The Economist ~ Productivity and Profitability (Part 2)
Spite313
Dear friends
Last time we discussed the basics of production, and did some basic sums to show how you can work out the profitability of individual companies. As I said last time, each company is influenced by a number of different productivity buffs and debuffs which influence the final production of your company. To simplify matters, I assumed that you would be producing goods at exactly 200% bonus (double base production). This would be a ‘good’ amount to produce at and would indicate maximum resource bonuses, some region bonuses and no pollution, which is a best-case scenario.
Last article we looked primarily at Food Raw Material (FRM) and Weapon Raw Material (WRM) companies. Food and Weapons are the two most widely used products in the game, and so it made sense to focus on them. Housing and Aircraft Weapons are both fairly new products and the market hasn’t yet fully worked itself out, which means many companies are either selling products at a loss, or not at all. I will touch on this a bit more later this article, but to begin with I will look at the Food and Weapon industries.
Food Manufacturing
First of all, food is used to regain energy, which you need to work, train and fight. It is therefore necessary for all citizens to buy or make food. Unlike weapons, where it is always advantageous to use the highest quality weapon you can afford (ideally always Q7), food quality has a linear scale and merely determines how much energy you get per item:
Q1 = 2 energy
Q2 = 4 energy
Q3 = 6 energy
Q4 = 8 energy
Q5 = 10 energy
Q6 = 12 energy
Q7 = 20 energy
Like weapons, food has a single base productivity of 100 for all quality levels. This means that in the scenario above where you have 200% bonuses, you would produce 400 energy in a Q1 factory, 800 in a Q2, and so on up to 4000 energy in a Q7.
The FRM required to produce food of different qualities also scales, so at 200% bonuses, a Q1 company requires 2 FRM, a Q2 requires 4 and so on up to a Q7 which requires 20. Essentially that means that although a Q7 produces ten times more energy per worker than a Q1, it also requires ten times as much FRM.
What does this mean for the industry? Q1 companies are cheap- so cheap in fact that Q1 food companies are usually the very first company a new player with no other advice will buy. As they usually work as manager in the company, they can then sell their products for the cost of 2 FRM, work tax and ten of their own food. As we worked out in our last article, work tax in Romania is around 6-7cc, 10 energy is around 0.8, and FRM is 4.45cc. That means 100 Q1 food costs around 16-17cc to produce, or about 0.16 to 0.17 per unit, or about 0.085 per energy. Because these companies are so common, and because supply exceeds demand as a result, the price of sale is actually around the price of production. In Romania for example, Q1 food is nearly always for sale at 0.17 or 0.18cc.
As higher quality food does not scale, this means that the production cost works the same as that of Q1 food. Q2 food is twice the price to make, Q3 three times the price, and so on. The very highest Q food is often more expensive (this is discussed further down), and therefore not worth buying. The only real reason to buy anything other than Q1 is that it uses less storage space. Q3 is usually a good balance between price and storage space.
So should workers ever be used in a food company? The short answer is no. Below you can see the cost of energy (per one unit) produced in food companies using workers, assuming that they get paid the same as me (388cc).
Q1 - 1.015
Q2 - 0.935
Q3 - 0.365
Q4 - 0.285
Q5 - 0.235
Q6 - 0.205
Q7 - 0.142
As you can see, even a Q7 company cannot make a profit with employees, as the cost of energy per unit is 0.142, when the cost with WAM is around 0.085.
Does that mean you shouldn’t invest in food companies? Well certainly if your intention is to make a profit, or to supply yourself with energy it is not worth it. You are better off buying Q1-3 food from the market. However people are strange, illogical and sometimes a bit stupid. Here are the current prices of food on the Romanian market:
Q1 - 0.17
Q2 - 0.34
Q3 - 0.5
(makes sense so far)
Q4 - 0.81
Q5 - 1.2
Q6 - 1.48
Q7 - 2.58
What’s interesting is that although all these products provide exactly the same thing, the amount people are willing to pay (per energy) is not consistent. Q5, Q6 and Q7 food is almost 50% more expensive per energy than Q1, Q2 and Q3. However the food does sell at this price, or in line with the concept of supply and demand the price would fall until it met equilibrium.
Q4-7 are still not able to employ workers, however they can actually make a small amount of money for the owner.
Q4 = 34cc per day
Q5 = 80cc per day
Q6 = 104cc per day
Q7 = 176cc per day
Honestly, these small amounts are not worth the investment of gold required. The return on investment is:
Q4 = 2048 days
Q5 = 1838 days
Q6 = 2902 days
Q7 = 2704 days
And that is assuming you buy the company from the market, and the gold price remains constant.
I hope this has illustrated a few things. Firstly, higher quality food companies are not a good investment for the amount of money you make. The return on investment period is so long that you would actually be better off with literally any other type of company. Secondly, it is not worth buying these companies to produce your own food. The production cost is so close to the market value that even new players are much better off buying food directly from the market. Finally, anyone who does own Q4-Q7 companies already can continue working in them if they wish, but if it was me I would dissolve them and reinvest the gold somewhere else as the profit is so tiny it is essentially inconsequential.
Weapons Manufacturing
Weapons production has been the main employer in eRepublik since its foundation. This is largely because the admins have never sat down with a team and worked out how to balance the economy. It is actually not really profitable to employ workers in WRM, FRM or Food Production, and although the Housing and Aircraft Weapon industries force you to use workers, this has the effect of making housing and aircraft weapons overpriced and killing user demand for them.
Weapons scale by providing a boost to the damage of the person using them. Q1 provides 20%, Q2 40%, Q3 60%, Q4 80%, Q5 100%, Q6 120% and Q7 200%. Q1 weapons have 1 use, Q2 have 2, and so on up to Q6 which have 6. Q7 weapons have ten uses.
Weapon production companies always produce 10 weapons as base production, and in our hypothetical scenario with 200% bonuses, that goes up to 20. Weapons require the following amount of WRM per unit to produce:
Q1 = 0.1
Q2 = 0.2
Q3 = 0.3
Q4 = 0.4
Q5 = 0.5
Q6 = 0.6
Q7 = 2
Working as a manager, and using WRM bought for 4.8cc (with work tax of 6.5cc and energy costs of 0.8cc) you produce weapons for the following costs:
Q1 = 0.85cc
Q2 = 1.33cc
Q3 = 1.81cc
Q4 = 2.29cc
Q5 = 2.77cc
Q6 = 3.25cc
Q7 = 9.97cc
The crucial thing here is that Q1-6 companies are completely disconnected from the markets due to lack of demand. Q1 and Q2 guns are vastly under production value, and Q3-6 are massively over. That is because nobody buys these guns, and neither should you. The fact that Q7 has not only 10 hits, but 200% damage, makes it much more impressive than any other Q.
Q7 is also the only Q which is actually profitable to run with workers. In fact, it is the most profitable company in the game. Assuming 200% bonuses, 4.8cc WRM and a wage of 388cc, a Q7 gun costs 29cc to make. The price in Romania at the time of writing this article is 37.5cc. That is a profit of 8.5cc per gun, or approximately 1700cc per day (plus your WAM profit of around 550cc).
Housing Manufacture
As discussed in my last article, housing companies require employees and you cannot work in your own company. I believe this was a heavy handed attempt by the admins to break the hold Q7 weapon companies have on workers, with some success.
Q1 house companies can employ 1 worker, Q2 can employ 2, Q3 can employ 3, Q4 can employ 5 and Q5 can employ 10 workers. For the rest of this article we will go on the assumption that any company you have is fully staffed and (as above) the wage we will pay workers will be 388cc. Below is the amount of houses a fully staffed company can make per day with 200% bonuses:
Q1 = 0.4
Q2 = 0.4
Q3 = 0.3
Q4 = 0.25
Q5 = 0.3 (recurring)
As always, these numbers display the careful thought and planning the admins put into working out how the industry would work. Below is the approximate amount of House Raw Material (HRM) this would use per Q:
Q1 = 4
Q2 = 8
Q3 = 12
Q4 = 20
Q5 = 40
And finally, the production cost per house, including the wage cost, and HRM cost of 76.5 (current best market offer- actually below the cost of production):
Q1 =1735cc
Q2 =3470cc
Q3 =6901cc
Q4 =13880cc
Q5 =20820cc
At current market prices, this is the profit (per day) for each Q of housing company:
Q1 =24cc
Q2 =12cc
Q3 =120cc
Q4 = -195cc (loss)
Q5 = -107cc (loss)
So there you have it, eRepublik’s newest industry is loss making in Q4 and Q5and barely scrapes a profit elsewhere, and Q7 weapons remains the only truly profitable industry in the game. Of course there will be people who have workers employed at poor wages, or are using communes. In the former case, those workers should get new jobs, and in the latter case, they would be better off working in a Q7 weapon company, selling the weapons, and buying houses with the profits (see: opportunity cost article).
Conclusions
Some of you may have noticed I haven’t given analysis on aircraft weapon manufacture. I don’t feel that this industry even really exists at present, though it has been added to the game. From what I can tell prices of both aircraft weapons, and raw materials seem to be disconnected from production costs. Demand is currently way too low to actually make any sort of impact on the game. The admins need to rebalance both the usefulness of the weapons and their production formulae if they want to fix this.
As I expected, Q7 weapons remains the only truly worthwhile industry to own in the game. The problem is that the initial startup and running costs of a Q7 company run into the hundreds of thousands of currency, and unless you spend RL money this is not achievable for a new player. This means there is no obvious path to being a business owner in eRepublik. You either go in at the highest level, or you do not participate at all. This is something the game owners need to address, and I will discuss how they could do that in future articles.
Thank you for reading,
Iain
Bonus!
I contacted citizens who had holding companies in a number of major economies to ask them what work tax they paid per company in currency. Using the work tax formula I then worked out the apparent “mean wage over the past 30 days” for each of the countries concerned. I then compared this to the current top wage to find the difference. You can see this below:
This isn’t a perfect analysis as I don’t have an average (top) wage for the last 30 days. However it gives you an idea. Bearing in mind the top wage for most countries is around 400cc, this shows you how many people are being underpaid (roughly). Very high numbers suggest a lot of people working in communes (or bot farms!).
Translations: Please feel free to translate any article I write. If you PM me the link I will include it in the original article.
Thank you's
Firstly, thank you to everyone who endorsed my last article:
Bulletz4Breakfast
N0s3
Kravenn
Yogozord
Blabla.
Piasts22
Rodney Mckay
MaryamQ
Mr Woldy
Perilouspanther
Alcek
Paul Tyndale
Arrlo
Bogi
The Lone Cobra
El Speverino
Vettige Swa
Niemand
rainy sunday
l GOSHETO l
Perry Rhodan
Zzzingo
Certacito
Alphabethis
Thank you also to Osmol, Bosshawk, Bulletz4breakfast, gamepoint, Barovo, Garcil, SEP II, Mr. Indigo, PPandP, Wizardarg, Ectore, Makinatanri and Kami who helped provide work tax data for the bonus graph.
Comments
MOAR PLS
great!
You didn't really delve into the demand for housing.
Q1 should be quite high as any player that isn't a bot should buy one, Q2 and above is only for tanks/medal collectors.
You're right, this time I was only really writing about productivity and profitability but I'll go into demand in future articles. I'm actually learning about housing myself as it wasn't really a thing last time I was around.
Nice 🙂
Wow, you're back!
VERY NICE ARTICLE! ...n u can't emphasize space 2 much...SPACE, SPACE, SPACE!
amazing article man , let's get on the translation xD
There is a reason why Q5 food is popular - the game uses energy in blocks of 10 energy and so it makes sense to use the food that gives 10 or 20 energy. It can be cheaper to use lower level food but I've always found the "you can only recover 2 energy but you only have food that recovers 6 so you happy to waste the food" messages annoying. I suspect this is true of other established players. Additionally it is easy to look at your stores and know that one food = experience.
If people want to make money and is prepared to put off jam today to have a feast later, then people should out their products for sale at 2-3 market price and wait for some event which causes demand to go through the roof.
The problem with the assumption made with housing is it is bloody difficult to get workers who work more than a day at a time. Workers seem to work one day and then disappear the next...
Everything that divides by ten also divides by two... If you're willing to pay 50% more for something just because every few hundred energy you get an odd number... Well.
You miss the point a little bit.
If you can recover 10 energy and all you have is Q2 food then you will be using 12 energy worth of food for 10 energy (3 x 4 = 12).
If all you have is Q3 food then you will be using 12 energy worth of food in order to recover just 10 (2 x 6 = 12).
If all you have is Q4 food then you will be using 16 energy worth of food in order to recover just 10 (2 x 8 = 16).
The problem is that eRepublik recovers energy by using the smallest food type first. There would be times I would have the following stock:
4 x Q1
100 x Q4
and to recover 10 energy it would use the three Q1 and then ask if I want to waste a Q4 only recovering 2 energy. It would be so much easier if it used a Q4 and then used the Q1.
I appreach it might be cheaper but I was explaining to this comment:
"Q6 and Q7 food is almost 50% more expensive per energy than Q1, Q2 and Q3. However the food does sell at this price,"
I am explaining that some people (myself included on the occassions I might need to buy food) find buying Q5 food a lot less hassle than shopping between the different lower Q levels trying to minimise my spend. Is that less hassle worth paying a little extra? Sure and I suspect most Q5 food buyers have several 100k in their bank accounts so the cost is meh.
Q5 is fifty percent more expensive per energy. So using 2.5 q2 (for example) is still cheaper.
3 q2 = 1cc
1 q5 = 1.2cc
Quick maths!
Leading off what Mr Knee mentions....I'm one of those people who likes/needs to have a large stockpile of food available.
Knowing that prices shoot up in an event - I try buy when prices are low.
I therefore prefer filling my storage spaces with '100,000' Q5 food rather then '100,000' Q1 food. It may be 50% more expensive but its also 50% better considering weight to cost.
As your maths prove........Food isn't really an employee friendly sector so the food that is out there is WAM produced and therefore you have 100's if not 1,000's of people like me competing for the same limited resource for the same reasons.
It's five times better than Q1 but only 40% better than Q3.
but Q3 runs into the division problem that mr knee points out.
Rule of thumb is Q1 or Q5, everything else is useless.
In every full refill it only happens once, and one in literally hundreds of products does not counter 50% increase in cost per product. It might be psychologically annoying but in a 1000 health refill, losing 0.25cc of a q3 is nowhere near as bad as the 60cc extra cost.
Actually the highest quality food is used first. Then it uses the lower food when you your highest food cannot come equal exact to the health recovery. For that I always have some Q1 food available. It may be otherwise earlier, but now your highest quality food is used first.
So there is only need to buy higher quality food to save storage space.
To save your high quality food for emergency times, just put it on the market at 1000 cc. 😉
I preciate a good mathman.
great article
Thank you for this great article.
Excelent.
Endorsed
Keep it up.
You can always tell a serious businessman by the way he designs his products around his customers. Q1 ok if cheaper... if same price q2 is TWICE as good(+)... and so on. Sounds like SOMEONE has had a lot of BUYING experience.
But seriously, these very BASIC tips can be used as FOUNDATIONS by new players.
But, i also keep enough q1 in my belly 4 when my last hit gets messg: "u will be using q1... for 1u..." I'd rather waste 8,9 cents than 2.5-4 cc.
Nice article and plenty of useful stuff.
Don't agree with the idea of selling high Q companies, you're going to make a loss so unless you have a moratorium on purchasing gold, it's a pretty awful idea as it'll take years to make back the loss in profits from another sector - which point it's likely to have shifted requiring more loss to re-align.
Whilst your analysis of wages is interesting, I don't concur with the conclusion. A wage gap between mean average and top wage is going to be low in countries with less activity and where people are not so entrepreneurial as to accept smaller margins with a particular goal - such as dominating/setting a sale price by being a key supplier, etc. I happen to work at the best company in eUK, and my wage was increased just because, not part of a recruitment drive. This is only going to happen when the employer is (apart from being boss, thx Huey...) focused on strategy and not micro-managing hiring & firing, working their way through the pool of people they've yet to treat like morons (some peeps think this is a never-ending resource). Where you have a couple of people who think like this, you get eUK with relatively little difference in mean/high wage; Many people competing for the best workers will cause a market where regardless of total population, an employment shortage exists (such as employees who can work multiple times a day).
I'm aware my first point is very much conjecture, and welcome a worked through example showing how long it would take to be profitable switching out of Q7 food.
vote, excellent