ROMVLVS
Part 1
There seems to me that there is a rather large trend on Gaia of saying every single price change is "inflation". This isn't true. This isn't even remotely true. Here is a handy guide to why you people are idiots. (This week, next week's topic on why you guys are idiots will be completely different from this one.)
What Inflation Is
Inflation is the rise in cost of things over a period of time. In real life, standard inflation rate is around 3-5% (It's much higher right now I believe do to well, the recession). I have no idea what the inflation rate on Gaia is, but it's probably somewhere between a 5-10% raise a month.
We could figure out the inflation rate of Gaia by taking every non-new item that can not in any way, shape, or form be created (IE: A set amount), the items must also be final in the case of EIs (Done evolving), and the items can't be 'crafted' or gained from some sort of quest like the Gambino pen.
Items that inflate:
Ancient Katana
Gogh Reed
RiGs after they've left the CS.
Items that don't:
This month's RiG
This month's MC
The items from this month's RiG
Shop items
Items from zOMG.
Artificial Inflation is a Misnomer
There is no such thing as artificial inflation. There is a term that really really works with what this is, but I can't remember it off the top of my head. (D'oh.)
Artificial Inflation exists in the real world, and it's not at all inflation. It's more like a monopoly mixed with price gouging.
What an "AIer" attempts to do is to attempt to raise the average buy price of an item by buying all of the item that they can buy, and then setting the price.
Basically, if one user owns all of the unwanted Red Rose Corsages, and someone who doesn't have one wants one, they're going to have to pay what ever the user who owns all of the corsages wants for it. If we're going to say that a RRC is a "good" then this user is setting up a "Barrier to entry" (Kind of) and is then taking the competition out of the market.
Why do they always seem to fail?
Well, we don't know if they actually do fail, honestly. It's quite possible that someone has successfully raise the price of an item by buying the excess stock, it's possible. But, more often than not the prices stabilize in less than an hour. Here's why:
User X buys up all of Item Y under a certain price.
User X then sells item Y for a certain price.
Eventually, other users will see that Item Y has gone up in price and go, "Man, I hate item Y. I'm going to sell it." and the price under-cutting begins. Of course, they put their prices low so that other people will buy them. Eventually the price stabilizes.
The reason why User X failed is because you have to have a monopoly on the item, you have to have almost all of the items that people don't want or cherish, or plan to sell at a certain price. In order to actually get a monopoly, a user would have to spend quite a lot of time buying that item, and making sure they purchase all of the items that are being put up under their price. It would take a lot of time, and a lot of price-watching.
According to a particular user who claims to have successfully "AI'd" an item, it really helps if the item is popular. This makes sense, because if the item is popular, lots of other people will be helping you purchase the items, and will take to the higher price change quicker, given the volume of sales in a day of those items.
Also, there are supposedly groups who engage in "AIing" which would make sense, there are groups who engage in insider trading, and the market is not unlike the stock market.
What Inflation isn't
The word inflation is literally used every time an item goes up in price.
A certain user is questing a North Kitten Star. They supposedly almost had the money and lo and behold, the NKS rose up by a million over night. What ridiculous inflation! But wait, it wasn't inflation, it was supply and demand. What happened was that a freaking NKS pin came out, and that created a rise in demand for the item, and with the set supply, created a rise in prices. (If the NKS spawns from most rigs these days I don't know, all I know is that if it does, it's an extremely limited amount from each, and a very rare drop.)
This is a supply and demand graph showing price stabilization:
The higher the price and the lower the quantity, the less demand for an item there is.
Note: Demand doesn't mean "How many want it" it's more like, "Who is going to actually buy it"
The lower the cost the less supply there is.
Note: Supply doesn't mean the actual amount in existence, it means the amount that is willing to be sold.
Supply and demand reach an equilibrium when the most people are willing to sell an item and buy an item at a particular particular price.
Supply and demand generally will go up and down all the time, but will always fall back to some sort of equilibrium (With prices being adjusted for inflation.)
This is a supply shift:
A shift in supply on Gaia can occur only for a couple of reasons that I can think of.
The supply can go up because Gaia re-releases an item. The demand for the item will remain the same, but the quantity will be more, causing the item to lose value.
The Supply can really only go down for a couple of reasons that I can think of.
1. Someone is trying to gouge the prices of an item, and they are doing fairly well at purchasing all of the items on the market. Then they get banned.
2. Some huge max exodus.
3. Someone actually successfully "AIs" an item.
Now, for point 2 I make it seem that there would have to be a large amount of people leaving at quick pace, but this isn't true. The majority of the people who own Golden Halos probably don't use Gaia any more, and those halos sit on their dead or banned accounts, never again to see the light of day, and will never grace the marketplace again.
When the supply goes down, the demand for the item remains the same, which causes the price to rise due to the limited quantity.
Demand.
It's really the same thing as supply, honestly.
A good reason why Demand can decrease is this:
Look at my head. What do you see? No, not my hair. Thank you, it IS lovely, but no, the Wed to Darkness.
Wed to Darkness caused a decrease in the demand for both Horns of the Demon and the Nitemare Tail.
Why? Well, I don't want them, I've got a rip-off item of them. Actually, I've got a BETTER item than them, in my opinion. I never actually wanted HoD, but I love my rip-off horns.
Something like 95% of Louis Vuitton hand-bags are fake. These fakes feel like the real thing, look like the real thing, and still cost an arm and a leg because they're still superior than a regular purse. A woman with a fake Louis Vuitton doesn't want a real Louis Vuitton, they already have one.
A good reason why Demand can increase:
Plot: Gambino got shot. Guess what went up in price? G Pins, those pens from him, and those belts. Anything Gambino related went through the roof. Everyone wanted some Gambino s**t.
When the sparkle comic came out, Fallen Wish went up in price. It's still around 1.5 mil. It might not go back down, because it's a well-liked item already.
The supply of those items remained the same, but the demand increased because of the plot.
Complimentary items: The Kitten Star pin item just came out. The NKS just went up in price because the supply remained the same, and the demand for the NKS rose because it compliments the new pin.
Events/Holidays: In the winter, Christmas items go up. In October Halloween/Nitemare items go up. If we have a towns centered summer event, the Water Festival shirts go up.
NOTE ABOUT SHIFTS:
Now, I didn't exactly cover whether or not these were shifts or moving along the curve, but it doesn't really matter for this basic list. If you're an economics major and are going to say, "Point 2 in Supply isn't a shift, it's moving along the curve because of blah blah blah." I'm going to tell you this: Every economics class I've ever taken I've gotten an A in. I also considered them to be the most boring classes I've ever had to take in my entire life. I'm not going to explain the difference between moving along the curve and shifting, because it doesn't really matter.
Why do new items lose value quickly?
When an item enters the CS, or the RiG is new, people want them NOW, and so they buy them. The large amount of people buying these items allows for people to sell them at really high prices. As the month goes on, less people buy them and the price begins to settle lower and lower, and at around the end of the month a RiG item reaches it's zenith, about a week after the RiG leaves the CS, it starts to rise and rise. This is true of CS items as well, though not so ridiculous.
Stocks, Bonds, and Items.
The Marketplace of Gaia is not unlike the stock market, there are people who buy items low to sell a little higher not five minutes later--the day traders of Gaia. There are people who buy things because they know they'll go up later. This is pretty much explaining what you want to do with certain items if you're investing.
EIs are Stocks.
People don't know what a stock is going to do, will it go up? Will it go down? There's a lot of speculation about them, which actually in turn effects prices directly (If you know how the price of gas works, you know what I'm talking about, if not, you'll be pissed when you do.)
This is why certain EIs go up on Thursday, because TekTek says they're going to evolve, so people speculate in a price rise later, and buy them, IE the demand goes up for that short period of time.
Of course, the evolution could suck, which will lower the price. Maybe the entire EI turns out to be crap, and you end up losing money (I'm looking at you, Catastrophe and Experiment). No one knows, and that's why EIs are like stocks, they're unpredictable.
Bonds
Bonds are guaranteed money, usually along the lines of inflation, that pay out at certain intervals and expire at a certain time. Items on Gaia obviously don't expire, but there are quite a few items that could be called 'Gaia Bonds'.
Basically, popular MCs, older discontinued items, EIs that stopped evolving, (Don't get them when they JUST stopped evolving, because they're going to drop in price shortly), and many, many other items that are prone to inflation. Remember, the more popular an item, the higher it will go faster, because supply is set, and demand is always increasing due to Gaia's growing population.
FAQ:
Why do new RiGs/sealeds increase in price month after month?
Inflation. Although, there was a boost that wasn't inflation when RiGs went from 99 GC to 149 GC, but the increased cost of a RiG/Sealed Envelope every month is directly because of inflation. The value of a RiG and a Sealed remains the same, but the amount of gold in the system is greater.
Why do Casino Items remain around the same rough value?
If anything, the Casino items should actually lower in value.
You get tickets by wagering tokens, and the exchange seems to be roughly 3 tickets to a token. A token is worth 1 gold if you buy it.
No one buys tokens, we get them for free from the DC. I have thousands in my inventory.
Tokens are worthless, and tickets are worth three tokens. Three times nothing is still nothing. (Or infinity, depending on how you do your math.)
Why do the prices stay the same? Because no one plays the casino games, and because the tokens are still considered as being worth 1 gold, it kind of gives them a set value, even though it's a stupid, baseless value.
