The Economist ~ A very brief note on inflation
Spite313
Dear friends,
I just wanted to drop a very brief note in about inflation as I’ve seen quite a few comments/articles/posts/mails about it. Inflation is described as a sustained increase in the cost of goods and services over a period of time. In the case of eRepublik, you will all have noticed that Q7 tanks and houses of all qualities have risen in costs over the past 6 months. In addition, food and raw materials have also risen in cost (overall) though at a less steep rate.
In order to understand how inflation works, you have to first of all accept that all parts of the economy are linked. This is because houses and Q7 weapons both use work tickets in order to function, and work tickets are by their nature a finite resource. This means that however they are allocated, if demand for work tickets exceeds supply, then the value of a work ticket will rise as different people compete over the resource. This means that wages will go up so long as the demand for houses and Q7 weapons, and therefore the demand for workers, exceeds the available supply.
In the real world this is sometimes described as built-in inflation, as workers constantly up their wages and the increased cost is then passed on to consumers. In the real world this usually only affects a small part of the economy at once and so it can be effectively countered in various ways. In eRepublik, the entire workforce is effectively employed by the same industry and shares access to a common job market. Therefore the effect of built-in inflation is much stronger.
This type of inflation has the effect of creating a ‘death spiral’ of inflation, where wages constantly increase and as a result the price of products increase with it. In the real world there are two rather draconian methods used to control this: price controls and wage controls. This is where either a regulator or the government itself acts to prevent price increases or wage increases above a certain level (often both). Neither of these options is available to eRepublik governments.
The secondary impact of this in eRepublik is that all other industries are also impacted, albeit in a more minor way. This is because work tax is based on average wages, the direct cost of producing raw materials and food also increases.
Anticipating comments, most of you who own either raw materials or weapons companies will have noticed a recent decrease in weapon raw material (WRM) costs. This is likely due to a slight slump in demand and also a gradual increase in supply. Normally the market rests the price of goods as being close to the cost of production. So for example, at current wages a Q7 weapon costs around 94cc to produce with workers, and if you check the markets they sell for around 95-100cc per unit (pre-tax). However WRM costs around 2-10cc to make (depending on local work tax, bonuses, etc etc) and until recently were sold for 18-20cc.
That I expect is because of the new year event which saw a huge increase in demand for weapons, combined with the end of “the Truce”, which meant many more people were buying WRM to run factories to take advantage of increased profit margins in Q7. For a while, it was very profitable to open WRM factories (potentially 80cc per day with a single 35g Q5 WRM factory for example) and so many people opened factories. In addition we have also seen a decrease in demand due to the rather disappointing Valentines day event and the normalisation of the ongoing conflict. In other words, supply has increased and demand has decreased, meaning raw materials is trending downward towards it’s natural equilibrium point. This has caused a slight decrease in weapons prices as owners pass this saving onto customers. However this will likely go up again in the near future as wages increase further.
In the medium to long term I think only a formula change will break this spiral. However there are some possibilities which could be considere
😛
1. A baby boom. An influx of cheap young labour could temporarily add supply to the job market without significantly increasing demand (most fighting involves only a small amount of old very strong accounts). Given the state of the game this seems unlikely.
2. A major cease fire. A real drop in demand for weapons could in theory curtail inflation, at least temporarily. However the almost constant training wars and the rush for ‘legend’ ranks means this would only have a small effect.
Beyond these, the only real way to change is to shift the way work tickets are generated. There are several ways to do this:
1. Allow work tickets to be traded
2. Allow houses to generate additional work tickets
3. Get rid of the 1 hour cooldown on working overtime (this means people with fewer logins could just use all their tickets at once)
4. Change productivity formulas for tanks and houses so they use less work tickets
5. Change the entire economy module so it more effectively models a real economy (my preferred option, one I’ve written about a lot but also the least likely to occur).
I hope this clarifies a few points in any case. If you have any questions, stick them in the comments.
Iain
Comments
very rare and very good articles 😃
vote + endors... now time to read 😃
Good article, some things are more deep, but this is a perfect article explanation
Price of q7 is "managed" to make TP CC profit from high Legends almost 0
It's the opposite way, Legends made the cost of weapons higher 😛
FF or weekly damage of Legends is constant , not less of higher , You need every week same amounth of tanks . But you make every week more TP ( more cc from TP )
Admins realise that about year ago and step by step correect prices of q7 weps
A very informative as always.
The root cause of inflation is currency generated from TP medals. As players gain strength and legendary ranks, their maxhit increases and they gain more and more TP medals. Since the increase of currency in circulation isn't countered by an increase of goods/work tickets/raw materials, their prices rise.
If this were the case, then all prices would increase proportionally. It does have some impact but is not the root cause of the inflationary spiral.
They don't increase proportionally because of WaM. Houses and air weapons require workers, which are optional in the other industries.
Please write more often.
You have no idea the pleasure we have reading your articles.
Voted, endorsed and subscribed (long ago)
You must have a very boring life if reading one of these articles is considered a source of pleasure 😃
Not your business.
I always read ur articles
An excellent piece on economics, keep em coming.
one sugestion: admin fix the clone's problem and we have a real economy, now we have 10-20k of clones that work and some eaven fight on scripts 🙁
imagine we have 1 month with no clone work... prices will change, economy will be very diferent.
The rate at which the average wage is rising seems to be increasing - wages of 10k soon?
Three major problems in eRepublik
1. Multiaccounts
2. Broken economy
3. Old vs new accs in terms of battle contribution
O7
Very good article it´s always a pleasure to read yor paper
V S E 😎7
Yeah, agree with all that.
v + c
o7
Hail Phoenix!
Fix economy!
o7
2 workers for 2 cc total
that's my formula 😃
I think that inflaction, expecially of q7 weps, isn't wrong. When I started the game (3 years ago) nobody was buying q1-6 weps because q7 were really cheap, it took like 8 months to build all training centers beacuse to gain 1 gold you had to work like 5 days, now 1 work = 2.5 gold, there were no need to hire employees because you were on loss with everything.
Now almost all goods are valuable to use and to produce, it makes sense to spend over 1000 gold to build or buy q7 companies, tanks are tanking not for free anymore (people sell packs every month to buy houses and weapons) bonuses beacame very important for every country, not like years ago, and I can go on with other aspects..
All these things were be possible for rate between demand and offer, and for inflaction.
szpem
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Hello I'm Ian Keers.
In 2007 I failed to be elected in the Hull council elections so instead invested 12 years of my life in an abandoned browser game which is being kept on life support because Eastern Europeans are still spending enough money to keep the servers on.
I will now expend my vast expertise in this game to give feedback to the development team that doesn't exist to fix a problem nobody gives a shit about.
Don't be too hard on poor old Iain - he *did* get 329 members of the electorate to vote for him.....
Fuck off CC, you shouldn't encourage the mentally ill. What were you doing when you were 19? Playing with train sets probably.
At the age of 19 I was learning the social graces - possibly something that you missed out on old chap.
It is sad that someone with your intellect lacks the ability just to be pleasant with others....
Hugs (as always)
Cc
By social graces you mean stalking someone's RL and posting about it online? Cos it doesn't seem like you learned that at all.