence, this is what the Charm of the Crucible Jewel is. You sink ten marketable items into it, and assuming you predict correctly three times, you get approximately five non-marketable items back. Because your prophetic skills are most likely not as amazing as mine, the average amount of items back is probably closer to three. The market shrinks, and the quantity of items total also shrinks.

Where Birdie's Munchies Have Gone
Valve have most likely done this to attempt to fix the completely over-saturated part of the market: the part where the supply is very high (and thus price low). To make as many Charm of Crucible Jewels as possible, players are purchasing as many cheap items (three cent items, in this case) as they can. If the Charm of Crucible Jewels continues for some time we will almost definitely see the four cent items disappear too, further increasing the price floor of low-priced items. Unfortunately for me, I have to now spend more money to generate more hats, which suits Valve just fine.

+ Show Spoiler +


Why Not Fix What Is Broke?
While this helps remove part of the market glut of cheap common items, it does not yet solve a further problem. Supposedly "rare" items are common as chips, in part due to the massive influx of new players, and in part due to Valve ceaselessly throwing items at their players. While Valve's previous attempt of reducing the item drop rate and making the items more interesting presumably had a good effect on the market in terms of reducing supply and increasing demand, unfortunately they have returned to dropping the base items just about every game, which takes us back to the same problem of before. This leaves us with only one-off and arcana/immortal/mythical items as actually rare and expensive, and even those are not always particularly pricey. Rares are almost as common as Commons.

Unfortunately, this is not an easy problem to fix beyond simply reducing the amount of items that are dropped (which the community rejected in their senseless avarice desire to be dressed in quality, cheap headwear). One possibility would be taking the line of Bitcoin and other digital currencies, and making sets/items have a particular set max quantity. Once that quantity is reached, the set/item will no longer drop, and is only purchasable from the official Valve store. Of course, it would be difficult to establish for each set/item what exactly the max quantity should be. However, this would mean that there could be a new, different set/item placed into the drop list in exchange for the one removed once reaching its max quantity.

With a fixed supply of items, this would ensure that demand remained healthy. Indeed, as the player base increases, the demand would increase, as the items would become comparatively rare. This would keep the market healthy, and still allow a large degree of free market trading to take place. While my hungry prophetic stomach desires more three-cent hats to turn into hat-generators, the trader in me wants to see a market where a rare item is reasonably rare and thus a little more pricey. And the community would remain happy as they would continue to get hat drops each game, and Valve would still get great wads of cash.

+ Show Spoiler +
[image loading]
Red classic | A butterfly dreamed he was Zhuangzi | 4.5k, heading to 5k as support!
Birdie
Profile Blog Joined August 2007
New Zealand4438 Posts
February 19 2015 03:31 GMT
#2
Why aren't my spoiler tags working ;_; liquiddoto pls
Red classic | A butterfly dreamed he was Zhuangzi | 4.5k, heading to 5k as support!
Jinxed
Profile Blog Joined May 2011
United States6450 Posts
February 19 2015 03:57 GMT
#3
Huh... that weird. Not sure why that's happening. Especially as all of your other code is working correctly.
LiquidDota Staff"LeLoup is a great name pls undo." -Liquid`Nazgul
TheEmulator
Profile Blog Joined July 2010
28104 Posts
February 19 2015 04:38 GMT
#4
I fixed your video at least. Just need spaces between spoiler tags and youtube links to make it show up. Have no idea what's going on with the spoiler tags though.

+ Show Spoiler +
asdf
Administrator
Yurie
Profile Blog Joined August 2010
12181 Posts
Last Edited: 2015-02-19 06:18:35
February 19 2015 06:14 GMT
#5
How many millions of .03 items got sold? Each is .01 profit for valve and item maker, often the same. 10 000 profit for each party per million sold.

For Valve there is no difference to a 0.03 and a 0.1 item. Same profit margin. The thing that makes the less value better for them is the higher sales volume, translating into more profit. So I think they will remove this to once again make prices drop to 0.03 and then re-add it.
ahswtini
Profile Blog Joined June 2008
Northern Ireland22213 Posts
February 19 2015 11:35 GMT
#6
the market restriction for new items was such a good call on their part (bad for hat lovers)
"As I've said, balance isn't about strategies or counters, it's about probability and statistics." - paralleluniverse
Deleted User 135096
Profile Blog Joined December 2010
3624 Posts
February 19 2015 12:59 GMT
#7
you commented out a string of code via an erroneous \ in your bbcode and that cascaded throughout your entire post. your end strikethrough tag looked like this [\s]
Administrator
Folca
Profile Blog Joined October 2006
2235 Posts
February 19 2015 18:23 GMT
#8
So when are you going back to the BW server project?
Dea : one time when he was playing vs the comps he asked me "how do I make that flying unit that makes the other stuff invisible" and I reply "ur playing terran zomg"
TheEmulator
Profile Blog Joined July 2010
28104 Posts
February 19 2015 18:46 GMT
#9
On February 19 2015 21:59 wo1fwood wrote:
you commented out a string of code via an erroneous \ in your bbcode and that cascaded throughout your entire post. your end strikethrough tag looked like this [\s]

You know I looked at his code for like 10 minutes and I never noticed the incorrect /

Administrator
Birdie
Profile Blog Joined August 2007
New Zealand4438 Posts
February 19 2015 20:44 GMT
#10
On February 19 2015 21:59 wo1fwood wrote:
you commented out a string of code via an erroneous \ in your bbcode and that cascaded throughout your entire post. your end strikethrough tag looked like this [\s]

Hahaha that's what I get for having a keyboard with backslash and forward slash keys directly next to each other.
Red classic | A butterfly dreamed he was Zhuangzi | 4.5k, heading to 5k as support!
Corgi
Profile Joined December 2014
United States408 Posts
February 20 2015 05:36 GMT
#11
Well honestly they fubar'd their own market by saturating it in the first place and attempting to artificially boost the cost by introducing frivolous tags. I don't know who did it...that Greek economist or some other person at Valve. Either way it seems like they've been trying to correct the problem without "sinking the ship" over the past year. This is just another stepping stone for them.
Yurie
Profile Blog Joined August 2010
12181 Posts
February 20 2015 16:14 GMT
#12
On February 20 2015 14:36 Corgi wrote:
Well honestly they fubar'd their own market by saturating it in the first place and attempting to artificially boost the cost by introducing frivolous tags. I don't know who did it...that Greek economist or some other person at Valve. Either way it seems like they've been trying to correct the problem without "sinking the ship" over the past year. This is just another stepping stone for them.


Valve has no problem with .03 values for items unless they can drive the costs up by something like a factor of 10. A few cents actually decreases their profit margin due to the 10% of value with a minimum of 1 cent. As long as they keep .03 items moving quickly they make more than if they have more expensive items selling for the same total value.

The problem is probably in keeping them selling.
WolfintheSheep
Profile Joined June 2011
Canada14127 Posts
February 20 2015 21:56 GMT
#13
I have absolutely no idea what Valve's profit margins look like, but I'm sure they're something so ridiculous that scrimping cents on the Steam Market is a very small concern for them.

The artists and modellers, though, it's probably a huge deal for them.
Average means I'm better than half of you.
Birdie
Profile Blog Joined August 2007
New Zealand4438 Posts
February 20 2015 22:09 GMT
#14
For what it's worth, I don't think they generally do this kind of gold sink for the purposes of making money, but rather for fixing the market.
Red classic | A butterfly dreamed he was Zhuangzi | 4.5k, heading to 5k as support!
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