Skyrates Economics: Part 2

In my earlier post, I gave a brief introduction to the world of Skyrates, in which I mentioned that the inhabitants of that world all live on floating islands in the sky. Of course, no skyland is completely self-sufficient, and thus this is when the player steps in. Trading usually takes place between skylands.Theoretically, one can trade and still make a profit without ever taking off that skyland, but it takes a very long time and is dependent on the changes in quantity of that good over time.

This is the trading post of the Skyland, where you deal with the goods.
If you can see at the bottom left portion of the screenshot, they refer to the graphical representation of the quantity of goods as the "supply bar". From what we have learnt in our Econs, the game has used the general definition of supply as opposed to the economic definition of supply, probably to cater to a more general audience.

Sorry, I digress. The multicolored bars do not show the supply; rather they show the quantity, and to an extension, the equilibrium price of the good.

The market supply and demand can be broken into two portions each: The skyland's supply/demand as well as the players' supply/demand. Let's look at the market supply for a given good.
The above diagram is for the skyland supply and players' supply respectively. The skyland's supply is generally inelastic - it will continue producing that good irregardless of price. The players' supply, however, is elastic, and probably only start from "green" prices. Also, take into account that the skyland produces a much larger quantity than all the players selling that good at the skyland combined.

Thus the market supply is almost the same as the skyland's supply.

For demand, again the skyland's demand is inelastic and in large quantities. Player's demand is elastic, just like supply.
The above diagram shows the skyland's demand and players' demand respectively. The market supply will be roughly similar to the skyland's demand.

When the supply and demand curves intercept, the resulting equilibrium price will be pretty low if there is more supply than demand.

The only way for the equilibrium price to increase would be either:

• A increase in the skyland's demand
• A significant amount of quantity demanded by the players

which will result in a rightward shift of the market demand, causing a shortage and a higher equilibrium price.

Yay?
Next: some random examples :/(coming Soon™)
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Probably contains lotsa errors, please point out if you guys find any thankyouverymuch <3

Facebook

After Mr. Tan's recent explanation on the positive externalities of posting on the Econs blog, what would be more apt than...my virgin post on externalities? :D

I just got this screenshot off Facebook a little while ago:


Sooo, when someone advertises for an event by spamming wall-to-wall comments, he only considers his PMC, not the SMC, and since SMC > PMC this leads to overproduction of spam.

In this case:

PMC - Next to nothing except the few seconds needed to copy & paste the message on all his friends' Walls. Oh, and the few hundredths of a cent of bandwidth he takes up.

PMB - Increasing the chances of the recipient attending the event by approximately 3.78%, since he would feel special after receiving a heartwarming personal invitation from his friend.

SMC - The annoyance caused to other Facebook users who are already attending the event/not attending the event - which unfortunately works out to be most of the other users - from seeing their live feed clogged up by a wall of text. Also, the extra second it would take to scroll through all of that, which works out to be about 51.7 cents in lost productivity if President Nathan was surfing Facebook during office hours (why is he on Facebook in the first place?!)

Not to mention, the greater vulnerability to swine flu from the production of all that spam.

SMB - Errrr probably none, except providing the inspiration for this post, which could in turn possibly increase the chances of readers of this blog attending the event by 1.43% (because you heard about it here first!)

Therefore, we get the ever-so-dreaded case of... *drumroll*

MARKET FAILURE! Because social efficiency was not obtained, and because I am annoyed. >=[

What can Facebook do to correct this?

1. Regulation - Limit the number of characters in each, or by restricting the number of comments one can make in a certain period;


2. Taxes - Imposing a tax on the poster by spamming his wall back with the equivalent number of comments he makes;


3. Marketable Permits - Issuing a set number of posting permits, so if people feel that commenting on a friend's quiz result saying that he is in fact a Pikachu is a life-and-death matter, they can trade ingredients in Restaurant City for the permits;


4. Or better still, not update friends' live feeds with their wall-to-wall conversations, to eliminate the EMC altogether so this problem wouldn't have existed in the first place and I wouldn't have to waste 30 minutes typing out this post.

However, upon careful evaluation, Facebook might not want to impose such measures as people (mainly the spammers) would protest about their right to "free" speech ("Free", as in you don't need any sense cents to speak out on the Internet, GEDDIT?) and the uproar would generate bad publicity and be bad for business.

Furthermore, spamming blatant advertisements on Facebook might have an indirect EMB as well, in that 5.78% more people would attend CARITAS and be enlightened about international understanding, after which they would spread its joy to their just-as-enthusiastic peers.

So, do let international understanding be a greater part of your life and attend CARITAS!

Just don't spam Facebook while you're at it.

Applying Econs to Facebook

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 :) )

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?

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.

Skyrates Economics: Part 1

Hi all, Bowie here. Today I'll be introducing a game I've been playing for quite some time now. It's a flash game that has quite a lot of economics factored into the gameplay, that I think can be discussed in detail on this blog so as to get CA marks share some of my views with you.

Skyrates (currently still in beta for like 4 years already)
http://skyrates.net

"lol what is it about?"
It is set in a world where there are floating islands in the sky, and you are an anthropomorphic pilot trading commodities in the market economy between these islands, fending off pirates as you go along. It is a persistent sporadic world, where you can set a route, close the browser, and still continue playing.

tl;dr: flying animal flash mmorpg

"sporadic play? is it like some kind of delicious food?"
Unlike other "no-life" MMORPGs where it is demanded that you stay in front of the computer and grind for eternity (say, WoW), even if it is slightly economics-related (say, VBC), in Skyrates you can play the game with only five to ten minutes at a go, spread throughout your free times in the day.

There is this "action queue", where you can tell your character what to do for the next n number of hours, and after you update the queue, your character will do those things for you, leaving you all your time to do more important things (like that tutorial you've been daoing)

Of course, there are some benefits of staying and baby-sitting your character, such as being able to respond to price changes and changing your supply at the fastest time possible, as well as a combat minigame that sometimes shows up. Thus, playing the game itself already requires you to make choices that have opportunity cost.

"Do I just queue up my sales and get time to do work or do I babysit my character to get the most out of my sales?"

Well, from a purely trading perspective, it is much better to just queue your actions. Because the game takes place in real time, when the queue says "Fly to X in 2 hours", they really mean two hours. Thus, babysitting the game will consist mostly of staring at your plane bobbing up and down in the sky (as shown in the screenshot above). The opportunity cost of doing just that, would be all the things you could have better spent your time on, say, going out and smelling the flowers. Or mugging. Or even Facebook (gasp)

The opportunity cost for queuing will be the loss of profit due to the change in pricing (which on average only happens every one or two days), as well as not being able to play the combat minigame (in which you won't lose out either, since your character will also fight on his own if you are not around.)

Thus in conclusion queuing has a comparative advantage over babysitting the game when it comes to trading. (For combat and missions, that would be another matter, but I'm focusing only on the trading and economics aspect of the game in these posts.)

On Scarcity

Because the game consists mostly of trading between the floating islands ("Skylands"), it is a brainless observation that all the skylands are scarce for whatever it is that you are trading. But what about the player?

When you start out, your plane is really pathetic. It is called the CR-4P, and had been compared to a floating rock ("and even rocks steer better"). So you might want a better plane. Thus, you trade and whatnot, just to get money to buy a slightly better plane. Just after buying the plane, you will love it lots (because anything is better than a CR-4P), but soon your love will diminish, as you know there are better planes out there, and you want one of those.

Thus, you continue trading and amassing monies, just so that you can get one of those high-end planes..

As your want for a slightly better plane is satisfied, immediately comes a new want and desire for an even better plane, and so on.

What happens when you have the high end plane? Well, that is for you to decide. You can compete on the rankings board, which brings around a new scarcity. You want to climb higher on the ladder in rankings. For example, you are ranked #1000 in profit, and you want to be at least in the top 500. But once you reached rank #500, you might want to aim for the top 200, and so on.

Or, you can run missions and gain influence for your faction, if you have one. But that does not really pertain to economics, so I would probably only touch lightly on it in future posts.

Next: The Non-Introductory Post Where I Actually Talk About Trading, Demand, and Supply (coming Soon™)

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(heya people post post post! like, write something about restaurant city or smth)

にぱー☆

First dibs, and hopefully not the last

So i was clicking around on yahoo after checking my mail and i chanced upon this potentially interesting article. Something about incest and locking his daughter up. Definitely not something that happens everyday. Anyway as i read on, somehow i have no idea why, but i was thinking of opportunity cost, and i thought of a few questions. Here's the article.

An Austrian man who fathered seven children with a daughter he locked in a cellar has pleaded guilty to rape and incest - but denied the murder of a newborn boy.

Retired engineer Josef Fritzl, 73, also pleaded not guilty to enslaving his daughter Elisabeth for most of her life.
She spent 24 years in the cellar complex in Amstetten before the case came to light in April last year. Three of her children had never seen daylight.
Sky News Europe correspondent Greg Milam is outside the court in Sankt Poelten, Austria.
He said: "Austrian law does not have a consecutive sentencing policy, so whatever the greater sentence he is handed by this court will be what he serves.
"If not guilty of the murder, the most likely sentence will be 15 years for the rape charge."
Milam added: "(Fritzl's) lawyer is very much trying to paint a very different picture of Josef Fritzl ... as a man who is not a sex monster, but someone who loved his daughter and tried to protect her."

Sky producer Anja Kroll, who has been inside the courtroom, said jurors where shown items from the cellar so they could appreciate the smell of the place.
Fritzl had arrived in court hiding his face behind a blue plastic folder.
Describing the rapist answering questions from the judge, she said: "I got the impression he was really self-confident. He was speaking slowly... but we were not able to see his face.
"You got the impression he was the nice neighbour... but he is not the nice he seems to be."

What was Josef’s opportunity cost in this particular case?

Because the opportunity cost his daughter incurs is obvious (she had no choice in the matter, thus no alternative was sacrificed), I believe it to be more interesting focusing on Josef’s opportunity cost instead. To make things interesting, let’s say, he idles the rest of his years away and then dies. Sex is an activity itself, and the next alternative that Josef would have would be to sit and idle his time away. It is not a great alternative, but it is an alternative. But let’s say his aim in this case would be the satisfaction of his sexual desires. It is degrading to label a human as a good, but for the sake of discussion let’s ignore that. As his daughter has already been born, to Josef and his sexual needs, he can choose either choice: to have incest with his daughter, or not to. Because of the fact that she is already born, having sex with his daughter does not have an opportunity cost (ignoring other activities they could have together, because the primary purpose is fulfilment of Josef’s sexual needs). This scenario, therefore, is similar to a windmill, after it has been constructed (single use factors of production).


So is his freedom his opportunity cost? Does the state of being free constitute opportunity cost?

Yes, even though the state of being free is not an activity, and it is difficult to measure, it is still the next best alternative to committing incest. However, being free is originally a ‘free good’. One does not have to ‘pay’ any amount in order to obtain it; he/she is entitled to it the moment he/she is born (at least according to the Declaration). Thus, because being free is in itself a “free good”, does it mean that he has not incurred any opportunity cost? No, this is because carrying out his actions automatically remove his right to freedom, he can be jailed by law. Thus, the moment he has committed incest and locked his daughter up, he has removed his right to freedom, and it has no longer become a “free good”.

On hindsight, if his freedom is his opportunity cost, assuming he did not expect to be caught when he carried out his act; is his freedom still his opportunity cost?

Well, I’m stumped at this one. The definition of opportunity cost does not state “before” and “after” events have occurred. It automatically assumes parties are aware of the opportunity costs involved. I believe it suffices to say that because he is unaware of the opportunity cost involved (or he did not expect to be caught and held liable), therefore he did not incur any opportunity cost. I am not fully convinced of my answer either, this one is undecided.

hopefully i got some brain juices flowing and everyone's all revved up and ready to blog. this is karl your awesome econs rep.