Welcome Back! ► The GCD's Inflation Recap (v.3)

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[sterek]

What happened to the Marketplace?
Why is everything so expensive all of a sudden?

The short answer: Gaia removed the gold limit for Marketplace transactions and started selling items that grant gold.

The long answer: Gaia started actively selling gold generators in the Cash Shop in 2013. These items, once opened, grant the user a random amount of gold that can reach several billions, even possibly over a trillion. Since the average wealth for users was drastically increased, sellers raised their prices in the Marketplace. Gaia removed the Marketplace price limit that used to be 1 billion gold, so sellers can now sell rare items for billions (or even trillions!) of gold. All of this happened over a very short period of time; this economic phenomenon is called hyperinflation. It means the value of gold quickly decreased from August 2013 to August 2014, and might continue to do so in the future unless a combination counter-measures are taken.

Wikipedia

In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. [...]

Hyperinflation occurs when a country experiences very high and usually accelerating rates of monetary and price inflation, causing the population to minimize their holdings of money. Under such conditions, the general price level within an economy increases rapidly as the official currency quickly loses real value.

UPDATE! On August 6, 2014, gold generators were temporarily removed from the Cash Shop for a then-undetermined period of time. (source: admin Zero Omega's answer) On August 11, 2014, it was announced that "modified" gold generators would return to the Cash Shop. (source: official staff announcement) The gold generators turned out to be choice generators, generally in the form of chance items giving the user the choice between winning a random amount of gold or an assortment of GoFusion charms.


Gold Generators

Gold generators (GG) are Chance Items (CI) sold in the Cash Shop, either individually or as bundles. Similar to the monthly Random Item Generators (RIG), the original gold generators granted users a random amount of gold. Certain CI also randomly gave out gold in addition to items, or gave the user a choice between gold or items. The latter is the current incarnation of gold generators we can occasionally find in the Cash Shop.

Gold generators as a frequent addition to the Cash Shop were introduced in August 2013; the first one was Flynn's Booty. (The very first gold generator, GGR Wheel, was released in 2008--but its effect was much more limited.) The gold payouts steadily increased proportionally to the inflation, quickly reaching over a trillion as their maximum reward. The average payout is however much lower, reportedly around 200 million.

Why are gold generators bad for the economy? Why shouldn't I buy one?

Buying a pure gold generator or picking the "gold" or "surprise" option in a chance item is not only bad for the economy on a large scale: it's bad for you personally. Gold generators essentially create gold out of another currency (GC). That gold is dropped into the system, and once you spend it on items in the Marketplace, it circulates between users, technically making everyone who has the luxury to buy and sell items a bit richer. While this might sound like good news, it's really not; the more gold people have, the more sellers can afford to raise their prices, since they know they'll find buyers ready to pay dozens of billions for a single item. The gold you win through gold generators only contributes to devaluing gold as a currency. Unless you have hundreds of dollars to spend on gold generators and very good vending skills, using gold generators will only contribute to raising Marketplace prices beyond what you can afford.


But I want this expensive item from the Marketplace and I need to buy a gold generator.

Correction: you "need" quick gold, and gold generators are far from your only option. In fact, it's not even the most reliable one! Gold generators are a gamble every time. If you're willing to spend cash on something, pick another item from the Cash Shop instead. Certain items (specifically limited items, item bundles and monthly RIGs) have a stable or gradually increasing gold value, and they sell incredibly quickly. It's a far better investment, and you're not using your cash to damage the economy.


Someone said using gold generators was a bannable offense. What's up with that?

The term "gold generator" can also sometimes refer to various downloadable programs that can be used to generate gold onto an account via different means, all of which require little to no user action. This is considered cheating and, yes, can get your account frozen. These gold generators have nothing to do with the ones sold on the website, however.

The Gold Cap

The term "gold cap" refers to a maximum amount of gold, generally the one that can be held on a single account. The initial gold cap for users was 2,147,483,647 gold (2.1 billion). As of late March 2014, the maximum amount of gold has been changed to 9,223,372,036,854,775,807 gold (9.2 quintillion). It's highly unlikely that this amount of gold will ever be reached on a single account, but just to be practical, Gaia released Mythril coins in Barton Boutique to hold an unlimited amount of gold in users' inventory. The coins now serve as an alternate currency to be used in trades.

Why is the new gold cap so high?

The initial gold cap wasn't chosen by anyone--in fact, having a gold cap at all was a technical requirement, not a staff decision. All the possible numerical values programmed on the site are data, and numerical data is usually stored in an integer (a data type for positive and negative numerical values). When the gold system was implemented on the site, it was programmed as a 32-bit integer. By default, a 32-bit integer can only contain values ranging from -2,147,483,648 to 2,147,483,647--so the gold cap was 2,147,483,647 gold, because it was the highest possible numerical value. In March 2014, Gaia programmers increased the gold cap at the demand of numerous users. To do so, they "upgraded" the gold system to a different data type that could hold larger numerical values: a 64-bit integer. The 64-bit integer can hold values ranging from -9,223,372,036,854,775,808 to 9,223,372,036,854,775,807. The latter is, by default, our new gold cap.

On April 7 2014, the gold cap for individual Marketplace sales was also increased, along with the trade gold cap. (You can see the staff announcement here.) This means that items priced over 1 billion gold can now be purchased and bid on in the Marketplace, and trades can contain more than 1 billion gold as well. The exact gold cap wasn't announced, but it's more than several trillions. It has yet to be determined because at the moment, because no user has reached a quadrillion gold in pure.


The "Modified" Gold Generators

On August 6, 2014, a year after the first major gold generator was introduced, site admin Zero Omega posted a staff update announcing the staff's decision to pull all gold generators out of the Cash Shop for an undetermined period of time, at least long enough to study how their removal affects both the site economy and the company's profits. This wasn't a permanent decision; they returned to the Cash Shop in the form of so-called "modified" gold generators.

What would have happened if gold generators had been gone for good?

The combination of the absence of gold generators and several site-wide gold sinks (Marketplace tax, kickstarters, gold shops, etc.) would have created a deflation: there would have been less gold for everyone, which would have meant that the currency would have been worth more due to its rarity--so a smaller amount of gold would have allowed users to purchase more items. Buying and selling items would have started to look a lot more like it used to last year, and wishlist items would have started to be more attainable again.

Prices won't ever go back to what they were a year ago, much less a decade ago--and that's perfectly fine! The issue with the inflation wasn't the number of zeroes in the prices, but rather the fact that the prices kept increasing while users who didn't buy tons of GC could hardly keep up with the website's small gold-earning opportunities. Once a noticeable deflation happens, the market will be stable again, as there won't be any more large amounts of gold thrown into the system at once. Gaia has already increased the Daily Chance payouts; more payouts might be adjusted in the future if necessary. The wealth gap between average users and Gaia's richest users will be significantly smaller over time, which is our main goal when we aim for a stable market.


How can I personally help convince Gaia to remove gold generators permanently?

► Spend GC on things that aren't gold generators. Consider buying GC and completing GC offers. As nice as user satisfaction is, it doesn't pay the bills. Gold generators were once one of the most, of not the most, lucrative Cash Shop release for the site. They cost very little to make and were purchased by the ton. If the staff decides to permanently remove them, they need to be able to financially compensate for that decision. This is why it's extremely important for people who can afford to spend money on Gaia to do so. Completing GC offers also help, because they are sponsored--which means that Gaia is getting money from them without you having to spend anything.

► Give Gaia your feedback. Gaia admins check the Site Feedback forum every day. Leaving positive feedback (either by creating a thread or posting in existing ones) praising their decision to remove pure gold generators and urging them to take it a step further by removing all gold generators is a clear way to express your opinion.

► Contribute to fixing the inflation. Read the next section to find out how to do this. Users have been asking for gold generators to be removed for an entire year so the economy could be stable again; since Gaia is listening, it's the userbase's time to act. Showing the staff that we are also willing to collectively make the efforts needed to change things is a step in the right direction, and will let them know we are serious about our demands (and not just complaining for the sake of it.)

Frequently Asked Questions

If you have a question I didn't adequately answer below, please let me know by posting in this thread. I'll answer it to the best of my ability, and I might add the information to this post if necessary.

What can I do to contribute to the deflation and fix the economy?

What you have to know is that, in order to fix the economy for yourself and for everyone else, gold needs to be permanently taken out of the system to make it less common and, by extension, worth more.

► Use the Marketplace. An increased Marketplace tax (5%) has been implemented to sink gold. Concretely, this means that 5% of the gold you make by selling an item is erased (or, inversely, that 5% of the gold you spend on an item doesn't go to the seller and is erased instead). This has little to no effect on the actual Marketplace prices; 5% is barely noticeable on a single small listing, but affects users selling high-end items or spending tons of gold. Basically, it can either contribute to making the richest users a little less rich, or it will force users to list their items for less so that they lose as much gold in the transaction. (Remember--the tax is a percentage! The higher a price is, the bigger the amount lost to the tax is.)

► Encourage and participate in kickstarters. Kickstarters are short gold sinks that reward users for donating (and sinking) gold. They are usually advertised by an animated icon in the site header. If you don't have enough gold to participate, you should still encourage those to have to means to donate to do so, and give Gaia positive feedback to make sure these kickstarters keep happening. Kickstarters have personal and global reward tiers--the latter can be enjoyed by the entire community regardless of whether you donated or not, so it's to your advantage to make sure others contribute as much as they can!

► Sink other people's gold in Loyal's Bazaar. If you have access to Loyal's Bazaar, you can either purchase items and resell them in the Marketplace to users who don't have access, or you can directly offer purchase services to someone. Gold spent in gold shops is permanently removed from the system.

► Bid in Flynn's Plunder. Flynn's Plunder is a weekly auction held by a Gaia NPC. She auctions several rare items for pure gold, which means they often end up being sold at a fraction of their real value. Unlike buying them from another user, bidding for items in Flynn's Plunder means the highest bidder's gold is erased rather than passed onto another user. At the moment, the auctions sink several trillions every week!



I just came back. How can I earn enough gold to make up for the inflation?

► Spend wisely. Gaia has introduced deflation CIs and bundles, which re-release items and, by putting more of them out there, help lower their prices. If an item you want is out of your reach or just suspiciously expensive, your best bet is to wait until more of them are released. Sometimes, even the rarest drop in a monthly CI ends up being re-released as a common CI drop only a few months later! A good tip is to look at the Marketplace listings for a current REI; if an item has a similar or lower price, it's usually a safe and reasonable purchase. If you still feel like most items are out of your reach, visit the GCD's "How can that item be that inexpensive?!" thread, which is usually updated several times a day with links to cheap but interesting items.

► Start vending. Once you've mastered the art of making smart well-timed purchases and have observed the Marketplace trends, you can start vending. Vending involves buying items when their price is low and waiting to sell them once it has significantly increased (usually because there are fewer listings). However, you need to remember that buying all the listings for one item only to re-list them at a higher price is very frowned upon--and pretty ineffective, since the Marketplace still displays an average price based on sold listings.

► Check out the Daily Chance. Gaia has updated the Daily Chance rewards to give out larger amounts of gold (several thousands at once) and GOFusion charms, the latter which can be sold for a pretty decent amount of gold since certain amounts and combinations of them are traded for items.

► Use GC. This is by far the quickest and simplest method to earn gold: purchase an item in the Cash Shop and sell it through the Marketplace. LQI (limited quantity items) are the most profitable because their worth is guaranteed to steadily increase for at least 3-4 months before they are re-released. Of course, not everyone has the funds to buy GC--which is why Gaia has free offers for you to gradually earn GC you can later spend in the Cash Shop. Discounts are also a fairly common thing, and can reach up to 40-50% on special occasions. The Holiday Sale and the Summer Sale are two very popular occasions to buy discounted GC and make maximum profit with LQI.



Why should we try to trigger a deflation when gold generators are still out?

Gold sinks are viewed as "useless" by many users--they're not entirely wrong, but they're not entirely right either. If the goal is to make the effort once and cause a permanent deflation, then no, it's not going to work. Gold sinks would be fantastic and single-handedly fix our economic issues if gold generators weren't there. However, they still have a positive impact because they do take gold out of the system. Depending on their popularity and timing, they either cause a temporary deflation or, at the very least, slow the inflation down a bit. This is not a solution, obviously, but it's a positive impact that should not be overlooked.


Where can I read more about gold generators?

► Umioko's Full & Detailed Gold Generator List
A very thorough thread providing a list of all the gold generators, including release dates and maximum payouts.

► Owlie's Summary on Gold Generator Releases
A feedback thread on gold generators that also documents all the negative feedback to give you some perspective on the situation and how informed users feel about it.

Want to spread the word? Keep a link to this thread in your signature.

[url=http://www.gaiaonline.com/forum/gaia-guides-and-resources/welcome-back-the-gcd-s-marketplace-inflation-recap/t.91957757/][img]http://i.imgur.com/JC0qiV7.png[/img][/url]

Several users have reportedly reconsidered their decision to buy gold generators by reading this post. By linking to this thread, you are raising awareness and helping users make an informed decision. This thread is only aiming to spread information and remain objective despite any personal bias. If you find incorrect or misleading information, or if you have suggestions to improve the content of this post, please let me know!

[Denham]

Seriously, this is needed.

[Elena Kiara]

This is great, especially since we get at least 1-2 threads every day in the GCD that ask the same question. xD

[Lolita~Samurai]

Thank you so much for making this thread! I'm not the sharpest tool in the shed so it was nice to have everything explained simply in black and white.
Though I wish there were more things we could do to help with the inflation. sweatdrop

[Vampire_Hunter_CJ]

Can I just stop in and point out that the way raising the gold cap and releasing gold generators are conflated is confusing and misleading? The fact that raising the gold cap allows transactions involving high-priced items to be taxed (which, given the prices of the items being taxed, sinks a pretty large amount of gold even at the 2% tax rate) is actually beneficial to the economy, and prices were going to rise whether or not the marketplace could actually handle the transactions. Had the cap not been lifted, most people would have simply sold their high-priced items in the Exchange (using mules or items of comparable worth), or not at all.

[The Moonlight Densetsu]

Yes now when someone posts those "WHAT HAPPENED TO THE MP-I JUST GOT OFF OF HIATUS" threads I can just point them towards this!

[sterek]

Vampire_Hunter_CJ

Can I just stop in and point out that the way raising the gold cap and releasing gold generators are conflated is confusing and misleading? The fact that raising the gold cap allows transactions involving high-priced items to be taxed (which, given the prices of the items being taxed, sinks a pretty large amount of gold even at the 2% tax rate) is actually beneficial to the economy, and prices were going to rise whether or not the marketplace could actually handle the transactions. Had the cap not been lifted, most people would have simply sold their high-priced items in the Exchange (using mules or items of comparable worth), or not at all.

I don't entirely disagree; the Marketplace tax is definitely a good gold sink the more the prices are raised, and I was actually all for a gold cap that was proportional to the economy in theory. However, even in this current economy, there is absolutely no need for a "regular" item (read: not a Halo, a Medal or a Project ticket) to be priced above 10 billion--and I'm being very generous.

The question isn't so much "what caused the inflation" (as in, where does all that gold come from) but "what happened to the prices". Gold generators have been around for about 9 months now, but the steep increase in Marketplace prices happened right when the transaction cap was raised, even for items that were previously listed under 1 billion. We've seen just yesterday that artificial inflation (sellers buying all the listings and relisting them higher) is very real and very frequent. That phenomenon isn't new, it happened in the Exchange before (with people hoarding Halos, for instance), but raising the Marketplace cap made it much easier/quicker--and consequently, all the prices were raised according to that new standard. If a rare RIG drop can be bought for 1 billion, a common RIG drop should be worth about 1 million. If a rare RIG drop is worth 10 billion, people will sell their common RIG drops for 10 million.

Marketplace prices aren't only influenced by supply and demand; they're proportional to the amount of gold the sellers need. Similarly, the payouts of gold generators were increased proportionally to the prices of items in the Marketplace. (From a marketing perspective, nobody would buy a gold generator that could only give a maximum of 1 or 2 billion gold, because it's not enough to buy the majority of RIG items nowadays.) The reason people still buy gold generators is because they want to acquire items from the Marketplace and the items are out of reach. There are very few people hoarding gold just for the sake of controlling the Marketplace, and those who do generally prefer to earn their wealth through vending than with GC purchases.

So I still do think that the increased prices are a result of both the gold generators and the rise of the Marketplace cap. The gold generators are responsible for the inflation (that is, the devaluation of gold) but the hyperinflation (the drastic devaluation of gold within a short period of time) was only possible because of the combination of these two factors.

[Vampire_Hunter_CJ]

sterek

Gold generators have been around for about 9 months now, but the steep increase in Marketplace prices happened right when the transaction cap was raised, even for items that were previously listed under 1 billion.

Your statement is technically true, but highly misleading. The marketplace cap was raised at approximately the same time that Make it Rain and Dragon Hoard were released and put in 100-packs for what I believe was the first time (followed in the course of the next few days by releases of Let's Party, Project NPC Apprentice, Make It Rain again, Lucky Spin, and Cutie Catcher again). The mass introduction of gold from those GGs, particularly the 100-packs of Make it Rain and Dragon Hoard at deep discounts, is what caused the massive surge of inflation. If you look at the marketplace revenue chart from that time (and excuse the red border, this was a screenshot originally used for another purpose; it highlights the period when the amount of gold in circulation more than doubled over the course of a few days, from roughly March 27-March 31):

You'll see that the amount of gold in circulation increased rapidly well before the gold cap was raised, starting on March 27 or so. (I did a relatively in-depth examination of prices over this rough period over in another thread, but enough time has passed that you can't see most of the period I'd like to highlight in the marketplace graphs sweatdrop ). Yes, marketplace revenue peaked on April 7 (when, I might add, Make It Rain bundles were 40% off), but that particular surge of inflation was almost all on the GGs, and began well before the cap was raised.
You'll also note that in the period immediately following the change in the gold cap, specifically April 2 and April 3, total marketplace revenues decreased sharply.

sterek

Marketplace prices aren't only influenced by supply and demand; they're proportional to the amount of gold the sellers need.

Economics note: That is part of a producer's (seller's) schedule of supply, so it is part of supply and demand, actually.

sterek

So I still do think that the increased prices are a result of both the gold generators and the rise of the Marketplace cap. The gold generators are responsible for the inflation (that is, the devaluation of gold) but the hyperinflation (the drastic devaluation of gold within a short period of time) was only possible because of the combination of these two factors.

I have already explained that the surge of inflation occurring around the end of March was due to the near-simultaneous release of two (well, a bunch, really, but Make it Rain and Dragon Hoard were the big ones) deeply-discounted GGs. The other at-least-semi-relevant factor during this period was certainly the marketplace price cap, but not really for the reasons that you believe. Price caps have the effect on markets that I briefly described earlier - if the price cap is below the market equilibrium price, many sellers will choose not to sell their goods at the capped price. This causes a severe shortage in quantity supplied relative to the quantity demanded - a lower (forced) market price means that fewer sellers are willing to put their items on the market, because they know that they are being forced to sell for less than their goods are actually worth.
Visually, a price cap looks like this (and you'll excuse my amateur-ish visuals; I made it in Paint just now):

Where P is price, Q is quantity, D is demand, S is supply, PC is the price ceiling, Qe is the marketplace equilibrium quantity, Qs is the quantity supplied when the price is capped, and Qd is the quantity demanded when the price is capped. Also I think I missed Pe in there, which would be the price at equilibrium (the horizontal grey line; it's the price at the point where the supply and demand curves intersect).
And lifting the price ceiling could certainly have had some effect on prices, particularly the very high-end items (because, once the price ceiling was lifted, they would gravitate to their actual equilibrium point, increasing both in price and quantity sold), but for the most part prices on items did not run up against the gold cap before the release of the GGs during the period under discussion, and as such I don't consider it a big factor in causing inflation, particularly compared to the influx of gold from Make it Rain and Dragon's Hoard (and all the other, lesser GGs).

[Hassli]

God bless you, citizen!

[sterek]

Vampire_Hunter_CJ

I completely agree that the pair of gold generators that were simultaneously in the cash shop did terrible things to the economy on their own. It was pretty infuriating to watch it happen. You also raised some very good points about the effects of a forced market on supply, although I can think of several specific examples where items were listed slightly above the gold cap and only purchased via trades at that price. Even when sellers were conscious that they could find buyers willing to pay more than a billion for an item, they didn't inflate the prices more than it would have been proportional for the economy at that time. Right now, these items have about the same amount of listings, but they're more than four times the price they were before the cap was raised. You could argue that it's proportional to the average wealth after the two generators combined, but the only thing you can tell from looking at the Marketplace stats is the total revenue, which can't determine that on its own. The only fact we know is that more transactions happen on the Marketplace now (because rare items used to be sold in the Exchange or via PMs and trades) and that the prices were raised everywhere.

Say you have 10 users. User A lists an item for 100 million. User B wants the item, but only has 20 million and pretty bad items. User B decides to sell his items for 10 million each. The 8 other users buy his items using all their gold, so User B can buy the item they want. The result is that 9 users have nothing and 1 user has 100 million. This isn't something the gold generators forced upon us; it's a problem we created, because we've taken that perfectly normal situation and took it to the extreme by pricing items beyond what a $20 100 pack of Make It Hurricane might give us. We're conditioning users to either price their items higher or buy gold generators, and while the rise of the gold cap was necessary for various reasons, it doesn't many any sense to find items priced over 20 billion just because one person will be able to afford it if they overprice all their items.

I have a bit of trouble viewing the decision of raising prices as a question of supply schedule, because we're looking beyond the conditions that affect the specific item. We're talking about individual users putting tons of items in their store and consciously overpricing them in hopes that one sells quickly enough to grab another overpriced item while the supply lasts; it's really just users ******** themselves over because rising their prices goes full circle and automatically rises the price of an item they wanted to acquire...thus forcing them to raise their prices even more, and so on.

Given that it's been reported that certain sellers mass-PM other sellers to ask them to raise their prices on a specific listings because they need that amount of gold specifically (and not for personal profit, because the gold is just going elsewhere), I really get the impression that everything is interdependent, and that it's necessary to look at the whole picture to understand what happened. Given the limited time for which specific listings are valid (whether it's a question of expiration date or just someone being quicker to buy), the fact that the Marketplace cap was raised so high comparatively to what it used to be left more room for users to abuse a vending system that should have been beneficial.

What happened was basically the equivalent of trying to convince a user to trade a rare item for a common item that you suddenly decided was worth a lot, but with a gullible middleman. If you're lucky enough that the supply is low within a specific time frame or if you've monopolized the supply on your own, you can easily decide that Red's Hood is worth the price of a Halo (again, what happened yesterday). The next seller will follow with a slight decrease, and so on, until you have an ABP of 13 billion and people saying "aw crap, should have bought it when it was 8 billion". As someone who couldn't afford rare items during at least the first six years of the site, I can still safely say that the gap between average user wealth and item prices has never been this high. The highest gold generator payout is 7.5 billion; I would need to win it twice to buy one of the rare items (and not even the rarest!) from last month's RIG. People are essentially using the Marketplace to trade items, and the only thing the gold is doing in the equation is keeping newbies (or anyone without valuable items to sell) away. That can't possibly be a result of the gold generators alone. I've checked those "opening a 100 pack" threads and the average payout is still 10-12 million. Unless someone has hundreds of dollars to spend on gold generators, someone couldn't possibly acquire that kind of wealth without selling items. In order to sell those items, someone out there necessarily needs to have that amount of gold to begin with--and given the 20 listings limit and how quickly the price increase happened, the biggest factor that comes to mind is still the sellers' decision to raise all the prices at once now that they could. (Really, the best example is the March RIG drops vs the April and May RIG drops; different items, new listings, but similar drop rates and immensely inflated prices.)

It's really the fact that some people argue that gold generators are necessary to keep up with the economy that makes consider that they're not the only thing at fault. (Again, I'm not blaming the rise of the Marketplace cap, but rather what users did with it.) A 7.5 billion jackpot should be considered a very big prize that would otherwise be unattainable. Last week one of my friends purchased a pair of eyes for over five times that amount.

Someone won't buy ten copies of a one-pose item; if there are more than twenty of them in the Marketplace for two weeks, why are they listed above 10 million? Sellers overprice items for a virtually non-existent demand and would rather wait for someone to give in (we've been conditioned to buy quickly just in case someone raises the prices even more) or obtain that amount than to cater to the average Gaian with average wealth. Of course, that's understandable, because everything is priced so high. Oh...wait.

TL;DR: I think your economic model, while entirely accurate, mainly takes into account people who actively participate in vending for monetary profit. The vast majority of users still only purchases items to use/own them and sells items to afford others, so the prices are interdependent and the higher you price a popular (and generally rare) item, the higher people will price their once-affordable ones. The inflation wouldn't have happened if we'd strictly raised the Marketplace cap, obviously, but raising the cap so high while throwing gold generators at people discounting gold generators made it so that gold generators aren't enough to afford items, and consequently they're more likely to be purchased for quick gain by people who slept through Economics 101, which will raise the prices even more. A cap at 20 billion would have been preferable, as I'm sure 90% of users won't even reach that amount of gold.

[UNSUB]

I wonder if it's appropriate to add information how these decisions came to be? People are putting blame on the wrong set of staff, for instance.

[sterek]

UNSUB

I wonder if it's appropriate to add information how these decisions came to be? People are putting blame on the wrong set of staff, for instance.

I'm not sure. I mean, of course it would be appropriate, but I don't think anyone is qualified to give that information. A change in CEO doesn't necessarily mean a change in department leaders, and I can't say for sure where the decision came from beyond "someone who thought it would be lucrative". For all we know, the previous CEO could have made the same choices if Gaia Interactive's recent financial statements called for them. I'm not comfortable pointing fingers for that reason. If we ever do get a clear answer (no just whose idea it was, but why that decision came to be) I'll definitely add the information. For now, it would be too easy to preface this with "following the change of management" because it would imply it's just one guy's fault, when in fact it was most likely an idea that came from an entire department.

[Vampire_Hunter_CJ]

sterek

I'm not sure. I mean, of course it would be appropriate, but I don't think anyone is qualified to give that information. A change in CEO doesn't necessarily mean a change in department leaders, and I can't say for sure where the decision came from beyond "someone who thought it would be lucrative". For all we know, the previous CEO could have made the same choices if Gaia Interactive's recent financial statements called for them. I'm not comfortable pointing fingers for that reason. If we ever do get a clear answer (no just whose idea it was, but why that decision came to be) I'll definitely add the information. For now, it would be too easy to preface this with "following the change of management" because it would imply it's just one guy's fault, when in fact it was most likely an idea that came from an entire department.

You could just say that Gaia started releasing GGs as a part of its new marketing/sales policy (along with re-release bundles and RIGs, more frequent CS releases, GCash sales, limited items, and so on), reflecting a push to boost GCash sales starting last year, which is uncontroversial enough, I think. You don't need to put the blame on anyone in particular to explain why it happened.

[sterek]

Vampire_Hunter_CJ

sterek

I'm not sure. I mean, of course it would be appropriate, but I don't think anyone is qualified to give that information. A change in CEO doesn't necessarily mean a change in department leaders, and I can't say for sure where the decision came from beyond "someone who thought it would be lucrative". For all we know, the previous CEO could have made the same choices if Gaia Interactive's recent financial statements called for them. I'm not comfortable pointing fingers for that reason. If we ever do get a clear answer (no just whose idea it was, but why that decision came to be) I'll definitely add the information. For now, it would be too easy to preface this with "following the change of management" because it would imply it's just one guy's fault, when in fact it was most likely an idea that came from an entire department.

You could just say that Gaia started releasing GGs as a part of its new marketing/sales policy (along with re-release bundles and RIGs, more frequent CS releases, GCash sales, limited items, and so on), reflecting a push to boost GCash sales starting last year, which is uncontroversial enough, I think. You don't need to put the blame on anyone in particular to explain why it happened.

Good wording, thank you! I'll edit the post as soon as I get home on Monday.

[Vampire_Hunter_CJ]

sterek

Even when sellers were conscious that they could find buyers willing to pay more than a billion for an item, they didn't inflate the prices more than it would have been proportional for the economy at that time.

I don't know what this is supposed to mean. Prices on an item are "proportional for the economy" for as long as the item is selling (i.e. when a supplier's willingness to sell intersects with a consumer's willingness to buy), which has occurred at every point in Gaia's history, including right now (when prices on many items are well above a billion gold). Prices now are certainly proportionate to the amount of gold that has been flooding into the system.

sterek

Right now, these items have about the same amount of listings, but they're more than four times the price they were before the cap was raised.

Yes, and many, many GG releases (with ever-increasing payouts) have occurred since then, pumping a huge amount of gold into the economy, which has caused more inflation. It's a pretty direct cause-and-effect relationship.

sterek

You could argue that it's proportional to the average wealth after the two generators combined, but the only thing you can tell from looking at the Marketplace stats is the total revenue, which can't determine that on its own. The only fact we know is that more transactions happen on the Marketplace now (because rare items used to be sold in the Exchange or via PMs and trades) and that the prices were raised everywhere.

I actually do know that prices on items saw consistent large increases (while quantity sold saw very short-term spikes followed by a return to typical quantities) before the MP/trade cap was lifted and coinciding with the release of the 100-pack GGs, because, again, I've done some research on this. Unfortunately, because the MP graphs update on their own, most of the price increases cannot be seen on the graphs I used anymore, though some of them do go back as far as April 3 or so (4 days before the gold cap was lifted), and you can see the price increases there.

sterek

Say you have 10 users. User A lists an item for 100 million. User B wants the item, but only has 20 million and pretty bad items. User B decides to sell his items for 10 million each. The 8 other users buy his items using all their gold, so User B can buy the item they want. The result is that 9 users have nothing and 1 user has 100 million. This isn't something the gold generators forced upon us; it's a problem we created, because we've taken that perfectly normal situation and took it to the extreme by pricing items beyond what a $20 100 pack of Make It Hurricane might give us.

Your conclusion about your scenario doesn't follow. The users involved are either quite irrational (buying things they don't want) or are satsfied (one having sold a high-priced item and therefore able to afford an item of similar price, another having bought the item that he wanted, and the other 8 having bought items that they wanted) with their purchases; had they not been, they wouldn't have made the purchases in the first place. Secondly, this is exactly what GGs have forced upon us. Introducing large amounts of currency into an economy without a means to remove it causes inflation, whether or not people want it to. It's not a matter of "Oh I can rip people off now, so I guess I will," it's a matter of "Oh if I keep selling at the low price levels that I have been, I'm going to be losing a huge amount of money and be unable to keep up with the price level."

sterek

it doesn't many any sense to find items priced over 20 billion just because one person will be able to afford it if they overprice all their items.

This is statement very much not reflective of the market. People are willing to sell and buy their items at very high prices (which we can tell by looking at pretty much any recently-released item), whether you, I, or anyone else likes it or not, which means that there is a marketplace equilibrium at the very high prices. Or, put another way, there are a number of people for whom these prices do make sense, and that's all that really matters, as far as the marketplace is concerned; prices aren't going to adjust downward in the foreseeable, because people are willing to conduct transactions at current prices.

sterek

I have a bit of trouble viewing the decision of raising prices as a question of supply schedule, because we're looking beyond the conditions that affect the specific item. We're talking about individual users putting tons of items in their store and consciously overpricing them in hopes that one sells quickly enough to grab another overpriced item while the supply lasts; it's really just users ******** themselves over because rising their prices goes full circle and automatically rises the price of an item they wanted to acquire...thus forcing them to raise their prices even more, and so on.

No, that is very much not what is happening (or, at least, not what is happening in general). GGs are driving prices higher and higher - even if the payout is the same (and the payouts have been rising, mind), they would continue to cause prices to rise higher because they are dumping gold into the system faster than it can be removed. You may deem the result "overpricing," but it's not - it reflects a shift in the equilibrium market price that GGs have caused. It is, in fact, pretty easy to explain using the standard supply and demand model - GGs pushes the demand curve for an item (by increasing the willingness to pay for the item; people are willing and able to buy the same item at higher prices than they were before), while at the same time decreasing the supply curve (by decreasing the willingness to sell the item at the same prices it was before). Visually:

Where P is price (and P1, P2, etc. are price points at various times), Q is quantity (and Q1, Q2, etc. are prices at various times), D is demand, LRSS is the long-run supply schedule (which is almost perfectly inelastic because the quantity of most non-gold-shop item in the marketplace is fixed; users generally don't have the option of increasing "production" ), SRSS is the short-run supply schedule (which is a more conventional supply curve because in the short run quantity can vary as demand changes faster than supply).
Or, to put it another way, the chain does not start with someone saying "I'm going to raise the prices on my item by a lot." It starts with someone (buying a gold generator and) saying "I can afford this item that I couldn't before thanks to all this gold I have lying around, so I'm going to buy it now." They buy up the lowest buy price for whatever item, or items, they wanted, which on its own will generally raise the LBP. Then the person that they bought the item from buys whatever item that they wanted, and so on and so forth as the newly-created gold gets transferred around through transactions. It is in response to these rising prices that sellers realize that they can list their items at a new, higher price (as GGs increase willingness to buy and drive up prices as the lowest-priced listings for items are purchased), and do so, returning sales on an item to their previous quantity (more or less) and at a higher price.

sterek

TL;DR: I think your economic model, while entirely accurate, mainly takes into account people who actively participate in vending for monetary profit.

No, it mainly accounts for people who act rationally (those who act in their own self-interest and who don't, say, make decisions completely at random), which is to say, most users; I am using the bog-standard models of supply and demand, slightly adapted for Gaia's economy (increasing the money supply will never increase output because of the lack of loans, and very inelastic long-run supply curves to account for the fixed quantity of most non-gold-shop items). Those who sell their items in order to buy another item are almost certainly going to act rationally; they will buy and price their goods at (or around) the market equilibrium price so that they can maximize their earnings and minimize expenses, which increases their odds of purchasing another item (presumably the one they're working towards), and the model that I'm using reflects that. Lifting the gold cap allowed users to put their items up at prices above a billion gold on the (big-M) Marketplace, but, again, keeping the old gold cap wouldn't have stopped prices from increasing across the board (most noticeably, on items with prices below the billion mark), it just would have caused shortages of certain high-price items in the (big-M) Marketplace.

So, again, to re-state: prices had been rising sharply across the board well before (and continued to rise after) the gold cap was lifted, primarily because the GGs in the past month or so have been released in larger quantities (bundles), at deeper discounts, and with larger payouts than ever before. That is entirely sufficient to cause constantly rising prices. The gold cap change happened shortly after prices began to rise, but the relationship between that and rising prices is largely spurious. It was not the cause of rising prices, with the exception of the relatively few items that were pushing up against the gold cap at the time that it was lifted, and it did not somehow change people's attitudes towards overpricing, "artificial inflation," or whatever the activity may be called. Lifting the gold cap is certainly something that should be mentioned in an explanation of rising prices (particularly as more and more items reach the price level at which they are worth more than the old gold cap), but it's silly to put it as a cause of inflation, and particularly to attribute it with importance anywhere near that of GGs.