Guild Wars 2

My guildmates and I have long debated the opaque mechanisms that control the price of Gems (purchased with real life money) and their exchange rate with in-game gold. Clearly the process by which the transactions are handled has a large benefit for ArenaNet in terms of continued income since no one will be paying subscriptions each month. My issue with this exchange system is that the method by which price is established is clearly not in the players best interest. Before we get their, lets take a look at what you get right now;

1 gold is currently exchanged for 366 Gems.
366 Gems are exchanged for 72 silver 7 copper.
509 Gems are exchanged for 1 gold 4 copper.

Clearly players are being ripped off by trading gold in for gems. The trick here is why?

In theory the rules of supply and demand would dictate a radically fluctuating price of gems over the first month of this games release. For example, during the first few days the exchange rate should have been in the low 1-10s range (not a lot of players had more then that due to leveling characters in lower ranged zones). In today’s market gem prices should have largely inflated due to an increased monetary supply (more players are level 80 and have been farming dungeons or what not to generate income).

The problem exists that the gem prices are NOT set by players. A player cannot set a purchase order to buy 500 gems at X price. Instead the player is forced to use the exchange rate set by ArenaNet. The question now, becomes why?

By relatively fixing the prices, and separating the supply from the demand, ArenaNet has created a system where the prices stay at a specific range. This means that as players need higher levels of gold, they will be forced to purchase more and more gems.

The deception comes from the “market exchange history”. Players think the cost of gems is fluctuating based on THEIR demand when in fact it is not. This deception gives players the idea that their purchase or sale of gems might yield more money one day.

I am not saying that ArenaNet is wrong in this practice, but the idea that they are controlling the price (or not tying it to actual demand) seems off to me. ArenaNet may be approaching this incorrectly. If prices were coupled to demand, then likely the value of a gem would increase (more players would see value in purchasing them if the cost of gems increased ….easy money always sells). As it is, the sale price has continually shrunk (currently around 19s…down from 29s at the launch of this game).

Anyone have any other insight they’d like to add to the discussion, by all means!

I think this entire argument is flawed.

People buy gems with real money.
People do not buy gold with real money.

There is zero reason that the free commodity is greater than the purchased commodity.

Problem is the prices aren’t set by players but by an algorithm that adjusts it live based on buy and sell trade volumes, with the starting price set arbitrarily. The ENORMOUS spread (fees) results in no possibility to gain any profit by playing this market (like a stock market I mean) and overall it doesn’t feel like it was player driven at all (even if it somewhat is).

Eh. It seems to me when you exchange gold for gems or vice versa, they take a pretty big cut from you. It makes it impossible from my perspective to make a gain in this system, but i havn’t done any “real” analysis of the system.. so meh.

I think it’s neccessary for Arena.net model. The problem is I think you’re looking at or demanding thing at an incorect angle.

As people play the game for the next few months and years, eventually people will have a lot of money. The Real Money <—> Gems relationship obviously can not change, for example Arena.net can’t make a policy where they say: depend on the in game market, we will charge $5 for 300gems today, and it will be changed to $8 for 300gems tomorrow. Neither they can alter the cost of the gems shop price like this item will cost 500 gems today and cost 800 gems tomorrow. This mean without some constraint, eventually you will see the gem is so cheap that nobody will bother to buy gems with real money (bad for Arenanet) or too expensive that cause people buying gems with real money and convert to gold (creating massive inflation, which can’t be a good thing).

Another argument is that the majority of in game gold are also black box generated vendor. When you loot a mob, the items you got wasn’t created using some finite resource pool in the game. When you vendor that item, the gold being paid to you weren’t withdraw from the finite bank. So there have to be a control to limit inflation.

Yes, the policy does favor Arenanet but that’s for obvious (and not unreasonable reason). This is not a stock market, so you can’t demand or liken it to one, it’s not a free for all environment. It’s a great alternative option and as far as I can see, nothing yet is unreasonable. Maybe that’s exactly what it’s meant to be, an alternative to the cash shop for people who can play more and want to pay less, not as a mean for a “get rich quick” scheme. Also the disparity between the 2 conversion rate is for a very obvious that I’ve mentioned so far, in case you can’t see it, again, it’s to limit inflation.

exphryl.3857:

I think this entire argument is flawed.

People buy gems with real money.
People do not buy gold with real money.

There is zero reason that the free commodity is greater than the purchased commodity.

IF you buy gems with real money with the intent to convert it to gold, then yes you are buying gold with real money. Thats why the conversion exists! You can’t “cash out” your gems so why else would a gem→gold conversion exist in the first place? lol.

It’s a money sink and further values the gem buyer’s money. I see no issue here. Gem prices are ridiculously accessible, and they have actually dropped from headstart.

It also gives ArenaNet an advantage over gold sellers.

Think of it as a gold sink, not a direct trade in value.

If you assume that ANet has build a sales tax gold-sink into the system, I think your number make more sense:

• Let’s say 100s = 431 gems; after a 15% tax, that would be 366.
• Take those 366 to convert to 85s, but pay another 15% and you end up with 72s.

So if you try to churn gold → gems → gold, you need to wait for a > 30% price increase. (Which is why most people playing the market tend to invest in dye or mini packs instead.)

I’m presuming the cut is so huge because they want you to spend a majority of your gems in-store, and then only trade what you have left, which is usually a measly 100-150 gems because of the pricing.

I’m no expert in these kind of fluctuating markets so it all goes well over my head, but just one theory to think about.

Edit – Another theory, could also be to stop people from churning gems into gold at a high rate. Currently the average price for gold farmer prices are soemthing like 10 gold for $30. If you were to buy $30 worth of gems and trade through the entire sale to gold, what would be the profit?

Arciel.9650:

I think it’s neccessary for Arena.net model. The problem is I think you’re looking at or demanding thing at an incorect angle.

As people play the game for the next few months and years, eventually people will have a lot of money. The Real Money <—> Gems relationship obviously can not change, for example Arena.net can’t make a policy where they say: depend on the in game market, we will charge $5 for 300gems today, and it will be changed to $8 for 300gems tomorrow. Neither they can alter the cost of the gems shop price like this item will cost 500 gems today and cost 800 gems tomorrow. This mean without some constraint, eventually you will see the gem is so cheap that nobody will bother to buy gems with real money (bad for Arenanet) or too expensive that cause people buying gems with real money and convert to gold (creating massive inflation, which can’t be a good thing).

Another argument is that the majority of in game gold are also black box generated vendor. When you loot a mob, the items you got wasn’t created using some finite resource pool in the game. When you vendor that item, the gold being paid to you weren’t withdraw from the finite bank. So there have to be a control to limit inflation.

Yes, the policy does favor Arenanet but that’s for obvious (and not unreasonable reason). This is not a stock market, so you can’t demand or liken it to one, it’s not a free for all environment. It’s a great alternative option and as far as I can see, nothing yet is unreasonable. Maybe that’s exactly what it’s meant to be, an alternative to the cash shop for people who can play more and want to pay less, not as a mean for a “get rich quick” scheme. Also the disparity between the 2 conversion rate is for a very obvious that I’ve mentioned so far, in case you can’t see it, again, it’s to limit inflation.

well put…good to see someone with a firm grasp of economics to see this from a wider/overall perspective.

WOW . All i know as a customer the conversion sucks. I paid 20.00 to try and buy racial armor T3 from the market for my character but with the current converion rate. its 2 gold 98 silver so about 3 gold. 1 piece of the armor is 2 gold and some change. their are 5 pieces to the set. Soooo. should armor cost 60.00 to 80 dollars. i mean come on 20.00 should have been way more than enough.

Arciel.9650:

I think it’s neccessary for Arena.net model. The problem is I think you’re looking at or demanding thing at an incorect angle.

As people play the game for the next few months and years, eventually people will have a lot of money. The Real Money <—> Gems relationship obviously can not change, for example Arena.net can’t make a policy where they say: depend on the in game market, we will charge $5 for 300gems today, and it will be changed to $8 for 300gems tomorrow. Neither they can alter the cost of the gems shop price like this item will cost 500 gems today and cost 800 gems tomorrow. This mean without some constraint, eventually you will see the gem is so cheap that nobody will bother to buy gems with real money (bad for Arenanet) or too expensive that cause people buying gems with real money and convert to gold (creating massive inflation, which can’t be a good thing).

Another argument is that the majority of in game gold are also black box generated vendor. When you loot a mob, the items you got wasn’t created using some finite resource pool in the game. When you vendor that item, the gold being paid to you weren’t withdraw from the finite bank. So there have to be a control to limit inflation.

Yes, the policy does favor Arenanet but that’s for obvious (and not unreasonable reason). This is not a stock market, so you can’t demand or liken it to one, it’s not a free for all environment. It’s a great alternative option and as far as I can see, nothing yet is unreasonable. Maybe that’s exactly what it’s meant to be, an alternative to the cash shop for people who can play more and want to pay less, not as a mean for a “get rich quick” scheme. Also the disparity between the 2 conversion rate is for a very obvious that I’ve mentioned so far, in case you can’t see it, again, it’s to limit inflation.

Well ok, I’m a noob in this thing so forgive me if I say some non-senses. But from what it seens the gem conversion to gold do not worth at all atm. If people stop to trade gems for gold, what will happen? Like a guy here already said he used 20 dollars to get 1 gold and 9x silver lol
The most correct for me would be a price set by the player. It can create inflation but the game itself has so many ways to take out in game gold from the player that I do not think a apocaliptic inflation will happens. lol
In Perfect World for example you put the price you want for your cash (zen), not only for the itens you buy in the cash (you can sell them in the streets and auction) but for the cash (zen) itself. From what I know, theres no company’s control in the prices. The prices are always ok, I never ever seen a giant inflation. It worth to change cash for gold there, and its worth to change gold for cash. It’s just supply and demand…
By the way I know theres variables we do not have here, like most people there NEED gold to keep upgrading and buying their armors and weapons with a high chance of failure, and things like that wich make them do not keep so much in game gold for example.

Yawg.1294:

Problem is the prices aren’t set by players but by an algorithm that adjusts it live based on buy and sell trade volumes, with the starting price set arbitrarily. The ENORMOUS spread (fees) results in no possibility to gain any profit by playing this market (like a stock market I mean) and overall it doesn’t feel like it was player driven at all (even if it somewhat is).

You expect to make a profit from the gems system? Wow!

The only misleading thing about the gold-gem exchange is the presentation, which makes it look like a stock or currency exchange. And it’s utterly misled the OP.

Arciel.9650:

I think it’s neccessary for Arena.net model. The problem is I think you’re looking at or demanding thing at an incorect angle.

As people play the game for the next few months and years, eventually people will have a lot of money. The Real Money <—> Gems relationship obviously can not change, for example Arena.net can’t make a policy where they say: depend on the in game market, we will charge $5 for 300gems today, and it will be changed to $8 for 300gems tomorrow. Neither they can alter the cost of the gems shop price like this item will cost 500 gems today and cost 800 gems tomorrow. This mean without some constraint, eventually you will see the gem is so cheap that nobody will bother to buy gems with real money (bad for Arenanet) or too expensive that cause people buying gems with real money and convert to gold (creating massive inflation, which can’t be a good thing).

Another argument is that the majority of in game gold are also black box generated vendor. When you loot a mob, the items you got wasn’t created using some finite resource pool in the game. When you vendor that item, the gold being paid to you weren’t withdraw from the finite bank. So there have to be a control to limit inflation.

Yes, the policy does favor Arenanet but that’s for obvious (and not unreasonable reason). This is not a stock market, so you can’t demand or liken it to one, it’s not a free for all environment. It’s a great alternative option and as far as I can see, nothing yet is unreasonable. Maybe that’s exactly what it’s meant to be, an alternative to the cash shop for people who can play more and want to pay less, not as a mean for a “get rich quick” scheme. Also the disparity between the 2 conversion rate is for a very obvious that I’ve mentioned so far, in case you can’t see it, again, it’s to limit inflation.

It seems to me that this could just as easily be a free market with fees associated to buying or selling gems for gold to help limit inflation. For example, at the moment I would like to upgrade my bank. This currently costs me 600 gems ($7.5 if buying 800 gems) or just under 2g. This is a very cheap price in gold and encourages me to use gold to buy gems, which is a sale that Anet has lost (while they have sold to one person and I purchased those gems, Anet would vastly prefer both players to buy and use their gems). So, Gem prices being cheap has cost Anet a sale since I just purchased gems with gold.

Now, lets say I bought the 800 gems for $7.5 and have 200 gems left over. The low price that gems are selling for discourages me from selling those gems and encourages me to use them in the gem shop, which will provide better value. This is absolutely in favor of Anet, since more gems will get used. But, this prevents people from buying gems for the purpose of earning gold (as opposed to farming or playing more). In the end this is what discouraged me from buying 800 gems. It was a lot of money just to upgrade my bank ($7.5) and I would be left with 200 gems that I did not have a great use for.

If this were a free market it would allow for improvements across the board;

1) Gems start to get cheap
2) As a result, more people buy Gems with gold
3) The supply of Gems runs low
4) As a result, the price of Gems spikes
5) More people buy Gems with real money to sell for gold
6) The price of Gems drops
7) Repeat

If all along Anet was charging the 15% fee for selling gems this would still prevent inflation, while encouraging more people to buy more gems for multiple purposes.

Wraith.4103:

Arciel.9650:

I think it’s neccessary for Arena.net model. The problem is I think you’re looking at or demanding thing at an incorect angle.

As people play the game for the next few months and years, eventually people will have a lot of money. The Real Money <—> Gems relationship obviously can not change, for example Arena.net can’t make a policy where they say: depend on the in game market, we will charge $5 for 300gems today, and it will be changed to $8 for 300gems tomorrow. Neither they can alter the cost of the gems shop price like this item will cost 500 gems today and cost 800 gems tomorrow. This mean without some constraint, eventually you will see the gem is so cheap that nobody will bother to buy gems with real money (bad for Arenanet) or too expensive that cause people buying gems with real money and convert to gold (creating massive inflation, which can’t be a good thing).

Another argument is that the majority of in game gold are also black box generated vendor. When you loot a mob, the items you got wasn’t created using some finite resource pool in the game. When you vendor that item, the gold being paid to you weren’t withdraw from the finite bank. So there have to be a control to limit inflation.

Yes, the policy does favor Arenanet but that’s for obvious (and not unreasonable reason). This is not a stock market, so you can’t demand or liken it to one, it’s not a free for all environment. It’s a great alternative option and as far as I can see, nothing yet is unreasonable. Maybe that’s exactly what it’s meant to be, an alternative to the cash shop for people who can play more and want to pay less, not as a mean for a “get rich quick” scheme. Also the disparity between the 2 conversion rate is for a very obvious that I’ve mentioned so far, in case you can’t see it, again, it’s to limit inflation.

Well ok, I’m a noob in this thing so forgive me if I say some non-senses. But from what it seens the gem conversion to gold do not worth at all atm. If people stop to trade gems for gold, what will happen? Like a guy here already said he used 20 dollars to get 1 gold and 9x silver lol
The most correct for me would be a price set by the player. It can create inflation but the game itself has so many ways to take out in game gold from the player that I do not think a apocaliptic inflation will happens. lol
In Perfect World for example you put the price you want for your cash (zen), not only for the itens you buy in the cash (you can sell them in the streets and auction) but for the cash (zen) itself. From what I know, theres no company’s control in the prices. The prices are always ok, I never ever seen a giant inflation. It worth to change cash for gold there, and its worth to change gold for cash. It’s just supply and demand…
By the way I know theres variables we do not have here, like most people there NEED gold to keep upgrading and buying their armors and weapons with a high chance of failure, and things like that wich make them do not keep so much in game gold for example.

You are correct…it depends a lot on the game design and mechanism used to control inflation. But if GW2 starts implementing crafting system like PW, I’ll stop playing.

To answer all the people quoting me (since I don’t want to pyramid quoting).

- Yes, the players do have some control in it, why do you think there is an exchange rate to begin with? If it’s true that we don’t have any input in the rate, we wouldn’t need an exchange rate to begin with and the gem <—-> gold conversion would just be a flat rate. So don’t make a mistake, it is a fluctuating system that is depending on the volumne, it’s just a pseudo system instead of a 100% free system.

- Why do you think the gem is so cheap right now, how did it get there? The price of gems during BWE3 was at least 4 times more expensive. Yes, I know it sucks for people like zolinar who seeking to convert real money gem into gold, but the fact that the reason the gems price is what it is right now exactly because there are many people like him doing the samething. What you guys (Archtype, Wrath) are arguing for “might” work if the Gem<——>Gold thing is purely driven “in game”, after all that’re more or less like all other in game commodity, the system is not designed to control that. What it’s meant to control is the fact that Gem can be bought with real money, and inject gold into the system. It’s driven by the player sure, but you don’t want it to explode to a point that it become a barrier to new players that they have to buy some gems, convert to gold to have a viable starting capital.

Gems is not a commodity, period because it’s dealt in 2 currencies: in game gold and real dollar. It’s great as long as you keep it in mind, but if you in any way try to justify the cost between the real value dollar to gold value than … well, at that point you would have to talk in term of gold sellers. :P

Again, treat the Gems<—->Gold<——> as what it’s meant to be, a way for player to access the gem store “special items” with gold if they player enough, or to buy “special item” using real money. It’s not meant for a “quick” anything, not to get rich quick, not to go to the TP and kit your fresh 80 in full exotic with “bought” gold.

zolinar.5639:

WOW . All i know as a customer the conversion sucks. I paid 20.00 to try and buy racial armor T3 from the market for my character but with the current converion rate. its 2 gold 98 silver so about 3 gold. 1 piece of the armor is 2 gold and some change. their are 5 pieces to the set. Soooo. should armor cost 60.00 to 80 dollars. i mean come on 20.00 should have been way more than enough.

Areananet already told us pre-launch that the gem shop was not going to be “pay to win” but just a way for people to contribute to the on-going cost of the game by purchasing vanities and conveniences. This “exchanger’s block” is in place in order to prevent people from buying end-game, and also keep gem sales profitable for areananet.

In this case, I kind of feel like Gold is more valuable than gems because they are genuinely a measure of how committed you are to the game, not how well off you are financially. And that’s what makes gold items so prestigious; they represent hard work, not large wallets.

The ability to convert Gems into gold is just meant to give some recourse to that odd un-spendable 50/100 gems left over from a purchase, and not entirely shut out people who can’t purchase gems from the neat items there.

For one I am PSYCHED an MMO market isn’t a “free money machine” for the manipulators. In an economy where currency comes out of thin air (quest rewards, monster drops) supply and demand balancing often gets too out of control since the syncs can’t usually match up; especially since many are voluntary. This makes the people who understand market manipulation very rich, which the rest of us get just a little less enjoyment out of game and Areananet doesn’t get as much financial support as it could. (And in my opinion deserves.)

Awesome thread of info. Kudos.

Nozgeth.9638:

In this case, I kind of feel like Gold is more valuable than gems because they are genuinely a measure of how committed you are to the game, not how well off you are financially. And that’s what makes gold items so prestigious; they represent hard work, not large wallets.

You mention Gems to Gold in your next paragraph, which is what makes this paragraph all the more confusing to me. Gems and Gold are essentially the same thing. If you have a lot of money in real life you can buy an unlimited amount of gold and vice versa. So neither of them implies a commitment to the game, as a level one character with two hours play time could have an unlimited amount of either gems or gold.

Archetype.3582:

You mention Gems to Gold in your next paragraph, which is what makes this paragraph all the more confusing to me. Gems and Gold are essentially the same thing. If you have a lot of money in real life you can buy an unlimited amount of gold and vice versa. So neither of them implies a commitment to the game, as a level one character with two hours play time could have an unlimited amount of either gems or gold.

While that’s true in a factual sense, its not really so in a practical one. Yes, Gold to Gems, and Visa Versa is POSSIBLE; But as the OP complained about, not profitable or practical for the majority of the Game’s audience. Especially the EU crowd who pay more per Gem than than us dollar using crowd.

So sure, I guess some really well off players with $100 disposable income might buy their way to cultural armor, but most of the time you see it in game it will have been earned because it is so difficult to just cash-buy it.

Arciel.9650:

To answer all the people quoting me (since I don’t want to pyramid quoting).

- Yes, the players do have some control in it,
…
…

Got it now. lol
Thanks