eRepublik Market Structures
Day 522, 13:05
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Published in Canada 
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by
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by AugustusV
Written by: Alexander Rearden, Canadian Minister of Finance
Ever wonder what market structures are? How firms enter and leave the market? And its effect on prices, and economies as a whole? Hopefully this article will give you a clearer understanding on the different market structures in eRepublik.
There are 4 model market structures used by economists: Monopolies, Perfect Competition (the two ideals), monopolistic competition and oligopolies (mixed ideals). See the image below:
Two of these market structures are most prominent in eRepublik due to its built in free-market coding. The most prominent is Perfect Competition, ideally a market will meet these 4 criteria:
1. Many buyers/Many Sellers
The Canadian economy has approximately 1500 consumers (by my estimate) though this hardly would be "many" by today's real-world standards there is no evidence to suggest that it doesn't satisfy this specific criteria. It also stipulates that things sell for a price and not directed by the state or under coercion. The game enforces this criteria by mandating a market economy, where a firm produces a good and must sell it for a price in a market setting.
2. Homogeneous Products
Homogeneous products, refers to products of a particular quality level to be exactly the same, so for the sake of looking at markets from this theory each quality is considered its own market as opposed to just one big market. You can't tell the difference between a Q1 house made in Canada and a Q1 house made in Spain and exported to Canada, which is a big difference from the real world and changes the way we should view imports.
3. Low-Entry/Exit Barriers
Ideally there is no barrier to entering or exiting the market, however, in eRepublik there is a barrier of 20 gold, plus any subsequent upgrade fees or export licenses. Once this criteria is met, any person can enter the market and the government can do absolutely nothing about it. eRepublik economies satisfy this requirement of a low entrance barrier in the Q1-Q2 range, however in the Q3+ market this changes due to the 50gold or higher upgrade cost. As a result, the market is not entirely perfectly competitive which is one of a few reason why supply does not always surpass demand and prices are considered too high.
4. Perfect Information
The perfect information clause is satisfied for consumers but not for producers. A company owner will find it very difficult if nearly impossible to keep track of daily and per person productivity and therefore is near perfect. Consumers however, have access to perfect information; they can see all firms selling goods and at what price they are selling it. Though they can't tell the nationality of the company owner (which plays a part in some consumers purchasing decisions) this criterion is still satisfied.
In perfectly competitive markets the producer is the price taker and the consumer determines the price by the amount it purchases at each price and as a result prices are overall lower in a perfectly competitive market. Since all goods are the same, anyone selling a good the lowest will sell the most as a result all firms will gravitate towards this equilibrium price (read the supply and demand lecture for more information on equilibrium price). Business do NOT have any real say in the price they sell their good for, that power rests in the consumer this is a critical point to understand when looking at the cost of goods on the market.
There is another market structure prevalent in the high Q sectors of the economy, oligopolies, in oligopolies there are a few producers producing identical goods, with significant barriers to entry and as a result they make actions while anticipating the actions of the other firms on the market.
In eCanada the Q3, Q4 and Q5 companies are few and far between and actively watch one another and occasionally enter price wars to force the other out of business. This is excellent for the consumer, there have also been attempts to raise the price of a certain good but cooperation between firms is very difficult and typically fails due to some important portions of game theory.
Oligopolies are being phased out in eCanada right now as import taxes are lower and more firms are selling goods on the market and cooperation between firms becomes impossible, these markets are nearing perfectly competitive.
Monopolies are virtually impossible in eRepublik, though the eCanadian government does have an unforced monopoly on high Q hospitals and defense systems which are very capital intensive.
Monopolistic competitive markets can't exist in eRepublik because it is impossible to differentiate products which is central a monopolistic competitive market structures.
YOUR AD HERE!
- If you wish to advertise in the eWorld Economy Magazine please contact Octavian_F
- You can provide both pictures and text, and our marketing team can even help you design a custom banner to display.
- We can advertise companies, organizations, and even run political campaign ads.
- All fees are negotiated
Ever wonder what market structures are? How firms enter and leave the market? And its effect on prices, and economies as a whole? Hopefully this article will give you a clearer understanding on the different market structures in eRepublik.
There are 4 model market structures used by economists: Monopolies, Perfect Competition (the two ideals), monopolistic competition and oligopolies (mixed ideals). See the image below:
Two of these market structures are most prominent in eRepublik due to its built in free-market coding. The most prominent is Perfect Competition, ideally a market will meet these 4 criteria:
1. Many buyers/Many Sellers
The Canadian economy has approximately 1500 consumers (by my estimate) though this hardly would be "many" by today's real-world standards there is no evidence to suggest that it doesn't satisfy this specific criteria. It also stipulates that things sell for a price and not directed by the state or under coercion. The game enforces this criteria by mandating a market economy, where a firm produces a good and must sell it for a price in a market setting.
2. Homogeneous Products
Homogeneous products, refers to products of a particular quality level to be exactly the same, so for the sake of looking at markets from this theory each quality is considered its own market as opposed to just one big market. You can't tell the difference between a Q1 house made in Canada and a Q1 house made in Spain and exported to Canada, which is a big difference from the real world and changes the way we should view imports.
3. Low-Entry/Exit Barriers
Ideally there is no barrier to entering or exiting the market, however, in eRepublik there is a barrier of 20 gold, plus any subsequent upgrade fees or export licenses. Once this criteria is met, any person can enter the market and the government can do absolutely nothing about it. eRepublik economies satisfy this requirement of a low entrance barrier in the Q1-Q2 range, however in the Q3+ market this changes due to the 50gold or higher upgrade cost. As a result, the market is not entirely perfectly competitive which is one of a few reason why supply does not always surpass demand and prices are considered too high.
4. Perfect Information
The perfect information clause is satisfied for consumers but not for producers. A company owner will find it very difficult if nearly impossible to keep track of daily and per person productivity and therefore is near perfect. Consumers however, have access to perfect information; they can see all firms selling goods and at what price they are selling it. Though they can't tell the nationality of the company owner (which plays a part in some consumers purchasing decisions) this criterion is still satisfied.
In perfectly competitive markets the producer is the price taker and the consumer determines the price by the amount it purchases at each price and as a result prices are overall lower in a perfectly competitive market. Since all goods are the same, anyone selling a good the lowest will sell the most as a result all firms will gravitate towards this equilibrium price (read the supply and demand lecture for more information on equilibrium price). Business do NOT have any real say in the price they sell their good for, that power rests in the consumer this is a critical point to understand when looking at the cost of goods on the market.
There is another market structure prevalent in the high Q sectors of the economy, oligopolies, in oligopolies there are a few producers producing identical goods, with significant barriers to entry and as a result they make actions while anticipating the actions of the other firms on the market.
In eCanada the Q3, Q4 and Q5 companies are few and far between and actively watch one another and occasionally enter price wars to force the other out of business. This is excellent for the consumer, there have also been attempts to raise the price of a certain good but cooperation between firms is very difficult and typically fails due to some important portions of game theory.
Oligopolies are being phased out in eCanada right now as import taxes are lower and more firms are selling goods on the market and cooperation between firms becomes impossible, these markets are nearing perfectly competitive.
Monopolies are virtually impossible in eRepublik, though the eCanadian government does have an unforced monopoly on high Q hospitals and defense systems which are very capital intensive.
Monopolistic competitive markets can't exist in eRepublik because it is impossible to differentiate products which is central a monopolistic competitive market structures.
YOUR AD HERE!
- If you wish to advertise in the eWorld Economy Magazine please contact Octavian_F
- You can provide both pictures and text, and our marketing team can even help you design a custom banner to display.
- We can advertise companies, organizations, and even run political campaign ads.
- All fees are negotiated
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Comments
Good Article 🙂
Voted, did you just finish micro econ?
@Unthak: Thanks for voting, but what is micro econ?
@armour144: I'm glad u liked the article, this is the first article published by a different journalist, I hope to publish many such articles in the future. 🙂
Unthak is talking about microeconomics
I think you forget a small thing, in a perfect competition, it is not suppose to have any selling tax 😉 (it was in one of my last term curse at university)
Very good article !!
I wrote it at a time when our income/VAT's were super low anyway so they hardly mattered.
I don't think that eRepublik's markets are, as the author says "perfect" because of any coding or heroic intelligence.
They're just "perfect" - which I suppose can be contextualized to mean "not complicated" - because they are so ultra simplistic.
No derivatives, ETFs, short selling, mortgages, company shares (yes, I too have heard MANY times that an eStock Market is in the works - but I'll believe it when I see it crash) or other financial instruments.
There is not even a central bank. I have had many debates with players, and their "organizations" which they claim are banks - but CANNOT be because of the absence of basic market principles.
Namely - debt.
Anyone here in debt?
Exactly. Can't happen. Without debt there is no credit. Without credit, there can only be a definite barter system that only includes the producer and the consumer - no middlemen. No shipping companies. No energy crises. No credit default swaps. Getting the picture?
Sure, some of you might say, "Yeah, but we don't want market crashes."
I would say, "Is there anything more exhilarating than crashing a market?" What about getting out before the collapse?
Still I go to work, and I eat my loaf of bread each day. I work out. Still a buck private. I plod along. Would be nice if battles were 1st person shooter engines such as the Battlefield (1942, Vietnam, 2042, etc) Series.
Until then, I'll just keep on truckin'.
I didn't mean perfect as a moral adjective but rather a situation where everything works in a highly predictable manner. Sort of like the magical physics land one learns about in physics, the one where you have frictionless mass less pullies, mass less string etc.
It provides a benchmark for forecasting.
And we do have a central bank, it simply doesn't offer loans it regulates the money market and reduces volatility.
I think adding the capacity of banks, debt, would be an excellent addition to the game it would add a whole new level to the game that would make superior to any of its competitors.
The problem now is contractual enforcement, the contracts that are truly enforced are those coded in the game.
Good article. I voted.
It seems that all products, in all countries have reached a point where there is almost no margin remaining. What seems to separate the profitable business from the unprofitable business is the "tricks" used to avoid income tax, import barriers/taxes, and VAT taxes.
The economic model in this game is interesting. The concept of distance (thus transportation costs) is missing. Therefore I can live in B.C., work in Ontario, and buy food Alberta - with no consideration for proximity. Maybe food produced in B.C. should have no escalator for B.C. residents, while the same food offered in Ontario might cost a few cents more (transportation costs). But maybe this just adds unnecessary complexity.
Well this is just V1, who knows, the admins may add some more complexity to the game as it gains popularity.