Pack sellers are stupid

OP, this is a classical demonstration of the prisoner's dilemma. If everybody trusted each other and worked together, then everybody would benefit. But because people want to maximize individual profits, and could care less about anybody else, it leads them to deviate away from the "optimal" pricing.

Consider this example:
There are two firms, A and B. They strike an agreement to sell at 445K each.

Now, firm A thinks to itself, if firm B undercuts to 444K, they're going to sell all the packs and I won't sell any. They're going to make a lot more money than I will. This gives incentive for firm A to cut their price even lower.

(PW being a competitive market, people will find out someone is selling cheaper, and will buy the cheaper one. Who would buy for 445k if they can buy for 444k?)

Firm B also thinks the same, and as a result, firm B is also motivated to cut prices.

As a result, there is only incentive for firms to cut prices as to maximize their gains, and as such they reach a suboptimal solution where they're both worse off than they could have been.

This is what OPEC tries to do. They try to limit their supply of oil to the world to keep prices high and make the big money. However, the members always cheat and produce more than required so they can make more money, and since everybody cheats, it just drives the oil price down and the collusion doesn't work.

It's not stupidity, it's rationality. Would you trust some random joe you've never met before to keep their price at 445K? Of course not. Would they trust you to work together with them? Of course not. Being rational people, you're going to compete and undercut.

i dont like standard of discusions on forums for some longer time

every side braging convo down by using extreme arguments that dont really apply


OP with his all naivety is right, but whole problem about comeptition and pricing is bit more complex ofc



it still dont justify why topic must become hot so fast b:surrender

The way I see it, this happens simply because of the increasing supply of packs (as in more and more people trying to sell them), while the demand remains the same - which simply just drives down the prices. I don't see how there is anything you could do about it? Fixing the prices will never work.

MagicHamsta - Lost City wrote: »

Me had an interesting experience like the one you described, a certain seller named Icebender (well, when his prices were the lowest.) d(^.-d) sold packs & tokens while me made and sold MP pots from buying tokens from him.

hehe nom nom the good old token days when you made a big profit from tokens 1~2k per token b:laugh made me very rich and fast started with 4mil and ended with 1bil b:victory

but as you see the hamsta's took over and killed the token market b:sad now if you dont play ur cards right you can even lose cash with token trading

was one of the first trading in tokens, i left the tokens and traded in something better XD
now that market looks to go bye bye b:bye kiss the 12mil profit a day good bye. Ill soon get a new idea and make me some more monnie

(I've been taught to be kind to the less fortunate, so I will be polite to the OP)

Apart from the very valid observations on the potential numbers of sellers, and the potential for undercutting, here's a totally different view... And if you are on Heavens Tear you probably recognize me as a fairly successful merchant, so we can skip the merchanting-ePeen comments for the moment.

Here is what I do:

• I have between 200 and 1000 gold on rotation (gold trading, various prices, buy, sell) at any given time
• I have a spreadsheet that accepts current rate I can buy gold at, multiplies by 1.02 to cover the "tax", multiplies by 1.03 to give me a "sell rate per gold" 3% profit
• The sheet next computes sell-rate * 45 / 50 to give me a pack sell rate
• I update the buy rate every 4 to 8 hours, get my new prices
• If selling my gold gives me a greater profit (i.e. gold has jumped up by more than 7.1612% since I bought gold), I simply put some gold up for sale instead of buying packs
• If not I buy 2 to 10 sets of 50 packs, put up the kitty with some of them, and go back to doing other stuff

Sometimes people price higher than me, mine outsell theirs in a half hour to two hours, I make up to a mill in profit per set of 50 packs, I go back to AH and rinse-repeat.

Sometimes people undercut me, I wait for them to them sell theirs off, then mine sell out in the next half hour, rinse-repeat.

Either way, anywhere from 2 million to 20 million in profits per day. Risk mitigated by reviewing AH rates rather frequently.

I am happy with my 3% per cycle multiplied by around 8 cycles of profit-making per day. If someone suggested to me that I price-fix, I'd laugh them off.


Hope this makes some sense.

ElfinCharm - Heavens Tear wrote: »

Sometimes people price higher than me, mine outsell theirs in a half hour to two hours, I make up to a mill in profit per set of 50 packs, I go back to AH and rinse-repeat.

Sometimes people undercut me, I wait for them to them sell theirs off, then mine sell out in the next half hour, rinse-repeat.

Unfortunately some people can't monitor the prices every hour. If you work a normal job + RL things, you can probably only check AH and re-price your catshop twice a day (early morning and late night). It's a fine art to learn how to maximize profits like that.

Atone - Lost City wrote: »

Unfortunately some people can't monitor the prices every hour. If you work a normal job + RL things, you can probably only check AH and re-price your catshop twice a day (early morning and late night). It's a fine art to learn how to maximize profits like that.

Oh, I agree - much to my advantage.

ElfinCharm - Heavens Tear wrote: »

• The sheet next computes sell-rate * 45 / 50 to give me a pack sell rate

I just multiply by 0.9 . Makes my life easier since I can just do it in my head and I am an excel noob. But since you are using excel, my point is irrelevant =p

Asterelle - Sanctuary wrote: »

I used to think it was important to have a low price but this is really not the case.


If buyers were interested in getting cheapest packs they would just buy gold from the AH. I can't tell you how many people go to my shop and buy 100 packs when they can just go to the AH and buy 90 gold for like 3m less.

Buyers dont want cheap packs, they want convenient packs right now. Location and shop title make much more of a difference than pack price. In general I think most of my competitors are of this opinion too as there is more competition for prime location than there is for cheaper prices.

Asterelle is right on the dot. I spent some time reading this and got quite a kick out of it. I mean, if I was so stupid as to sell packs, then clearly my profits were quite stupid and the endgame equipment that I purchased on said profit is also stupid?

Also, I do not think 75% of merchants are too concerned with making the MOST profit. They just want to make a decent profit margin and sell in bulk instead. Buyers buy out of convenience. Accordingly, make your location, prices, and shop title convenient. You will sell out. If someone comes for lower, wait them out. My general theory is that something will sell given enough time. Depending on how brutally you pursue sales, you sell faster or slower.

tl;dr Even casual merchants make profits.

hi , i'm a merchant and i know that in the beginning those sorts of doubts can come but this is the economy and if u are good u can make tons of money anyway.
i'm happy with my 300M earn in 5 days

RoidAbuse - Sanctuary wrote: »

I believe at least 2 Bil of my coins are from selling packs with very low profit margins during the sale. However, that has changed as more pack sellers are coming into the picture. Packs aren't as profitable as they used to be but I'm still making at least 8-10M pure profit per day during the sale. The real profit isn't during the pack sale.

i agree completely

This has probably already been said but there's no way in hell that I'm reading through 9 pages of this **** (3 was enough).

If everyone one sells at the same price then buyers won't care who they buy from since they don't get a better deal from any single seller. Since packs are being bought from every seller then each seller makes less profit. The second a seller lowers his/her price then anyone who shops around will buy from that seller so that individual seller, although making less profit per pack, makes a greater total profit than anyone selling higher than he/she is. If all the sellers decided to raise their prices to the same amount (which, frankly, won't happen) then eventually someone will lower his/her prices and start the whole thing over.

Personally, I don't care for any of that **** so I stick to buying/selling gold. I don't make anywhere close to the amount of coins that a good merchant does but it doesn't require me to be logged in constantly and I can make a few 100k just by checking the gold prices a couple times per week.

Khanderin - Lost City wrote: »

If packs can be sold at 455k, then all the sellers would make more money selling at 455k. The minute one person starts undercutting, everyone starts to lower their price to compete until the price stabilizes at a value where the sellers can go no lower and are making minimum profit.

Right. But that just makes the one person stupid. The other merchants are forced to go along with it to remain competitive.

Same thing happens in reverse with buyers. A merchant sets up a shop with packs at 470k. The other merchants laugh at him. Then a stupid buyer comes and buys out the 470k packs. The other merchants go "WTF!?!" and immediately raise their prices closer to 470k. All other buyers now have to pay more even though they were not the stupid one who bought above-market price packs.

Maximum profit comes at selling at the highest price people are willing to buy and in the case of packs, it's around just below the price of gold.

That's only true when there's a limited supply. Like how there was limited availability of iPhone 4s when they were first released, and so some early buyers sold theirs on eBay for over $1000 - because some buyers were willing to pay over $1000 for an iPhone 4.

Packs however have an infinite supply. So their market price is predominantly going to be determined by how low sellers are willing to sell them for, not how much buyers are willing to pay for them. That is, if you somehow met with all the merchants and put together a cartel which fixed the price at 455k, someone not in your cartel would notice all the shops were selling them for 455k. He would figure what a great opportunity to make loads of money selling at 445k, and even though he'd never merchanted before, he would buy some gold, buy some packs, and set up a shop selling them for 445k, thus neutering your cartel.

If you're going to argue that less people are going to buy 455k packs than 445k packs then gtfo because buyers don't give a shxt about 10k difference on something like tiger packs. If they're given no choice because everyone is selling at 455k, then they will continue to buy at 455k.

See above. Because packs are available in infinite supply to anyone via the cash shop, it is impossible to "give buyers no choice because everyone is selling at 455k". The market price is determined by how low a single seller is willing to go, and how much the other sellers are willing to price-match him/her.

If the market were perfectly efficient, the profit per pack would only be slightly more than the cost of the time and effort it takes a merchant to exchange coin for gold, buy the packs, and set up the shop. So that's the true lower bound on prices (and even that is just an average - you can have stupid or desperate sellers sell for below their cost). Anything above that is purely psychological. Same thing for the buyer - there's a certain price they're willing to pay. Anything below that, and where the two meet in the middle, is purely psychological. How confident is the seller that he can sell at that price? How sure is the buyer that he can find a lower price? etc.

Asterelle - Sanctuary wrote: »

I used to think it was important to have a low price but this is really not the case.

If buyers were interested in getting cheapest packs they would just buy gold from the AH. I can't tell you how many people go to my shop and buy 100 packs when they can just go to the AH and buy 90 gold for like 3m less.

There does seem to be a large fraction of people who don't want to bother learning how to trade coin for gold. The price premium you can charge for doing the conversion for them is almost obscene.

Buyers dont want cheap packs, they want convenient packs right now. Location and shop title make much more of a difference than pack price. In general I think most of my competitors are of this opinion too as there is more competition for prime location than there is for cheaper prices.

*Some* buyers want convenient packs right now. Others shop around for the best price. Some only glance at the prices in the shop title, others check all the shops individually.

How all these different behaviors influence which shops sell the most packs is fundamental to how the market price is set. The market is essentially a great big kalman filter which takes all these individual quirks and different ideas about pricing, and conglomerates them into a single average market price; a price which can shift up and down over time.

Basically, there is no One Right Way to do this. You can run a successful shop focusing on low prices, you can run a successful shop focusing on prime location. How successful the shops are relative to each other is (1) determined by how much the pool of all buyers values price vs. location, and (2) changes on the whims of other players in the market (both buyers and sellers).

Dartwave - Sanctuary wrote: »

hi , i'm a merchant and i know that in the beginning those sorts of doubts can come but this is the economy and if u are good u can make tons of money anyway.
i'm happy with my 300M earn in 5 days

You just got yourself a stalker. b:chuckle

Khanderin - Lost City wrote: »

You guys who just find any excuse to flame someone and call them fail are pretty sad. And you're sitting here pretending you're an expert at merchanting when clearly you're not.

Oh boy! Somebody wants my opinion, since I actually am kinda an expert at merchanting...

What you're arguing is all well and good, except it only takes one greedy SOB to ruin it for everybody else. If all the merchants on the server agree to price collusion, then yes, they will indeed all earn more profits. But if just one person decides to break rank and undercut the rest, then that person will end up with massive piles of money at the expense of the other merchants.

I happen to be just such an SOB.

So is my main competitor, RoidAbuse (I don't think he'll mind me saying that). Between the two of us, we have absolutely no problem with undercutting the competition.

The reason I do so is because I have no delusions that somehow we merchants are all going to band together in rainbow-happy-sunshine-brotherly-harmony, just so that we can then **** over our customer base.

It just ain't gonna happen. Instead, I'd rather **** my competition and make my customers happy. I figure a few million per day is more than fair for me to be earning, and if the customers get lower prices as a result of us merchants bickering amongst ourselves, then yay for them.

However, I have profited from attempts to do exactly what you're describing, and so I encourage others to unite and attempt to follow your suggestions. Whenever I get messages from other merchants that we should agree on price collusion I take it as a sign of big profits ahead. Those who attempt to band together basically remove themselves as competitors, thus ensuring easy money for me until they realize I'm not going to join them.

Airyll - Dreamweaver wrote: »

1) The people selling packs are making huge profit. Again, you're somebody else who doesn't know or understand the system.

Profits are down, actually. Instead of ~5 million per day it's more like ~2 million.

It's not that we're any more or less cut-throat, though, it's just that there's a heck of a lot more merchants now. That means even less chance of collusion working, of course, and also lower prices for customers. In fact, some merchants are even occasionally losing money these days, which wasn't happening at all a few months ago.

Kupuntu - Sanctuary wrote: »

Everybody selling at the same, higher price = less profits since there are more packs for sale at that price.

Not really. If everybody was selling at the higher price, profits overall would almost certainly increase.

However, if you're talking about just one merchant, then having lower prices than everybody else equals higher profits for just that one merchant. That's actually how I was able to make ~15 million per day during the early days of the first Tiger Packs.

Khanderin isn't wrong about the basic idea that merchants could all earn more money if they all stuck together. If collusion does occur, then it is indeed very profitable, which is why it's usually illegal in the real-world. But as I said, as long as just one merchant refuses to collude, then the system collapses because then all the profits go to that person.

i wonder if some merchants are using multi clients (which your not suppose to yeah) to set up 3 or more shops all over archo to increase sales... ;P