Guild Wars 2

Mystic.5934:

they only influence it so far as to add attractive items for sale in the gem store.
buying gems with gold does benefit Anet, as then gems become more attractive to buy with $$, resulting in more gems bought with $$.

also, what’s up with the conversion rate? every time I buy gems with coin I have to check several prices around the amount I’m looking to spend. This is a theoretical example that illustrates what I have observed:
100g00s00c = 1428 gems
100g05s00c = 1428 gems
100g06s00c = 1426 gems
100g07s00c = 1428 gems
100g08s00c = 1429 gems
100g07s00c = 1428 gems
100g06s00c = 1426 gems
100g08s00c = 1429 gems
100g09s00c = 1428 gems
it’s happened often enough that I convinced myself it’s not just other people buying and selling gems. It’s like there are some magical amounts that give more than the amounts around it, and some amounts that give less. 200g always seems to give about 4 gems more than 199g99s00c…

It’s a floating rate. Any transactions taking place while you’re pricing would account for those changes. How sensitive the rate is, remains unknown.

linuxotaku.4731:

Inflation (more gold available to players)

Inflation is not what you think it is.

linuxotaku.4731:

A big increase in the gold : gem ratio strongly suggests there has been inflation

It suggests no such thing.

juno.1840:

Except the exchange rate is controlled to some degree by ANet.

ANet controls the goods and price levels of everything in the gem store, the gold generation rates in game, and the production functions of every item in game. That’s more than enough levers to pull to put the exchange rate wherever they want it to b. It’s not a question of whether they can interfere, but whether interfering would do anything good for the game.

Clearly the exchange rate is going to get hammered as new rewards continue to be released primarily through the gem store while in-game gold rewards languish. The question is at what point this breaks down, since players are increasingly farming to buy gems to get the new rewards while the players throwing cash at gold to buy (old) rewards should only continue to diminish.

What if converting gems to gold didn’t swing the exchange rate as far as converting gold to gems? Wouldn’t it make more sense to make the conversion of gems to gold more lucrative from an economists stand point?

They do have to find ways to entice people to buy gems with real money no? This game isn’t exactly supporting itself from charity donations.

In my opinion, the exchange rate is artificially manipulated at the rate they want it to be. I can see it as clear as daylight.

Ensign.2189:

linuxotaku.4731:

Inflation (more gold available to players)

Inflation is not what you think it is.

I’ll concede that adding money to the money supply isn’t inflation. I added that parenthetical because I was using the term colloquially, but I should have just said increased money supply. That said, standard economics theory typically assumes that the monetary exchange equation applies, and increasing the money supply (without other changes like making more goods available) will cause commodity prices to increase.

I’ll stand by my assertion that unless the volume of transactions went down, increased gold:gem prices are evidence of inflation due to increased money supply.

Ensign.2189:

linuxotaku.4731:

A big increase in the gold : gem ratio strongly suggests there has been inflation

It suggests no such thing.

You have disagreed, without any argument or evidence; you’re not likely to convince anyone that way, and it sounds childish. (I have more respect for the rebuttal above, where I was being loose with the term inflation.) You also left out the alternate explanation — unless the volume of transactions has gone down; here I was arguing that the demand curve has shifted due to increased “income” (more gold available):

http://en.wikipedia.org/wiki/Money_supply#Link_with_inflation
http://en.wikipedia.org/wiki/Demand_curve

For the record, I don’t think inflation is bad — I think it’s a necessary feature of a healthy economy. (And I personally benefited from the increased gems:gold ratio — I’ve never bought gems via gold … I value my time too much, though you couldn’t tell based on how much time I spend on this game.)

I just think it’s misleading to assert that a change in one exchange rate is emphatically not inflation. It’s not inaccurate, but it is misleading.

Ensign.2189:

juno.1840:

Except the exchange rate is controlled to some degree by ANet.

ANet controls the goods and price levels of everything in the gem store, the gold generation rates in game, and the production functions of every item in game. That’s more than enough levers to pull to put the exchange rate wherever they want it to b. It’s not a question of whether they can interfere, but whether interfering would do anything good for the game.

I don’t think using these levers is quite as easy as you make it sound, but otherwise I agree with the above.

Ensign.2189:

Clearly the exchange rate is going to get hammered as new rewards continue to be released primarily through the gem store while in-game gold rewards languish. The question is at what point this breaks down, since players are increasingly farming to buy gems to get the new rewards while the players throwing cash at gold to buy (old) rewards should only continue to diminish.

These comments above are purely personal opinion, and hardly qualify as an explanation for changes in the gems:gold exchange rate.

In-game gold rewards languish and new rewards are primarily released through the gem store? At this point (after various account/char unlocks) — I’m mostly disinterested in everything in the gem store … if I were to buy gems again, it’d mostly be to sell for gold to reduce grinding. (I guess I could get another couple of char slots, but there’s nothing else I can see buying via the gem store.)

Calae.1738:

What if converting gems to gold didn’t swing the exchange rate as far as converting gold to gems? Wouldn’t it make more sense to make the conversion of gems to gold more lucrative from an economists stand point?

They do have to find ways to entice people to buy gems with real money no? This game isn’t exactly supporting itself from charity donations.

In my opinion, the exchange rate is artificially manipulated at the rate they want it to be. I can see it as clear as daylight.

1) It’s already been explained that Anet doesn’t control the exchange rates. We players do through our own transactions. The more Gems people buy with Gold, the more Gold will be needed for the same amount. Please stop with the tin foil conspiracies.

2) Making Gem -> Gold exchange more lucrative would hurt the in game economy. The influx of Gold would destabilize prices, and result in out of control inflation. Short term revenue from Gems sales would not be worth the long term damage to the value of the currency. This is why Anet has a dedicated team that goes after RMT company accounts selling Gold in game.

Smooth Penguin.5294:

Calae.1738:

What if converting gems to gold didn’t swing the exchange rate as far as converting gold to gems? Wouldn’t it make more sense to make the conversion of gems to gold more lucrative from an economists stand point?

They do have to find ways to entice people to buy gems with real money no? This game isn’t exactly supporting itself from charity donations.

In my opinion, the exchange rate is artificially manipulated at the rate they want it to be. I can see it as clear as daylight.

1) It’s already been explained that Anet doesn’t control the exchange rates. We players do through our own transactions. The more Gems people buy with Gold, the more Gold will be needed for the same amount. Please stop with the tin foil conspiracies.

2) Making Gem -> Gold exchange more lucrative would hurt the in game economy. The influx of Gold would destabilize prices, and result in out of control inflation. Short term revenue from Gems sales would not be worth the long term damage to the value of the currency. This is why Anet has a dedicated team that goes after RMT company accounts selling Gold in game.

I’m sure they control the exchange rates. Most of what I’ve seen wouldn’t make sense if they didn’t.

Buying gems to exchange to gold does create inflation but, runaway inflation? I don’t think so. That gold is only really useful to purchase items on the TP. The TP takes a cut out of that gold and when it falls into someone else’s hands it’ll be used again on that same TP.

It would make sense for them to control the exchange rate in order to make it lucrative for people to buy gems to convert to gold. They want us to buy stuff on the TP. When that money goes into someone else’s hands, they’ll use it on the TP again.

Every TP transaction curbs inflation. They could swing the exchange rate in any direction they want and artificially keep it where they want it.

Buying gems to exchange to gold doesn’t create inflation, because the gold that the gem seller gets was already put up there by another player, which came from the game economy. In fact, selling gems for gold is another deflationary tool, because the gem → gold rate is LOWER than the gold → gems rate.

Calae.1738:

What if converting gems to gold didn’t swing the exchange rate as far as converting gold to gems? Wouldn’t it make more sense to make the conversion of gems to gold more lucrative from an economists stand point?

It is plausible that the algorithm could favor the gems -> gold conversion, but in my experience the stuff in the gem store is much more desirable than anything I would be able to buy for about the same amount on the TP if I converted those gems to gold. Gold just isn’t as desirable as gems until you’ve bought everything you want from the gem store. So yes, ANet is influencing the exchange rate because they keep adding new cool items to the shop which are a better value than the items that I want but can’t afford on the TP, which causes me to spend my gems directly instead of converting them to gold.

They don’t have to nefariously manipulate the exchange rate. The current situation seems like a pretty clear representation of supply and demand. GW2 is the one game I’ve found where I, as a player that has more cash than time, don’t need to buy gold to enjoy all the content. I spend my money on cosmetic and convenience stuff (and toys!) in the gem store for the most part, and just buy what I can afford off the TP.

Pandemoniac.4739:

Calae.1738:

What if converting gems to gold didn’t swing the exchange rate as far as converting gold to gems? Wouldn’t it make more sense to make the conversion of gems to gold more lucrative from an economists stand point?

They don’t have to nefariously manipulate the exchange rate. The current situation seems like a pretty clear representation of supply and demand. GW2 is the one game I’ve found where I, as a player that has more cash than time, don’t need to buy gold to enjoy all the content. I spend my money on cosmetic and convenience stuff (and toys!) in the gem store for the most part, and just buy what I can afford off the TP.

I’m not insinuating that their purpose is nefarious. I look at Jon Smith the same way I look at a central bank chairman. He has to create the conditions that promote economic activity. It would make sense to steer the consumer towards the gem store to purchase gems and convert them to gold. The gold gets dumped into the TP multiple times by exchanging hands and destroying a percentage on every transaction. The gold that gets created eventually gets flushed over time.

As long as they can keep a steady demand for items on the TP, the artificial exchange rate will be used to create a market for consumers to buy gems.

Calae.1738:

It would make sense to steer the consumer towards the gem store to purchase gems and convert them to gold.

They dont’ necessary need to do that. Because they can just sell gemstore item(skins, black lion key) directly.

I played a bunch of game with this type of gem conversion. Usually they do try to steer customer to purchase gem to convert to gold.

But since GW2 have no power creed, or over abundance of convenient item, it is hard to convince people to buy gem to trade for gold.

Thus having a high gem price is probably best for Anet’s interest so people are more motivated to buy gemstore item with real cash.

John Smith.4610:

The gold to gem rate on the exchange is not a measure of inflation. If you consider how the exchange works and interacts with players you’ll realize that it’s a great measure of only one thing…

No one is spending money or buying cards (which is money in bulk increments), which leads to everyone poring gold into the system causing a huge imbalance in the exchange. If someone spends over $1000, pounds, or euros on the gems you’d see the gold prices drop a bit or a lot (depends how much of a dent it leaves in the exchange system).

Calae.1738:

I’m not insinuating that their purpose is nefarious. I look at Jon Smith the same way I look at a central bank chairman. He has to create the conditions that promote economic activity. It would make sense to steer the consumer towards the gem store to purchase gems and convert them to gold.

Why would that make more sense than encouraging folks to buy gems with gold to get gem store items? By having really desirable items in the gem store, ANet both encourages folks to spend real cash and encourages folks to flush gold out of the economy by buying gems.

I know some folks who convert a portion of their extra gold into gems in anticipation of new items being added to the store instead of just letting it pile up in their bank. In my opinion, it’s more efficient economically to be continuously adding new things to the gem store than to try to continuously create demand for in-game items that can be purchased with gold.

The hard core farmers will always generate more gold than can be consumed with TP fees, especially when you add in the effect of the folks playing the market. If there wasn’t a lot of folks flush with gold, the exchange rate would be more favorable for the folks buying gems with gold. Why would it make sense to put downward pressure on the gold->gems exchange rate and pull less gold out of the in-game economy? It seems more effective to put items on sale in the gem store to encourage folks to spend both cash and gold at the same time.

Gems are the ultimate consumable – no matter what class your character is, or how high end their gear is, there’s an incentive to “invest” you extra gold in gems because it is very likely that there will be something in the gem store at some point that you will want.

https://forum-en.gw2archive.eu/forum/game/bltc/Who-sets-Gem-prices/first

Pandemoniac.4739:

Calae.1738:

I’m not insinuating that their purpose is nefarious. I look at Jon Smith the same way I look at a central bank chairman. He has to create the conditions that promote economic activity. It would make sense to steer the consumer towards the gem store to purchase gems and convert them to gold.

Why would that make more sense than encouraging folks to buy gems with gold to get gem store items? By having really desirable items in the gem store, ANet both encourages folks to spend real cash and encourages folks to flush gold out of the economy by buying gems.

If gold is too easy to get via farming and or grinding then it reduces the demand for gems. Gem sales is how they make money.

8000 gems for 100$ wasn’t available for awhile; at least not until they made changes toward farming and grinding. It’s more time consuming to farm for the materials you need now than it ever was when the game launched. I think that created a market for people with disposable income and they saw an increase in people buying gems to convert to gold.

Calae.1738:

Pandemoniac.4739:

Calae.1738:

I’m not insinuating that their purpose is nefarious. I look at Jon Smith the same way I look at a central bank chairman. He has to create the conditions that promote economic activity. It would make sense to steer the consumer towards the gem store to purchase gems and convert them to gold.

Why would that make more sense than encouraging folks to buy gems with gold to get gem store items? By having really desirable items in the gem store, ANet both encourages folks to spend real cash and encourages folks to flush gold out of the economy by buying gems.

If gold is too easy to get via farming and or grinding then it reduces the demand for gems. Gem sales is how they make money.

8000 gems for 100$ wasn’t available for awhile; at least not until they made changes toward farming and grinding. It’s more time consuming to farm for the materials you need now than it ever was when the game launched. I think that created a market for people with disposable income and they saw an increase in people buying gems to convert to gold.

Quoted for emphasis. Good post brother man.

I’m not sure gold is “flushed” out of the economy by buying gems. If the gem exchange is purely player driven, then it’s merely an exchange of gold from one player to another.

EDIT: However there is the buy vs. sell conversion rate which is roughly a 30% penalty. That might be the flushing you’re referring to?

Calae.1738:

8000 gems for 100$

Wow!
It’s been such a long time since I last bought gems with cash, I did not know this option was available ..

Yes, there is a tax on buying gems for gold.

It’s interesting that they discourage buying gold with gems (with that 30% tax). I’m pretty sure it’s so people don’t use gems as an investment opportunity. But it also discourages buying gems with $$ and trading those gems for coin as it’s perceived as a bad deal.
they likely do know this happens, and one way to combat it is: trading gems for gold changes the exchange rate price more than trading gold for gems. For example, let’s say people buy twice as many gems with gold as sell gems for gold, to keep the price stable they would need to have every gem purchased with gold increase the rate by 0.1% and every gem sold for gold decrease the rate by 0.2%. That’s one way they can indirectly influence the gem price (and no one would know).
Other ways they influence it are putting things on sale. character slot 20% off? +20% gem price! bank tab 10% off? +10% gem price! keys 30% off? +5% gem price!

The 30% difference (tax if you want to call it that) prevents people like me from actively treating the exchange like the real world currency markets. People who have experience in these types of exchanges are more likely to benefit/profit, which in turn hurts everyone else.

Now as for people who continue to wear their tin foil hats, please remember again: Anet does not manipulate the exchange.

The formula is set in the coding. Players’ activities within the exchange cause the movements you see in the rates. The more disposable in-game income they have, the more Gems can potentially be pulled from the pot. And the less Gems there are, the higher the exchange rate gets. You see the pattern each time there’s something uber awesome in the Gem Store.

Smooth Penguin.5294:

The 30% difference (tax if you want to call it that) prevents people like me from actively treating the exchange like the real world currency markets. People who have experience in these types of exchanges are more likely to benefit/profit, which in turn hurts everyone else.

Much like how traders beneift/profit from flipping?

Essence Snow.3194:

Smooth Penguin.5294:

The 30% difference (tax if you want to call it that) prevents people like me from actively treating the exchange like the real world currency markets. People who have experience in these types of exchanges are more likely to benefit/profit, which in turn hurts everyone else.

Much like how traders beneift/profit from flipping?

But the big difference here is that real money can be involved. You can buy Gems directly with money, but you can’t (legitimately) do the same with items.

And why does that make a big difference why one is allowed and one is not?

Essence Snow.3194:

And why does that make a big difference why one is allowed and one is not?

Players control both the exchange market, and the Trading Post items to an extent.

Gem Exchange – Player’s indirectly control the rates by the volume of exchanges either way. The formula is based on the balance of Gems/Gold ratios. The only time the pot can increase in size is when players purchase Gems with real money, and then put it into the pot for Gold. The fact that the Gem Exchange is partly tied to real money transactions, it makes sense to put barriers in place that prevent abuse.

Black Lion Trading Post – Players directly control the price of goods, be it Buy or Sell Orders. Players who make money flipping items are only providing goods to people who willingly pay the prices listed. All items in the TP are obtained via in game mechanics (i.e. farmed drops, or use of in-game currency to purchase). No real money comes into play directly with these items.

I fully understand what each is and how it works. That wasn’t the question. The question was to “why” money is the justification of not allowing players to basically do the same thing to the gem exchange that they do to the trading post.

Considering everything in the tp is only 1 extra click away from money…why?

Essence Snow.3194:

I fully understand what each is and how it works. That wasn’t the question. The question was to “why” money is the justification of not allowing players to basically do the same thing to the gem exchange that they do to the trading post.

Considering everything in the tp is only 1 extra click away from money…why?

Oh ok, I wasn’t sure to the extent of your understanding. So yes, the full point of all this is real money. While it’s true that it’s only an extra step apart, only one of the two affects the other. In order for a TP player to buy items in game for real money, they first must use the Gem Exchange. They buy Gems, convert to Gold, then use the Gold to invest on items in the TP. The end result is that Gold is still Gold.

Gems, on the other hand, are not the same. Sure you can buy them with Gold, but you can also buy them with real money. In the Anet’s legal documents, Gems hold no value whatsoever, bur the fact that you can acquire them with a creditcard forces the company to put in some protections. Part of that is to protect the game’s economy. Part of that is to protect the players from themselves (since you know there are some who can’t control their spending). Part of it is to protect Anet from fraud.

Regarding these protections, having an even exchange rate both ways opens the ability to game the market. In the real world, currency exchanges are tied to a multitude of factors worldwide. That’s why even the best currency traders can lose lots of money in the blink of an eye. Case in point, my friend’s brother lost $200,000 in a single day of trading. Now in game, the only factors that determine the exchange rate is the volume of trades that affect the Gem/Gold ratios. Holiday season has new Gem Store items = Gem rates get more expensive. If the rates had no 30% difference, it’d be far too easy to make money this way. And add the fact that you can game the system even more buy purchasing Gems with real money, and you have the potential to have a huge negative impact on the virtual economy.

As for the fraud. Not all fraudulent transactions are caught right away. An RMT company could easier use a player’s stolen creditcard information and account, get Gems, and then play the exchange market to make more Gold. The Gold is then distributed to other players who buy from RMT companies, and the vicious cycle continues. Having the 30% difference in place discourages short term flipping, and adds enough of a buffer to prevent massive profits on fraudulent transactions.

Of course, John probably has a lot more reasons, but the main ones that I can see are the fact that it’s tied too closely to real money. I did my best to put my thoughts in writing, so hopefully you got my point.

Calae.1738:

If gold is too easy to get via farming and or grinding then it reduces the demand for gems. Gem sales is how they make money.

8000 gems for 100$ wasn’t available for awhile; at least not until they made changes toward farming and grinding. It’s more time consuming to farm for the materials you need now than it ever was when the game launched. I think that created a market for people with disposable income and they saw an increase in people buying gems to convert to gold.

Too easy to get for whom? Just because the folks that enjoy (or just have a tolerance for) farming can amass a lot of gold doesn’t mean there is a problem. There’s only a problem if those folks have nothing to spend all that gold on. I don’t see folks not feeling pressured to buy gold with cash as a bad thing, especially when we’ve all bought the game client.

I’ve bought lots of gems, and I haven’t bought any gold. I think pushing folks to buy gold could easily backfire. If I had to either work or shell out cash to get gold in game to be able to afford the necessities like skill books or to be able to take a waypoint whenever I wanted to, well I’d probably go find something else to play that was more fun for me, which would decrease their gem sales.

Smooth Penguin.5294

Of course, John probably has a lot more reasons, but the main ones that I can see are the fact that it’s tied too closely to real money. I did my best to put my thoughts in writing, so hopefully you got my point.

Thanks for this post. You and I don’t always see eye to eye when it comes to the economic direction of GW2, but I do appreciate the insight into why things are done the way they are.

linuxotaku.4731:

That said, standard economics theory typically assumes that the monetary exchange equation applies, and increasing the money supply (without other changes like making more goods available) will cause commodity prices to increase.

Sure, but there are very few actions you can take in this game that will increase the money supply without also making more goods available. Goods and currency come together, in various ratios.

linuxotaku.4731:

I’ll stand by my assertion that unless the volume of transactions went down, increased gold:gem prices are evidence of inflation due to increased money supply.

Increased gold to gem prices imply either an increase in the quantity of gold offered on the exchange, or a decrease in the quantity of gems offered on the exchange. You could have an increase in the quantity of gold offered on the exchange because people have more gold to spend (inflationary or not), or you could have more gold offered on the exchange because demand for items priced in gems has increased.

The raw volume of transactions will have little effect on the exchange rate, only relative changes in proportions on the gold and gem sides of the exchange.

Without looking at other factors you cannot infer which effect dominates. There is very clearly an effect on the gem exchange rate when there is a demand surge for gem store items, as you can see the spike whenever new items are introduced. There is every reason to believe that the quantity of gems via dollars/euros/etc being thrown at buying gold is going to continue to drop as the game matures, as the same maturation curve has been seen in countless other games.

linuxotaku.4731:

I just think it’s misleading to assert that a change in one exchange rate is emphatically not inflation. It’s not inaccurate, but it is misleading.

The change in an exchange rate is emphatically not inflation. Conflating a change in an exchange rate with inflation is both inaccurate and misleading. You can have significant movement in an exchange rate without inflation on either side – this is in fact a critical feature of having distinct currency areas, as it allows trade imbalances between regions to get sucked up by a floating exchange rate instead of forcing inflation or deflation on either end.

Again, for emphasis – exchange rates move without changes in inflation all the time. This is normal, and represents shifts in inter-regional trade balances. The inverse, however, is not true: changes in inflation almost always imply changes in the exchange rate. Perhaps that’s where you’re getting tripped up. A can imply B without B implying A.

linuxotaku.4731:

Ensign.2189:

linuxotaku.4731:

A big increase in the gold : gem ratio strongly suggests there has been inflation

It suggests no such thing.

You have disagreed, without any argument or evidence; you’re not likely to convince anyone that way, and it sounds childish. (I have more respect for the rebuttal above, where I was being loose with the term inflation.) You also left out the alternate explanation — unless the volume of transactions has gone down; here I was arguing that the demand curve has shifted due to increased “income” (more gold available):

http://en.wikipedia.org/wiki/Money_supply#Link_with_inflation
http://en.wikipedia.org/wiki/Demand_curve

For the record, I don’t think inflation is bad — I think it’s a necessary feature of a healthy economy. (And I personally benefited from the increased gems:gold ratio — I’ve never bought gems via gold … I value my time too much, though you couldn’t tell based on how much time I spend on this game.)

I just think it’s misleading to assert that a change in one exchange rate is emphatically not inflation. It’s not inaccurate, but it is misleading.

You appear to be confused. The person making a completely unsupported assertion without any argument or evidence is you. Not only are you not likely to convince anyone with that tactic, anyone with even a basic grasp of the concept understands why Ensign’s response was sufficient.

An increase in the Gold:Gem conversion rate implies exactly one thing, a increase in the demand for gems relative to the demand for gold. Can such behavior occur while inflation is occurring? Yes. Can such behavior occur while inflation is not occurring? Absolutely. In fact, we can often expect to see this behavior when inflation is not occurring. The change in Gold:Gems exchange is approximately equal at implying inflation as the count of deer I saw on my drive home from work today versus yesterday. That is to say there’s absolutely nothing which can be inferred.

Vick.6805:

Smooth Penguin.5294:

But in regards to your desires to have more luxury items (aka Gem Shop). All these items are optional. They have no impact on the game itself. They are just for looks.

I see this subjective argument all the time. I’m not sure “no impact” is accurate in a game where the entire endgame is based around cosmetics. If they’re going to advertise a game based around horizontal progression…where is the horizontal progression outside the gem store lately?

I have zero problems with the gem shop. As Smooth Penguin already mentioned, it’s all optional. But I also agree with you that all new cosmetics these days can be found in the gem shop. And that also doesn’t sit right with me, for the same reason you mentioned, the horizontal progression being more important than the vertical one.

John Smith.4610:

Behellagh.1468:

“game to the correct conclusion”? Freudian slip? :p

Lol, that’s good enough that I’m not going to edit the mistake

A very rationale thing to do.

Mystic.5934:

they only influence it so far as to add attractive items for sale in the gem store.
buying gems with gold does benefit Anet, as then gems become more attractive to buy with $$, resulting in more gems bought with $$.

also, what’s up with the conversion rate? every time I buy gems with coin I have to check several prices around the amount I’m looking to spend. This is a theoretical example that illustrates what I have observed:
100g00s00c = 1428 gems
100g05s00c = 1428 gems
100g06s00c = 1426 gems
100g07s00c = 1428 gems
100g08s00c = 1429 gems
100g07s00c = 1428 gems
100g06s00c = 1426 gems
100g08s00c = 1429 gems
100g09s00c = 1428 gems
it’s happened often enough that I convinced myself it’s not just other people buying and selling gems. It’s like there are some magical amounts that give more than the amounts around it, and some amounts that give less. 200g always seems to give about 4 gems more than 199g99s00c…

Dude behind the counter is a twenty-something that can’t make change.

Ensign.2189:

linuxotaku.4731:

A big increase in the gold : gem ratio strongly suggests there has been inflation

It suggests no such thing.

What really bothered me is that Ensign omitted part of what I wrote — the quote makes it look like I was arguing a position I’m not — I don’t claim prima facie evidence of inflation from the exchange alone, but rather in the context of a market:

linuxotaku.4731:

A big increase in the gold : gem ratio strongly suggests there has been inflation — unless you also have a big reduction in the volume of the gold<->gems exchange market. AFAIK the latter information isn’t public.

“strongly” overstates the case, but there is an argument for my position there which I expanded in a followup.

Syeria.4812:

linuxotaku.4731:

You have disagreed, without any argument or evidence; you’re not likely to convince anyone that way, and it sounds childish. (I have more respect for the rebuttal above, where I was being loose with the term inflation.) You also left out the alternate explanation — unless the volume of transactions has gone down; here I was arguing that the demand curve has shifted due to increased “income” (more gold available):

http://en.wikipedia.org/wiki/Money_supply#Link_with_inflation
http://en.wikipedia.org/wiki/Demand_curve

For the record, I don’t think inflation is bad — I think it’s a necessary feature of a healthy economy. (And I personally benefited from the increased gems:gold ratio — I’ve never bought gems via gold … I value my time too much, though you couldn’t tell based on how much time I spend on this game.)

I just think it’s misleading to assert that a change in one exchange rate is emphatically not inflation. It’s not inaccurate, but it is misleading.

You appear to be confused. The person making a completely unsupported assertion without any argument or evidence is you. Not only are you not likely to convince anyone with that tactic, anyone with even a basic grasp of the concept understands why Ensign’s response was sufficient.

It may make you feel better about yourself, but asserting that I presented no arguments is bizarre when you then spend time responding to them.

TL;DR of my main argument: an increase in this exchange rate is not inflation, but it suggests inflation iff volume hasn’t changed; and I can’t make an assertion about volume.

The argument about the demand curve should be obvious based on first principles.

I don’t really agree with the OP … I just think that the dismissals miss the point.

To actually talk about inflation, we would have to agree on a bucket of goods to track. Would you agree that the materials to make legendary weapons qualifies? After sampling from gw2spidy, I’m not sure it’d prove me right, but I am curious and had intended to write code against their API anyway.

Syeria.4812:

An increase in the Gold:Gem conversion rate implies exactly one thing, a increase in the demand for gems relative to the demand for gold. Can such behavior occur while inflation is occurring? Yes. Can such behavior occur while inflation is not occurring? Absolutely. In fact, we can often expect to see this behavior when inflation is not occurring. The change in Gold:Gems exchange is approximately equal at implying inflation as the count of deer I saw on my drive home from work today versus yesterday. That is to say there’s absolutely nothing which can be inferred.

This is where I think what you’re saying is not inaccurate, but it is misleading. There is clearly a relationship between these:

• the ease at which one acquires gold in-game
• the amount of gold players are willing to spend buying gems

That relationship only affects the demand side, a potential mechanism for causality is obvious, and we can make a coherent/testable hypothesis about this.

Without data to support it, the hypothesis proves nothing, but it’s different from the deer you saw.

It indicates an increase in disposable income and an increase in desire for something at the Gem Shop. Both need to be present for the exchange rate to spike as much as it does.

Behellagh.1468:

It indicates an increase in disposable income and an increase in desire for something at the Gem Shop. Both need to be present for the exchange rate to spike as much as it does.

While this is a possible scenario (my point), it is also possible that there are just fewer gems available for sale for gold. If the latter scenario is true, then the exchange rate should move like the sell and buy sides balanced.

Economics theory proposes a demand curve, which holds that there will be some demand even at high prices. There is also a supply curve, meaning more supply will be available at higher prices; the shapes of those curves are determined by factors external to the market itself.

linuxotaku.4731:

Behellagh.1468:

It indicates an increase in disposable income and an increase in desire for something at the Gem Shop. Both need to be present for the exchange rate to spike as much as it does.

While this is a possible scenario (my point), it is also possible that there are just fewer gems available for sale for gold. If the latter scenario is true, then the exchange rate should move like the sell and buy sides balanced.

Disposable income can increase either by increasing your income or decreasing your expenses. In my opinion, the high rate is due to a lack of desirable but not super rare items that can only be bought for gold. This causes more disposable income on the gold side, and less demand for gold on the gem side.

If I wanted to throw money at the game to buy a legendary, it would be between $500 and $1000 at the current exchange rate, which is way beyond what I’ll spend for a single virtual item. But I will drop $15 for something fun in the gem store. There’s just no reason for me to buy gold for the most part.

The exchange rate has flattened out over the past month, so maybe we’re at the point where it’s going to stay for a while.

Smooth Penguin.5294:

Calae.1738:

What if converting gems to gold didn’t swing the exchange rate as far as converting gold to gems? Wouldn’t it make more sense to make the conversion of gems to gold more lucrative from an economists stand point?

They do have to find ways to entice people to buy gems with real money no? This game isn’t exactly supporting itself from charity donations.

In my opinion, the exchange rate is artificially manipulated at the rate they want it to be. I can see it as clear as daylight.

1) It’s already been explained that Anet doesn’t control the exchange rates. We players do through our own transactions. The more Gems people buy with Gold, the more Gold will be needed for the same amount. Please stop with the tin foil conspiracies.

2) Making Gem -> Gold exchange more lucrative would hurt the in game economy. The influx of Gold would destabilize prices, and result in out of control inflation. Short term revenue from Gems sales would not be worth the long term damage to the value of the currency. This is why Anet has a dedicated team that goes after RMT company accounts selling Gold in game.

For #2 here: Yet it seems a lot of people in GW 2 rather have that than no money at all. As a lot of the money sinks in place are rather static.

linuxotaku.4731:

Behellagh.1468:

It indicates an increase in disposable income and an increase in desire for something at the Gem Shop. Both need to be present for the exchange rate to spike as much as it does.

While this is a possible scenario (my point), it is also possible that there are just fewer gems available for sale for gold. If the latter scenario is true, then the exchange rate should move like the sell and buy sides balanced.

Economics theory proposes a demand curve, which holds that there will be some demand even at high prices. There is also a supply curve, meaning more supply will be available at higher prices; the shapes of those curves are determined by factors external to the market itself.

1) When a player converts gold to gems, the conversion rate goes up for the next player due to how the exchange works (because fewer gems and more gold are now in the exchange).
2) A player wants to convert because there is something they want at the Gem Shop and are not willing to pay cash for it.
3) A player can’t convert if they don’t have the gold to pay for the amount of gems they want.
4) If the player has enough gold and an item they want, go to 1.

The exchange rate will probably never swing the other way. I’m convinced Mr. Smith will make sure it doesn’t.

Calae.1738:

The exchange rate will probably never swing the other way. I’m convinced Mr. Smith will make sure it doesn’t.

It’ll have swings, because there are people willing to exchange Gems for Gold when the rates are delicious enough. John doesn’t ever have to touch the Exchange’s formula.

Nothing is gonna be done for 1 reason. if people feel the gold to gems is to high they will turn to using real money to get the new shiny of the month and that makes anet smile.

Smooth Penguin.5294:

Calae.1738:

The exchange rate will probably never swing the other way. I’m convinced Mr. Smith will make sure it doesn’t.

It’ll have swings, because there are people willing to exchange Gems for Gold when the rates are delicious enough. John doesn’t ever have to touch the Exchange’s formula.

Luckily for us, we don’t have to deal with interest rates in GW2 like we have to in the real world.

In a virtual world like GW2 however, there is a theoretical, unlimited supply of gems. If these gems are to remain valuable, they need to be expensive to buy via virtual currency (gold). The system must also make it so that players cannot stockpile too much gold too quickly via in game mechanics.

The system, in its current state, promotes gem sales to convert to gold for players with disposable income who do not wish to spend all that time farming for the materials needed to create ascended/legendary weapons/armor. It also acts as a gold sink for people with too much gold who wishes to buy items that are only sold via gems.

Mr. Smith is definitely doing a better job now then when the game launched. If I would have been in his position, I’d probably do something very similar.

Keeping constant demand for items in ANY tier promotes economic activity; which is what a bank chairman is supposed to do.

KumajirouSan.3527:

So I’ve just gotten myself a self style hair kit with some gold I had lying around. 250 gems cost me 17 gold and 80 silver i believe. Seriously, This is starting to get ridiculous. I play this game all day every day and even I can hardly afford these prices. Imagine a casual player trying to get some of these items, the only choice they would have would be to actually spend real money on it and the entire point of the exchange is so we don’t have to do that. I’d rather spend real money on gems because I want to not because I have to. We need to fix this, obviously nerfing every possible way of making gold isn’t working and we need to try something else. Even if it mean making gold easier to come by and inflating prices slightly it would be better than prices inflating but actual income rate staying low.

Strange… it still costs me the same since launch. 800 gems / 10 bucks.