When teenagers go on Facebook, I am sure they only consider their Private Marignal Cost. (IF they do that I mean)
Like, not completing their homework, or not studying for their next class quiz.
They also only consider their Private Marginal Benefit.
AKA the fun they derive from doing such quizzes and playing the games.
(And announcing that they PWN all their classmates at Restaurant City)
However, I am sure they do not consider the External Marginal Cost. Which would be the annoyance on the teacher's part upon realising that said students did NOT do their homework. Or their parent's disappointment when they realise that their child scored yet another U.
NEGATIVE EXTERNALITY!
( I am sorry if this is a little confusing. I hope you know what I am talking about :) )
Wednesday, April 22, 2009
Monday, April 20, 2009
Does fun come into consideration when it comes to Economics?
Since we're talking about childhood games like Neopets, I began to wonder. Is fun a factor when it comes to economics? Or does it come under benefits of the activity? As part of an opportunity cost? Or is it an external factor? Positive externality? Would someone care to discuss?
Friday, April 10, 2009
Economics and Neopets
Hey all, this is Kai Li. I'll be looking into perhaps one of the earliest form of economics we may have experienced on the internet. Perhaps we may not have noticed it since we were so young then, but it's perhaps the closest we could get to real life markets. What is it? If the title didn't hint about anything, it's Neopets.
Neopets is more of a "wide-open sandbox" kind of game site, where you raise a (few) pets and a lot of options in what you could do - play a few games, dress up your pet, solve the next complicated HTML puzzles in the current plot...
Wait, just how does economics apply?
Perhaps we all only remember Neopets for the games and daily freebies, which are more or less the simplest means of obtaining currency. Meerca Chase and Extreme Herder are a few examples that are more famous than any other part of Neopets. Why are they so prominent compared to many other aspects of this? It's largely due to the comparative advantage within these games compared to the other means of obtaining currency. These games are rather quickly completed and have an average yield of currency, compared to other games like Sutek's Tomb which require longer play times for similar yield. Here, the faster games have a comparative advantage as they demand less of a player's time, therefore leaving the player with a little more time to, say, attend to things that are actually useful.
What else could I actually do with that rare item?
The system also shows several examples of opportunity cost. Suppose, in an extremely rare random event you find a piece of a Treasure Map, which is a highly-priced valuable as collecting all of the pieces leads you to a great fortune. However, the chances of obtaining such items are very slim. So you wonder to yourself, should I keep this piece of a Treasure Map for a delayed fortune, or make an immediate, yet smaller profit by selling this?
Alternatively, there's shopping. The automated shops around allow for haggling of the price, letting the user get an item he/she wants at a possibly lower price than displayed. However, these shops restock rather infrequently, and so the user is left to search through user shops, which present items at a fixed price, but will often have the desired item. Things can get more complicated from there. After browsing through all sorts of unnecessary items in a really large shop, they find the item they seek, but at a ridiculous price. This leaves them to whether they should press on in a search that is already difficult, or just take the item and bear its exorbitant price.
These are some of the more common examples of opportunity cost in Neopets, if it is not already between spending time on the site and doing work.
Why are the prices so high?
Moving on to supply and demand, we see that Neopets presents some egregious examples of this. Most of the sought-after items, like weaponry and items that will grant boosts to your pets, are often not found in stores and have to be obtained through rare random events or the like. If it is found in automated shops, then expect said item to be low in stock everytime the shop restocks, or be placed at an obscene price. Considering the high demand of some items, and the difficulty in obtaining them, we get an extremely low supply, coupled with a high demand. This prompts the users who have said item to sell it at the observed extreme prices, leading to the low quantity exchanged due to the lack of people actually able to pay the price.
On the other end of the spectrum, there are items that don't do anything except consume inventory space. Getting these items are often very easy as they are usually "consolation prizes" from the daily free luck-based games. However, their lack of ability to do anything means that nobody wants them. Add on to the fact that the only way for a user to sell items is to other users, and these items will often be seen discarded. High supply, essentially no demand - and nobody wants to take the item regardless of price.
What else?
Neopets even SIMULATES several markets, most notably the Stock Markets, and a management game of Plushie Tycoon. Not to mention inflation within the automated markets. However, due to my lack of exploration in these areas, I cannot fully provide details on how these can be linked with real-life economics. Maybe someone more experienced could elaborate in these areas?
So, yeah, it's pretty amazing how intricate something from our childhood can actually be, when you look back and look a little more closely.
Neopets is more of a "wide-open sandbox" kind of game site, where you raise a (few) pets and a lot of options in what you could do - play a few games, dress up your pet, solve the next complicated HTML puzzles in the current plot...
Wait, just how does economics apply?
Perhaps we all only remember Neopets for the games and daily freebies, which are more or less the simplest means of obtaining currency. Meerca Chase and Extreme Herder are a few examples that are more famous than any other part of Neopets. Why are they so prominent compared to many other aspects of this? It's largely due to the comparative advantage within these games compared to the other means of obtaining currency. These games are rather quickly completed and have an average yield of currency, compared to other games like Sutek's Tomb which require longer play times for similar yield. Here, the faster games have a comparative advantage as they demand less of a player's time, therefore leaving the player with a little more time to, say, attend to things that are actually useful.
What else could I actually do with that rare item?
The system also shows several examples of opportunity cost. Suppose, in an extremely rare random event you find a piece of a Treasure Map, which is a highly-priced valuable as collecting all of the pieces leads you to a great fortune. However, the chances of obtaining such items are very slim. So you wonder to yourself, should I keep this piece of a Treasure Map for a delayed fortune, or make an immediate, yet smaller profit by selling this?
Alternatively, there's shopping. The automated shops around allow for haggling of the price, letting the user get an item he/she wants at a possibly lower price than displayed. However, these shops restock rather infrequently, and so the user is left to search through user shops, which present items at a fixed price, but will often have the desired item. Things can get more complicated from there. After browsing through all sorts of unnecessary items in a really large shop, they find the item they seek, but at a ridiculous price. This leaves them to whether they should press on in a search that is already difficult, or just take the item and bear its exorbitant price.
These are some of the more common examples of opportunity cost in Neopets, if it is not already between spending time on the site and doing work.
Why are the prices so high?
Moving on to supply and demand, we see that Neopets presents some egregious examples of this. Most of the sought-after items, like weaponry and items that will grant boosts to your pets, are often not found in stores and have to be obtained through rare random events or the like. If it is found in automated shops, then expect said item to be low in stock everytime the shop restocks, or be placed at an obscene price. Considering the high demand of some items, and the difficulty in obtaining them, we get an extremely low supply, coupled with a high demand. This prompts the users who have said item to sell it at the observed extreme prices, leading to the low quantity exchanged due to the lack of people actually able to pay the price.
On the other end of the spectrum, there are items that don't do anything except consume inventory space. Getting these items are often very easy as they are usually "consolation prizes" from the daily free luck-based games. However, their lack of ability to do anything means that nobody wants them. Add on to the fact that the only way for a user to sell items is to other users, and these items will often be seen discarded. High supply, essentially no demand - and nobody wants to take the item regardless of price.
What else?
Neopets even SIMULATES several markets, most notably the Stock Markets, and a management game of Plushie Tycoon. Not to mention inflation within the automated markets. However, due to my lack of exploration in these areas, I cannot fully provide details on how these can be linked with real-life economics. Maybe someone more experienced could elaborate in these areas?
So, yeah, it's pretty amazing how intricate something from our childhood can actually be, when you look back and look a little more closely.
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