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Economic Studies...

Marker Dinova
I eat yellow paperclips.
Join date: 13 Sep 2004
Posts: 608
01-20-2005 12:51
I was just wondering..

Has anyone in SL bothered to actualy study the SL economy?

For example. What *is* a widespread fair rent to charge? What *is* the value of sold items? What *is* the value of a given service?

I was at avalon.com, and bought a beautiful avalon go go.. a scripted vehicle with stunning visual quality... for only 199L. That's like only 2 to 4 times the price of a pair of pants! But then a skin costs 1 or 2K! And a vase with flowers costing almost the same as the car! There are other examples, but I hope this makes my point.

I think the economy won't be stable enough if there isn't some reference to the actual value of things in SL.

What's your opinion?
_____________________
The difference between you and me = me - you.
The difference between me and you = you - me.

add them up and we have

2The 2difference 2between 2me 2and 2you = 0

2(The difference between me and you) = 0

The difference between me and you = 0/2

The difference between me and you = 0

I never thought we were so similar :eek:
Torley Linden
Enlightenment!
Join date: 15 Sep 2004
Posts: 16,530
01-20-2005 13:22
You know Marker, I was wondering about a similar thing the other day, and I'm glad you posted about this. It'd be curious to see what average "base prices" are on some items, and how much they can go up to. There are some automobiles that have a ridiculously high pricing just because they are modelled after expensive cars in the offline world -- something that doesn't quite make sense to me. I was looking at some of them, tagged anywhere from L$5,000 to L$10,000 , and it really did have me going "Whoa!"

Meanwhile, you have someone like Caroline Apollo (hey you! :) ), who creates some beautiful jewelry at what I consider to be affordable prices. NOT because the pricing tier is scaled to be like that of "real diamonds".

With a skin... you are intended to get daily, regular usage out of it. So it's a type of steep investment that, if you like it, then it'll likely be quite worth it.

Poses/anims are another area... I was doing a casual runthrough of these myself the other day, and they typically fall anywhere from L$25-100. Of course, quality must be taken into consideration. One obviously wants the best "bang for your buck", and some of the cheaper ones I've seen have problems like bad looping or arms-going-through-body-when-not-intended and such.

There's a certain classy markup you can expect to get with products of creamy quality. I'd pay extra for elegance.

I think that's called for and quite justified as long as there is demand. If you can sell it at that price, then you can price it for those sales! As in, "What's it worth to you?"

Donald Trump himself would approve... :)
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Jesta Lehane
Registered User
Join date: 13 Jan 2005
Posts: 7
01-20-2005 13:25
You can't compare a pair of pants to a car.... I mean, you can, but you first have to throw out all knowledge of how things are priced in the real world. Its all about work put into it, and demand.

Good looking skins aren't easy to make, and people are less likely to make thier own skins. Therefore, the price of those goods is higher. Now, a car... First off, you can fly. You can teleport, and even if both of those weren't true, you can throw together somthing that looks like a car in a few minutes and strap on a free script, and walla! You're set!

So naturally prices for various goods are quite wildly different. But, the stabilty is clearly evident. Most places you can rent charge around the same rate, mild differences depending on location, but more often then not, the prices are relatively close.

The economy is stable. Insane... But stable.
Alby Yellowknife
Sic Semper Tyrannis
Join date: 5 Jun 2004
Posts: 1,148
01-20-2005 13:35
Supply and Demand is the factor which tailors pricing. If everybody can build a 1 prim block, how much do you think that block might cost? JackSquat. But how about a super complex script-vehicle or skin, hair, etc that looks awesome and took 20 hours to make. That might cost top $$$ dollar because only 3 people sell it.

Since there is no cost of production in SL, the only factor which gauges prices is Supply and Demand. And Quality.
Torley Linden
Enlightenment!
Join date: 15 Sep 2004
Posts: 16,530
01-20-2005 13:36
From: Jesta Lehane

Insane... But stable.


Jesta, I smiled so much at this. I can totally relate. :)
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Nekokami Dragonfly
猫神
Join date: 29 Aug 2004
Posts: 638
01-20-2005 14:03
Costing in RL is labor + materials + overhead (e.g. office space) + profit margin (people who really understand economics, feel free to correct this oversimplified model). But we don't have materials cost in SL (though there is an additional implied "prim cost" to many items which makes them prohibitively expensive for people with plenty of L$).

If you wanted to build a cost model in SL, you might take into account:

- labor time needed to construct the item (in and out of SL)
- special software requred (e.g. Poser)
- rarity of talent required (ok, practically everything involves this to some extent, someone would have to do some kind of study of how many people in SL can make good textures vs. do good 3D builds vs. write good scripts, etc.)
- Overhead - SL land, shop space, listing fees, etc.
- Expected run rate of item (will only 3 people buy it, or is it destined for the masses?)

The first four tend to increase cost, probably multiplicatively (since the special software involves both a one-time cost, plus skill, plus extra fiddling time); the last one divides it. You might also need a fudge factor for uploads. And I myself would lower the value for inefficient prim-rich builds, but perhaps that's just me.

Oh, and possibly a "designer reputation" factor. :D

Then add a reasonable profit margin (you define reasonable, I'm not touching it) and you're pretty much set. The factor about how often one would use an item comes in here. I think that is where the free market has the most play -- "charge what the market will bear" tends to be heavily influenced by this factor.

Those are the variables I would look for, anyway. I don't know what values to give them, e.g. how much to value an hour of scripting time by a "good" scripter, or how you want to define what a "good" scripter can do. I'd have the most faith in an empirical study for the former. It would be quite difficult to get objective ratings for the latter, I think.

I'd be interested in seeing the results of this, too. At heart, I'd like to live in a system where we all just make stuff and give it away, but that's not the system we live in, so I'd like to see how what we have really works.

Neko
Alby Yellowknife
Sic Semper Tyrannis
Join date: 5 Jun 2004
Posts: 1,148
01-20-2005 14:21
From: Nekokami Dragonfly
Costing in RL is labor + materials + overhead (e.g. office space) + profit margin (people who really understand economics, feel free to correct this oversimplified model). But we don't have materials cost in SL (though there is an additional implied "prim cost" to many items which makes them prohibitively expensive for people with plenty of L$).

If you wanted to build a cost model in SL, you might take into account:

- labor time needed to construct the item (in and out of SL)
- special software requred (e.g. Poser)
- rarity of talent required (ok, practically everything involves this to some extent, someone would have to do some kind of study of how many people in SL can make good textures vs. do good 3D builds vs. write good scripts, etc.)
- Overhead - SL land, shop space, listing fees, etc.
- Expected run rate of item (will only 3 people buy it, or is it destined for the masses?)

The first four tend to increase cost, probably multiplicatively (since the special software involves both a one-time cost, plus skill, plus extra fiddling time); the last one divides it. You might also need a fudge factor for uploads. And I myself would lower the value for inefficient prim-rich builds, but perhaps that's just me.

Oh, and possibly a "designer reputation" factor. :D

Then add a reasonable profit margin (you define reasonable, I'm not touching it) and you're pretty much set. The factor about how often one would use an item comes in here. I think that is where the free market has the most play -- "charge what the market will bear" tends to be heavily influenced by this factor.

Those are the variables I would look for, anyway. I don't know what values to give them, e.g. how much to value an hour of scripting time by a "good" scripter, or how you want to define what a "good" scripter can do. I'd have the most faith in an empirical study for the former. It would be quite difficult to get objective ratings for the latter, I think.

I'd be interested in seeing the results of this, too. At heart, I'd like to live in a system where we all just make stuff and give it away, but that's not the system we live in, so I'd like to see how what we have really works.

Neko




Perfect Summary Neko.. I nominate you for Federal Reserve Chairman of SL..
Walker Spaight
Raving Correspondent
Join date: 2 Jan 2005
Posts: 281
01-20-2005 14:54
From: Nekokami Dragonfly
Costing in RL is labor + materials + overhead (e.g. office space) + profit margin


I might be wrong about this, Neko, but it sounds like you're conflating cost -- a measure of the resources the content producer must "spend" to come up with the product -- with price -- what the producer asks the customer to pay.

[VAST OVERSIMPLIFICATION]Labor, materials and overhead (however we measure them in SL) contribute to cost. Price would then be some function of cost + market forces (taking into account things like "run-rate";) + reputation factor (known in some contexts as "goodwill";) + profit margin.[/VAST OVERSIMPLIFICATION]

Time, some measure of prim, and overhead like tier fees and advertising are certainly inputs to cost. Software may or may not be, depending on how you look at it, as it can also be thought of as a capitalized investment that depreciates over time, and is generally accounted for when you're determining your profit margin, I think. Skill is accounted for in the reputation mark-up, aka pricing power, which can also emerge from other factors, such as quasi-monopolization. Lowered stipend bonuses are part of market forces.

Just food for thought. I, for one, am *very* interested in a closer study of the SL economy.
Prokofy Neva
Virtualtor
Join date: 28 Sep 2004
Posts: 3,698
01-20-2005 15:10
People really need their fancy skins to interact, date, etc. in the game -- they put a high premium on this.

Vehicles don't work very well because the physics of the game can't support them. Try driving one, you can't get down the road. You can't drive between sims. They are more for just fun and show. Hence they got lowered in value.
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billy Madison
www.SLAuctions.com
Join date: 6 Jun 2004
Posts: 2,175
01-20-2005 15:11
From: Prokofy Neva
People really need their fancy skins to interact, date, etc. in the game -- they put a high premium on this.

Vehicles don't work very well because the physics of the game can't support them. Try driving one, you can't get down the road. You can't drive between sims. They are more for just fun and show. Hence they got lowered in value.



Yep, go by cristiano's place he has a great display of cars in a nice 3-4 car garage. I used to have pretty much the same thing.. you might as well not waste your time trying to drive in sl.
Marker Dinova
I eat yellow paperclips.
Join date: 13 Sep 2004
Posts: 608
01-20-2005 17:20
From: Prokofy Neva
People really need their fancy skins to interact, date, etc. in the game -- they put a high premium on this.

Vehicles don't work very well because the physics of the game can't support them. Try driving one, you can't get down the road. You can't drive between sims. They are more for just fun and show. Hence they got lowered in value.


I totally agree!
_____________________
The difference between you and me = me - you.
The difference between me and you = you - me.

add them up and we have

2The 2difference 2between 2me 2and 2you = 0

2(The difference between me and you) = 0

The difference between me and you = 0/2

The difference between me and you = 0

I never thought we were so similar :eek:
Nekokami Dragonfly
猫神
Join date: 29 Aug 2004
Posts: 638
01-20-2005 17:24
From: Walker Spaight
Skill is accounted for in the reputation mark-up, aka pricing power, which can also emerge from other factors, such as quasi-monopolization.


I agree that what I wrote was an oversimplification, but I don't think this is quite right either... acquiring skill has a cost, in terms of time invested (and possibly training fees). But yeah, maybe it is more similar to the reputation/scarcity thing.

From: Alby Yellowknife
Perfect Summary Neko.. I nominate you for Federal Reserve Chairman of SL..


AAhhhgghhh! If nominated, I will not run! If elected, I will not serve!

[Actually, I'm rather in shock that Alby agreed with something I wrote. Anyone noticed any scripted flying pigs in SL lately? ;) ]

Neko
Marker Dinova
I eat yellow paperclips.
Join date: 13 Sep 2004
Posts: 608
01-20-2005 17:26
Thanks all for your replies.

I really didn't want to focus so much on the actuall prices in themselves.. but to call for a reflection uppon the pricing "system" so to call it.

For example. If I make something.. that's not a conventional item in SL.. how much would be fair to set it to sale for? (not to answer.. just a hypothetical question). Some economic study of the sort should be available to know what is the average value in the market of a determined kind of animation... or a detrmined kind of scripted object.. or that same object but with an animation.. etc.
_____________________
The difference between you and me = me - you.
The difference between me and you = you - me.

add them up and we have

2The 2difference 2between 2me 2and 2you = 0

2(The difference between me and you) = 0

The difference between me and you = 0/2

The difference between me and you = 0

I never thought we were so similar :eek:
Walker Spaight
Raving Correspondent
Join date: 2 Jan 2005
Posts: 281
01-20-2005 18:48
From: Nekokami Dragonfly
I agree that what I wrote was an oversimplification, but I don't think this is quite right either... acquiring skill has a cost, in terms of time invested (and possibly training fees). But yeah, maybe it is more similar to the reputation/scarcity thing.



Neko, that tag was referring to *my* oversimplification, not yours. Sorry for the misunderstanding.

I agree that *acquiring* skill certainly has a cost. And yes, that acquired skill makes the time spent producing an object more valuable. So the price goes up, but I'm not sure whether the cost of production goes up, other than in a notional sense. Depends on definitions, I guess.

btw, is Nekokami the same as Kamisama?

From: Marker Dinova
how much would be fair to set it to sale for? (not to answer.. just a hypothetical question). Some economic study of the sort should be available to know what is the average value in the market of a determined kind of animation... or a detrmined kind of scripted object.. or that same object but with an animation.. etc.


It would be great if a study like that were available. The reason they're available in RL, though, is that (a) merchants and retailers belong to industry groups and business associations that collect and synthesize such data into reports, and I doubt that's going to happen in SL, and (b) a smart shopper from the Federal Reserve goes out every once in a while looking at price tags on a whole bunch of different items and does some fancy math and comes up with the Consumer Price Index (and the Producer Price Index) by which we measure inflation. Something like that would be possible in SL, but I haven't seen it yet. I think people have made attempts at this in the past, though.
Nekokami Dragonfly
猫神
Join date: 29 Aug 2004
Posts: 638
01-20-2005 19:11
I knew what you meant by your tags, Walker, but you also suggested that I might be conflating cost with price, which is what I meant by saying I agreed I had also oversimplified.

Eh, I'm getting too sleepy to think about economics, much less type about it.

"Nekokami" 猫神 loosely translates as "cat spirit." "Kami" can also mean god, but without the "sama" it doesn't mean God the way monotheists mean God, so I usually translate it as "spirit" instead.

Neko
Zuzi Martinez
goth dachshund
Join date: 4 Sep 2004
Posts: 1,860
01-20-2005 19:19
From: someone
If I make something.. that's not a conventional item in SL.. how much would be fair to set it to sale for?

whatever people will pay for it. :D

not really but close. you gotta find the sweet spot where a reasonable proportion of the market can afford it but for stuff in sl where everything is a luxury item you can say that the price someone is willing to pay is the fair price. you can't gouge people when nobody needs anything.
Lance LeFay
is a Thug
Join date: 1 May 2003
Posts: 1,488
01-20-2005 19:47
From: Torley Torgeson

With a skin... you are intended to get daily, regular usage out of it. So it's a type of steep investment that, if you like it, then it'll likely be quite worth it.

I use socks every day...
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"Hoochie Hair is high on my list" - Andrew Linden
"Adorable is 'they pay me to say you are cute'" -Barnesworth Anubis
Chip Midnight
ate my baby!
Join date: 1 May 2003
Posts: 10,231
01-20-2005 19:50
When it comes to skins I think I their high price is pretty much my fault :D I priced them high to keep from selling too many, since I offer to add tattoos to them for free in perpetuity. I wanted to make sure that it wouldn't eat up all my time and become more than I could handle. I was rather shocked that they sold as briskly as they did even at the high price I sold them. I think this served as a marker for others as they started offering skins as to what the market would bear. Now there are many priced lower and some priced higher than mine. The moral of this story is that there might be factors beyond some sort of gold standard that determine the prices charged for various items. The amount of customer service required can definitely be a legitimate rationale for some of the higher priced items out there. I'm just about to change my policy and start charging for tatt additions after the first few which will still be free. Even at the high price it eats up the majority of my time making it hard for me to get new products out. As Zuzi said it really comes down to hitting the sweet spot, and if you happen to be lucky enough to catch a wave, you might be surprised what people will pay for things. That said, I don't advocate charging excessive prices without a legitimate reason to do so.
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Zuzi Martinez
goth dachshund
Join date: 4 Sep 2004
Posts: 1,860
01-20-2005 19:57
Chip are you going to lower your skin prices when you start charging for alterations or is this a case of "what the market will bear"? :D
Chip Midnight
ate my baby!
Join date: 1 May 2003
Posts: 10,231
01-20-2005 20:07
I haven't decided yet Zuzi, but it's a definite possibility. I'm planning to put out a bargain line that will be more affordable but I haven't had time to work on them for a while. People have been getting ten and twelve tatts added at a time and I just can't keep up anymore. I need to slow it down a bit.
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Zuzi Martinez
goth dachshund
Join date: 4 Sep 2004
Posts: 1,860
01-20-2005 20:11
what would the bargain line be like? stretch lines or big purple birthmarks or an extra nipple or something?

don't bother replying. i'm deliberately wasting your time.
Chip Midnight
ate my baby!
Join date: 1 May 2003
Posts: 10,231
01-20-2005 20:12
hahaha :eek:
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My other hobby:
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Moleculor Satyr
Fireflies!
Join date: 5 Jan 2004
Posts: 2,650
01-20-2005 20:25
From: Nekokami Dragonfly
I knew what you meant by your tags, Walker, but you also suggested that I might be conflating cost with price, which is what I meant by saying I agreed I had also oversimplified.

Eh, I'm getting too sleepy to think about economics, much less type about it.

"Nekokami" 猫神 loosely translates as "cat spirit." "Kami" can also mean god, but without the "sama" it doesn't mean God the way monotheists mean God, so I usually translate it as "spirit" instead.

Neko


So, minor cat deity?
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</sarcasm>
Mike Zidane
Registered User
Join date: 10 Apr 2004
Posts: 255
01-20-2005 21:06
For my items, I really just try to figure out what I would pay for something. I build little toys in a video game... how much is something like that worth to -me-? I don't think anyone ought to be giving away anything for free, but I also don't think we should be trying to screw eachother. So I try to price my stuff accordingly.

Someone could probably compile some economic data on this place and sell it for a heft fee. (hint hint)
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I'm only faking when I get it right. - CC
Walker Spaight
Raving Correspondent
Join date: 2 Jan 2005
Posts: 281
01-21-2005 00:56
Thank you for the translation, Neko!