Nice to see a positive response...

Check out this reply to Asri Falcone's recent post - nice to see a Linden is not only on top of the issue, but offers such helpful advice - comments anyone?

In that same time frame, the population of SL has gone up about 7 fold. If you're creating customized goods for each buyer, then you should raise your prices to reflect the change in exchange rate. Otherwise, if your variables costs are near zero, then you should do what it takes to maintain marketshare. If you do you should be able to wind up with about 3.5x the US$ you were making a year ago.

I'm not going to point out the obvious consequences of people following this sage advice en-mass...

However I AM getting my investment out of SL as fast as I possibly can. Can't really think of much to say, I simply can't find the words.

Well I think what they are saying is they don't know how to fix it

I would argue what they're saying is they're just fine with a ratio closer to 350/1 rather than 250/1.

As he said, if you maintain market share with the larger number of players you'll be better off, but if you're doing custom work you should raise your linden rate in order to maintain the same US dollar per hour rate you had previously.

What would the consequences be?
As I see it, if everyone raises their prices, the value of the $L would actually go up.

Sounds like the obvious quick "solution" to inflation to me. Mark up your prices of things sold in game to keep abreast of the exchange rate. Will it actually solve anything? I think it will, but who knows. Time will tell I guess.

Imho, this is going to be the next big traumatic forum topic -- Pricing Boom Hits SL. Also scripted price changing routines to keep up with the current market ought to start selling quite well.

That lil tug of war between merchant (supply) and consumer (demand) we all see in our day-to-day lives? Unprecedented!

As I said in another thread:

I think you'll find that the elasticity just isn't there if you raise prices. With the influx of new accounts there is alot more competition as well in every vein.

Bottom line: we raise prices at our own peril.

Um, no Schwanson, historically that has invariably resulted in uncontrolable inflation in the long term.
Short term it looks like a reasonable 'finger in the dyke' solution. Long term it's a recipe for disaster and almost impossible to control once it gets going.

Things are getting thoroughly out of hand. Sadly this IS real money we are talking about, regardless of what the worthless TOS says. Once you say L$'x' per US$, it's real money.
I think LL are stepping onto very thin ice at this point.

Welcome to the world of business!
Make an outstanding product and people will pay the price you demand, it is that simple.

Exactly -- most people are not using SL as a "platform" -- least of all the majority of shoppers.

Speaking of which, if we're supposed to raise our prices, shouldn't they raise the amount of $L newbies get initially ($L250)? What about stipends? What about the sky? Is it falling?

Is this not the definition of inflation?

As the L$ has less purchasing power (as the merchants were advised to raise prices) prices of a "market basket" of SL goods increase.

The advice to raise in game prices means that the merchants should see the same net real income but the consumers will be spending more US$ to purchase those L$. In such a scheme, the US$ changing hands remains constant you just have the extra overhead of merchants having to reprice constantly to keep pace. Thus, no one wins, merchants waste effort, if and only if repricing works as was suggested.

My feeling is that merchants do reprice at their peril and that the fundamental flaw is lack of faith in the backer of the L$. And that's nothing any player can do anything about.

I have raised my price 2 months ago and it didn't hurt my sales. And I will raise my price today again because the exchange rate seems to stay above 320.

Wholeheartidly agree.

I can see the wheels turning now....let's see overhead on product...zero except for maybe 15 minutes to find it boxed free....profit...whatever said person wants to jack the newer higher price to.....Gee I wonder who uses that theory in game.

You do realise that that part (correctly!) implies that without raising prices you could make 3.5 times more than a year ago?

Even better, with things as they are many people could've easily made a lot more money over time by lowering prices.

In theory Introvert. Unfortunately just one of the things that happens is that merchants raise their prices just a little more than necessary - after all, it'll only extend the interval to the next price rise - which causes a little more inflation than previously... a process of positive feedback then ensues.
Taken to it's logical conclusion you get the spectacle seen in Germany between the wars, of people taking wheelbarrows of DM (L$) to the shop to buy a loaf of bread... I believe at one point the exchange rate with the US$ (which wasn't too healthy itself at the time) was over a billion DM to the US$.

THAT is what happens when a government (LL in this case) relinquishes control of their currency AND continues to print vast quantities of cash...

No, the sky isn't falling. This is just a bunch of fools who think they can ignore well understood economic mechanisms.

I should note that I do not like the rampant devaluation either, I usually keep a $L reserve of ~ $200KL. It really sucks to see that go from $800 USD to $615 USD.

Given that this is the situation, and LL has stated that they want inflation, I think that raising prices is a valid option. The other is to increase sales. As for myself, I am doing both.

I own a RL business and went to a seminar a few years ago. First thing the business guru said was "When you get back from this seminar, raise your prices 15% across the board." Man, you should have heard us all complain and say "no way would our customers ever stand for that." I thought 1/2 the room was going to walk out, as this guy was obviously nuts.

As it turns out, that was some of the best advice I ever got for my RL business. At the risk of making this post too long, let me give a numerical example.

Currently, Acme widgets sells 100 widgets per month at $100L each. Acme widgets has a fixed operating expense (tier) of $25 USD per month ($8,000 L).
Acme widgets is making $2000L profit per month.

After the 15% price increase widgets are now being sold for $115L each. Due to the price increase, acme widgets lost 5% of their sales (VERY unlikely) so they are now selling 95 widgets per month. Fixed expenses remain the same at $8000L. Acme's profits soared to $2925, nearly 33%.

Lets take this one step further and say Acme doesnt loose any business (IMO the likely scenario). Acme's profits would be $3500 per month, a 75% increase!!

In my experience, people are not nearly as price sensitive as you may think. As a business owner you are your own worst critic, often way too critical of your pricing.

Raising your prices to what the market will bear is good business - I agree.

Taking action that WILL increase an existing inflationary trend is commercial suicide.

I suspect you are about to live in interesting times.

I don't see the problem with this. It's good advice, and it's telling you it's possible to make 3.5 x the amount of money you've made before. That sounds like a reason to stay, not pack your bags.

I have raised prices to keep up with Lindex and increase of vendor rental fees which have gone up. Sales are still the same as before. I felt it was ok to raise them based on a 260 to 300 fall in price of the Lindex and still thats not enough with the current price. I will be fine with it because I think 300 to 1 is a good target for the Lindex now. Hopefully it does settle down near there in the next few months even if things are get worse for a while.