Raise your prices, otherwise Philip won't grab a clue

Here's something to think about, if you, like me, have set your prices so that new people - and the not-so-wealthy people - in SL can buy them.

When the stipends are removed, the only anchor we had in SL whatsoever will go with it. At that point, people's prices will raise, and remarkably so. Those of us now pricing with the stipends in mind (partly, anyway) had better get on the bandwagon and raise prices now, before the stipends are gone.

There are many people who were "living within their means," as it were. With stipends gone, there will BE no "means." Then, the difference between something costing $2.50 and something costing $5.00 will not be a psychological detriment.

The true stumbling block was buying Lindens at all. Once our customers have to buy their Lindens, then it doesn't matter nearly as much how we price our goods.

coco

Wow, very well said =), however, I do think it will stil matter how we price our goods.

I see it as just the opposite. Once customers have to buy Ls then how we price our goods will matter even more.

ok, here is the new response to the change you made in yours. I support raising prices which is why I replied to this post after seeing all of the prevuos replies from people who do not want to raise. I do not agree with Anna's reasons for it, however I am trying to shed some light on the real reason why we must raise prices.

for starters i fixed saying you started...
another bit it pertains to everyone in SL really... because it effects everyone.
I dont sell much at the club (still building) i sell tattoos and give lessons to tattooing/simple clothing design in SL at a fair price. The club as a whole is trying to create oppurtunities for jobs and train people to do them wether they stick with us or not. I truly care about SL as a whole and dont want to see it go down the gutter. Pontentially ill state there isnt a real fix to the problem other then people themselves not being greedy to turn a quick profit there by undercutting compettion to do so. These people are the ones causing inflation!

Stipends arent going anywhere without proper recompensation, however. Without lower premium fees, or more land allotment, we will see premiums tiering down in droves.

Actually, no.. inflation is not being caused by greedy people. It is casued by the supply of lindens in circulation vs. the demand to buy lindens. Right now there is a larger supply than there is a demand which is why the value of the linden is dropping. Inflation is sparked from this, not from a few greedy people who want to take over the world. ofcourse, you and I have a totally different opinions I think on what greed is, however im not 100% sure so take that lightly please.

Actually, no.. inflation is not being caused by greedy people. It is caused by the supply of lindens in circulation vs. the demand to buy lindens. Right now there is a larger supply than there is a demand which is why the value of the linden is dropping. Inflation is sparked from this, not from a few greedy people who want to take over the world. ofcourse, you and I have a totally different opinions I think on what greed is, however im not 100% sure so take that lightly please.

while amount of L in circulation is the problem its the fact of how people are selling it. They dont want to wait to sell their L and undercut each other to sell faster like i keep stating. Hence greed to sell their L in circulation is what is causing the Value of Linden to drop not jsut what is in circulation. What is in circulation is only a tiny part of it if people opt to sell at a decent value and not undercut one another to do so. But again its based on faith in your Fellow Sl'ers which they are lacking in the ability to do so in my opinion!

the fact still remains lessining the volume may result in Increase in L value but this will be for a short time till people start doing the same exact thing again

You mean the ones who do raise their prices will be pricing themselves out of the market.

Walmart's prices are low because their economy of scale lets them sell closer to the marginal cost per item, and that marginal cost is lower.

The marginal cost per item in Second Life is close to L$0, even for the most inefficient vendor.

At which point the economy will contract significantly, because so many people will simply stop buying... period.

Wow. Is my RL time worth nothing?

The people (with an obvious exception I'm not touching with a ten foot barge pole) who are making RL money here are putting in way more then 40 hour weeks here to make marginal incomes.

Walmart requires its suppliers to lower their wholesale costs every year. They put their suppliers out of business. Its not a viable SL model, and thank Maude for that.

Well of course people are going to sell it at a lower price. People have real life things they want that money for. Things that they have decided they can not wait for days or possibly weeks to get there money or even take the risk of never getting it at all. That is how the market works.

Imagine if we posted all 20 some odd million lindens at the same rate to sell. for sake of argument lets just say L$250/$1 then add in the 7-9 million new lindens per day that get added to the market for sale. with only 6-7million being sold per day there would be a lot of lindens that would never get sold if that were the case becasue it would be impossible for the buyers to ever work there way through to the people who are at the end of the sellers line especially wit hall the new lindens flooding the economy and the market. That is why people post it for a lower price, so they actually have a chance of selling the lindens so they can use that money s they see fit in RL. So people are acting as humans act, its called human nature. They are acting on impulse and desire. IT will always be that way and it will never change, reagrdless of the economy or the type of currency being traded or whatever.

Let's face it. The LindenDollar will keep falling. As you have said, there will always be someone who will sell his L$ for a lower price. They should introduce a fixed exchange rate.

Btw. I will raise my price by 5-7 % tomorrow. (100L -> 107L) which should reflect the falling L$ (280L -> 300 L). My customers are right. I could sell my glasses for 120L and people would still buy them, because of my customer service. I'm at my shop most of the times and helping newbies to adjust their glasses.

Anyone going up with the price too here?

I will only raise my prices if the long term price stays where its at. Even then it would be very unnoticeable and more than likely only newer items and only a few Lindens higher.

Back to the point where the marginal cost to sell something in SL is close to almost $0L really bothers me. I hope this is coming from someone who does not understand how much it cost to pay rentals, classifieds, or tier fees. Then the amount of labor involved to produce something in really good quality. If I currently spend 20 hours a week making something to sell, the value of that time is put into the product when it sells just like anything else made.

Just a note of definition for some posters who may be unfamiliar with the term. The "marginal cost of production" is how much it costs to make each additional unit.

I may spend 20 hours of work developing a thingy in second life. That is a "cost". Since each additional unit of the thingy I sell costs me literally L$0 the marginal cost is zero. This is different than the cost of producing a thingy in the first place being zero, which no one is saying.

Anna, Philip is not saying that inflation is not happening. He says: "Inflation is good for you!"

This excerpt from Phillip's reply is the open invitation to convert L$ devaluation at the LindeX to inworld inflation:If residents would do this, we really would start runaway inflation (20% in 6 month, 10% in the last 40 days). An interesting suggestion to be brought forward by the head of a (virtual) country.

Actually the cost for items can be $0 it can even be negative. If someone places an SL exchange box on their house land(they need the land anyways no cost there), they pay nothing unless an item sells, and the time spent? If the enjoyment util's gained by the act of creating the object are worth the time they put into it the object cost them nothing to create and if they gained more util's than they value their time at the cost is negative. So while your items don't have a cost of zero you do have to compete with hobbists who most certainly can and do have 0 or negative costs.

I noticed you're throwing around a bunch of econ terms. Perhaps you'd like to shed some light on Adam Smith's invisible hand theory and how it applies(or doesn't apply) to SL?

It is correct to say that each additional unit does not cost anything to produce as far as labor goes. Though there may be labor involved with customer support for the item also. Also putting items into vendors and selling them. Also there are still tier fees, classified fees (advertising), and rental fees to pay, etc. Part of the additional sale beyond the first one still goes towards these fees.

I noted here that it appears that centuries of economic theory might well not apply in SL and am waiting to see what sort of analysis can be made when fundamental axioms are violated as they are in SL. Alas, I have little insight into whether or how these models can be reconciled.

I keep SL as a hobby, but I love and very much got used to the fact that I can pay for my land tier from my sales.
(Of course, this means work and much time, making those items I have for sale, so it's not like I get it for 'free'.)

Since paying land tier requires selling L$'s, and the rate has gotten worse, I am, too, thinking about repricing my things. Probably not much a difference, L$ 270 instead of L$ 250, etc, I don't think that few L$'s would make customers NOT choose my items. But I'm still not sure what to do, I'll have to run calculations, see if maybe increased sales volume makes up for the lost US$ due to the rate changes.

You're mixing up fixed costs with marginal costs.

A fixed cost is one that doesn't change based on the amount of product you sell.

A marginal cost is one that does.

Research and development, advertising, your storefront in Second Life, these are fixed costs. If you sell 1000 widgets in the next hour or 0 widgets in the next hour these costs won't change. You can change them, by (for example) closing stores that aren't moving product, but that's reducing the fixed overhead... if there's a run on a store you don't suddenly need to hire more checkers to move widgets.

Apart from the special case of land, the only marginal cost in SL that I can think of is customer support.
I'm not aware of any business in SL other than land sales that has any suppliers. It's interesting to note that land is the only business sector where inflation appears to exist.