Guild Wars 2

Dislaimer – i just thought this was interesting and I’m not trying to call anyone out or get anyone in trouble.

I’m curious what Arena Net’s thought process is and reasons behind some decisions about trading post economics. Fair warning I trade markets for a living so some of this draws on personal knowledge. . This will be very long, there will be a TL/DR at the end if this bores you, and some wild kitten guesses and accusations all in good fun. This is not a rant, I love the game, and I’m just a little geeky about these things. There will also be some math. Here are some things I’ve noticed (I’ll use the precursor market as an example where I’ve seen first hand what is up)

1. The precursor market is controlled and rigged externally, either by a person with a lot of time who wants to make a small (IMO) amount of money or a gold farmer outfit with access to cheap labor who wants to do the same. The amount of money they extract (real life money) is pretty small for the irritation they cause the player base (IMO)

2. The way the trading post works encourages wide spreads and makes it much easier to rig due to the way it’s set up. Specifically the listing fee and the selling fee, and the fact that you cannot change prices.

3. This causes (artificially) wider spreads for players wanting to buy and sell items that accrues as (RL) profit to the ones rigging the market.

Markets by nature are efficient if the number of regulatory impediments to price discovery and liquidity is low. The opposite is also true. IN GW2 there are a few notable things that make the markets inefficient and subject to manipulation. First, most markets have 2 expenses that cause friction to trading – commission and regulatory duty. Commission usually accrues to the broker helping you sell – in GW2 this doesn’t exist because everyone is their own broker.

The second, regulatory duty, is a tax that is levied by the regulator, be it the NYSE or the HKSE or whatever. In guild wars we have two – a flat tax of 10 percent when you trade (high but whatever, doesn’t matter) and a 5% listing fee that is only borne by the seller. The listing fee is the issue, but only because you cannot change your offer price.

In any market I’m aware of If you haven’t traded you can cancel or change your bid/offer without penalty. In GW2 you can cancel your offer(with penalty 5%) , can cancel a bid with no penalty, and cannot change either your bid or offer once posted.

Markets are more efficient when there are no frictions for placing, amending or cancelling bids and offers. More efficiency means tighter spreads (the spread is the difference between what people are willing to pay and where people are willing to sell). The spread accrues to the “market maker” and in this case it accrues to whoever is controlling/rigging the precursor market. TIGHTER SPREADS MEANS BETTER PRICES FOR THE LITTLE GUY.

Since the listing fee for sellers is so big, a normal person cannot make a mistake, it’s too costly. Say you get Dawn and you want to sell and the market is 550-625 ( a spread of 75 gold).

You will notice there are a huge amount of bids and just a few offers. This is because the rigger controls the supply. The highest bid will ALWAYS be the rigger. The lowest offer will ALWAYS be the rigger. (I shouldn’t have said always because they are not probably on 24-7). In an efficient market if the market is 575-625 and you would sell for 600 you just list for 600. In GW2 however if you list for 600 they just list for 599 and you are out 30 gold that you will never get back. He doesn’t care if people sell on the bid side – he knows what size of inventory he wants and he knows the market will always grow.

The rigger then drops his bid. The spread remains the same or close to it. The seller cannot compete twice on the offer (lower his bid – he cant afford ANOTHER 30 gold) – what will happen after a period of time is he will take away his offer and sell on the (often rigger’s) bid who then relists it at the offer side of the spread – he makes the spread, the players loses his 30 gold (TWICE – hitting the bid costs you 15%), and the rigger makes the spread between the bid and offer.

There is nothing wrong with this per se in the real world – but this is just a game. The rigger makes the spread and then sells the profit on a gold site (gold site gold sells for about 15-20% less than in game gem store gold – it varies).

I haven’t done the math on what I think they take out of the system in RL money, but it’s not much but Imagine it’s a normal part of their profit from running a gold farmer biz.

Ok that was long – here’s how you fix it. The costs associated with trading are a gold sink built into the system by ANet (like the mystic toilet). MMOs need these, but not to profit riggers. Instead, change the current system in order to make it MUCH harder to keep an artificially wide spread. Some ways:

1) Charge more as a transaction fee and remove the listing fee – tighter spreads mean more transactions and more gold sink from transaction fees – do the math and set it so the sink is equal after the change.

2) Keep it the same (5% listing fee) but ALLOW PEOPLE TO CHANGE THEIR OFFERS – not remove them without penalty. This will yield even more gold sinkage as transactions will go up and listing fees will remain the same.

3) Ban the riggers – the work of 30 minutes, it’s simple to see who’s doing the rigging– MMOs almost never do this. I often thought it was because they didn’t want to lose sub fees – in GW2, no idea.

4) Ban external gold buyers – again, simple, and I do understand why MMOs (never) care about external gold sites and can get into that privately if anyone cares.

If you do any of these problem solved. For ANet, If you don’t have any traders at ANet happy to consult for free and demonstrate what I mean.

TL/DR – the precursor market is rigged, people take RL money out of it, it’s simple to fix, and I don’t understand why they wouldn’t do it.

You are wrong- as has been explained in countless threads that had the same conspiracy theories.
There have even been a few official numbers about movements of precursors thrown in by John Smith.

Basically to sum everything up, the precursor market, like all other markets is driven by supply and demand.

First, you’ll have to prove the top buy and lowest sell are listed by the same person 24/7. Your entire post stands or falls with that assumption. If you can’t prove that, you’re entire post can easily be ignored as a conspiracy theory.

MMOs don’t ban players based on unfounded paranoia of other players. That’d be very bad practice.

“1. The precursor market is controlled and rigged externally, either by a person with a lot of time who wants to make a small (IMO) amount of money or a gold farmer outfit with access to cheap labor who wants to do the same. The amount of money they extract (real life money) is pretty small for the irritation they cause the player base (IMO)”

Well that’s a pretty big assumption for one, and you base your argument on it. There is no proof that one person is controlling it, and John Smith has shown previously that there are different unique sellers for one precursor in a 24-48 hr period.

I skimmed through your post cause it’s hard to read – but I do agree that removing posting fees encourages a shorter spread. However, you need to keep in mind that this acts as a gold sink, and one of the game’s best gold sinks.

You remove that and inflation runs rampant.

Forget the rigger aspect of the post for a minute. Rigging in many ways is an unintentional by-product of people thinking they can typically buy low and sell high, many people do it and the listing fee actually keeps these margins much looser. There are some player controlled markets that run through the TP overall, but in many cases it seems like it’s mostly those that play the market for profit, trading bulk low cost items between each other and speculating the higher priced stuff. Even if there were a few big players on the market that controlled pre-cursors at the top end, you will still see instant buy offers that are easier for players to swallow, that’s where we don’t see the data as clearly.

One thing, and i’ve mentioned this before, is to have instant buy offers cover costs so sellers don’t have to come up with the listing fee. Over and over i hear of people not having the fee to sell off to instant buy offers. I personally think this is an oversight and one that should be fixed.

I see the point of listing fees, however, being able to change your sell offer price is a huge thing missing from the TP. Even on small transactions, you could easily eat a large amount of your profit in single transactions, since the listing fee is fixed. Moving bulk at lower priced items yields next to nothing when selling in bulk, so many people put spreads on sell offers in units of 10’s increasing each sell offer buy 5% to cover smaller purchase profit loss. This not to mention the constant undercutting. So the spread really does hurt the buyer since the sellers need to resort to increasing the spread.

I’ve pointed out (almost to the length of it being a pet-peeve) that players general earnings are poor, which keeps the market fairly stale. Players with low incomes and very easy access to the market, make poor choices. If players had marginally better incomes, you’d see less of this nickle and dime movement of product.

I have seen no evidence that the precursor market is ‘rigged’, and no evidence that it is ‘rigged’ has been presented in the original post. Every conjecture based upon there being a ‘rigged’ market is thus utterly suspect.

The 5% listing fee up front is indeed a large impediment to the efficiency of the market. It presents a substantial risk to a seller and keeps spreads wide. It exists not because it is a good idea in a vacuum, but because the way their TP is coded it could be used as free storage without a listing fee to discourage that behavior.

Ideally, you would simply have items listed for sale on the TP eat up storage space in your inventory until they sell, without an up-front listing fee. That would make it much easier to adjust prices on the ask side, which would tighten spreads and increase liquidity.

You guys make some good points. In order for the market to be manipulated and spreads kept artificially wide it doesn’t have to be one group or person doing it.

I tested the theory and watched the movement in the market and spreads and it was indicative to me that there is someone acting as a market maker and aggressively defending the spreads.

If your evidence suggest otherwise perhaps we could PM each other to discuss.

I find it difficult to believe that in a market that is

1) Highly illiquid – the precursor markets are definitely low liquidity
2) Has large barriers to efficient market making – again, this is the case here
3) Unregulated

that people wouldn’t extract rents from/profit from said market, particularly when it is so easy to do so. Gold selling sites exist, they sell gold, this is an easy way to extract gold.

Anyway, if you don’t think people are defending excessively large spreads, we can agree to disagree – it’s not something I’m up in arms about – I just thought it was interesting.

What I don’t understand is why you can’t change your pricing, this will increase the frequency of transactions, compress the spread (which is good for everyone but market manipulators) and you can then simply vary the tax to get to the appropriate level of gold sinkage.

Those of you saying “it’s not true” – every global market that has these sorts of constraints has seen and will seen the sort of manipulation I’m speaking about.

A good example of what will happen when you remove artificial constraints can be seen by the NASDAQ market going decimilized. They removed an artificial constraint (minimum 1/16th spreads) and the spreads collapsed, liquidity increased, and trading costs diminished

&ensign – I hadn’t considered the storage aspect – they should still let you change your pricing – it will achieve the same thing

So, would you suggest the person who showed a [97 Jack-a-lop might be a market manipulator? I watch the Jack a lop listings every day and see quite obvious market maker actions.

If there is a wide spread, such as is the case in a variety of level 80 Rares lately, I usually set my listing around the mid-point of the spread. Every time I do this, the item sells in a relatively short time. The listing price isn’t low enough to give that person buying “50 great swords” an opportunity to profit on either end. If anyone else lists before my item sells, it usually continues to close the spread and take the profitability out of flipping the item.

..and I don’t get hung out to dry by the 1c less listings.

I agree that the listing fee should be merged with the sale completion fee.

Heck, I’d prefer a return to the good ok’ days of WTS/WTB, but I understand the benefits of an automated system in an economy of this size, with as many differing products as it has.

Im nto sure about jack a lops – i have never looked at the market or tested it like the precursor market.

It only makes sense to do this when the spreads are big – there are a lot of frictions in making RL gold profit

1) You extract the spread in Gold minus the aforementioned trading frictions.
2) You then sell to a gold farming biz on their bid (they have a spread too) unless the one IS a gold farmer biz (more likely)
3) Because their is an official gold buying rate set by ANEt the profit potential for our of game gold buyers is smaller than in games like WoW.

That’s why at the beginning I said it wasn’t that much RL money being made for a pretty irritating mechanic for actual players (artificially high spreads)

animalmom.1062:

What I don’t understand is why you can’t change your pricing, this will increase the frequency of transactions, compress the spread (which is good for everyone but market manipulators) and you can then simply vary the tax to get to the appropriate level of gold sinkage.

Those of you saying “it’s not true” – every global market that has these sorts of constraints has seen and will seen the sort of manipulation I’m speaking about.

A good example of what will happen when you remove artificial constraints can be seen by the NASDAQ market going decimilized. They removed an artificial constraint (minimum 1/16th spreads) and the spreads collapsed, liquidity increased, and trading costs diminished

Just as a counterpoint to this, if pricing changes were allowed, I could see a case where the casual seller would suffer due to automated, or even dedicated sellers – lets refer to them as “algos” for simplicity. If, as you propose, there are forces at work to maintain spreads, this inherently benefits them. Meaning that at any time, an algo would be able to readjust their offer to ensure their sales receive priority over a casual market player who isn’t monitoring their sales. Similar to what you describe happening now, only at an accelerated and unchecked rate.

What this leads to is sales being dominated by algos in the less liquid markets. A common seller would have to get extremely lucky in their listing timing to catch a buyer before being undercut in order to have have their order filled. Likewise on the buy side.

Spreads would eventually collapse to the tax level. Resulting in a virtual “fixed” cost for items. It would take significant market shocks to break out of this situation once it occurs.

More liquid markets would initially be less affected by this, but as algos tend to home in on these spreads, they too would eventually collapse.

I haven’t thought too deeply into this, but this would be my initial expectation. Counterpoints more then welcome.

“Just as a counterpoint to this, if pricing changes were allowed, I could see a case where the casual seller would suffer due to automated, or even dedicated sellers – lets refer to them as “algos” for simplicity. If, as you propose, there are forces at work to maintain spreads, this inherently benefits them. Meaning that at any time, an algo would be able to readjust their offer to ensure their sales receive priority over a casual market player who isn’t monitoring their sales. Similar to what you describe happening now, only at an accelerated and unchecked rate.

What this leads to is sales being dominated by algos in the less liquid markets. A common seller would have to get extremely lucky in their listing timing to catch a buyer before being undercut in order to have have their order filled. Likewise on the buy side."

Excellent point, the one thing that I would change about my OP was the observation that a person or group of people do the manipulating. Since my OP I’ve done some experimenting and it’s clear that the algos (bots) are already hard at work.

The speed at which the market moves when the spread is threatened makes me think it’s automated. It’s not like it’s hard to build a single market algo that can monitor a market as slow moving as the TP.

in any case, spreads will tighten (if you can change your offer prices) and this will benefit players at the expense of gold extractors/sellers.

To be clear, i’m not against what’s going on in general. markets that are poorly set up should be ruthlessly exploited. One must assume that ANet either wants it this way or doesn’t understand what they have done. if it’s the former, so be it, it’s their game. I wish I had more time to corner the various markets.

If it’ the latter this thread has some good suggestions on how to fix it.

animalmom.1062:

/snip

in any case, spreads will tighten (if you can change your offer prices) and this will benefit players at the expense of gold extractors/sellers.

To be clear, i’m not against what’s going on in general. markets that are poorly set up should be ruthlessly exploited. One must assume that ANet either wants it this way or doesn’t understand what they have done. if it’s the former, so be it, it’s their game. I wish I had more time to corner the various markets.

If it’ the latter this thread has some good suggestions on how to fix it.

Maybe I wasn’t quite clear. I don’t think allowing free price changes helps players in the long run at all.

Spreads won’t tighten – they’ll collapse entirely to the tax rate. And following that same methodology, due to irrational behavior, a downward shift in prices is likely to follow, depressing markets. And as I mentioned, without significant market shocks, breaking out of the spiral is unlikely. On top of that, the shock would just server to reset the price, and the spiral would start over again.

If it’s unclear how this is likely to happen, I can elaborate furhter.

The best way to tighten the spreads is to publish the trade data instead of making folks guess from existing buy and sell orders where they should be pricing their goods. Unless you’ve sold or bought a particular item before and have some information on how quickly it sells at different price points, you don’t have enough information to make a good decision when placing an order.

Edit and I apologize to ANet for sounding like a broken record about this… I know it’s not a simple thing to do

True, if we saw the last X transactions, timestamp, price and volume, we wouldn’t have as many of these “^%$&# undercutter!!” threads.