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Re: HAC Price Elasticity of Demand

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Shinnen	Posted - 2006.01.30 16:02:00 - [1] It seems that since the price increase of these ships, taking for example the Deimos, pre RMR the price of this ship could reach as low as 85m ISK, now a quick sell on the market can rack up an insanely high price of 125+ ISK. Demand since RMR has gone through the roof, a cerberus from big-sales.net now has a production queue of 189 units a huge amount with a waiting list of 140+ days. The price of the cerberus has since decreased, as would be expected with lower profit margins ( see: component BPs released ). Incidentally there was demand for these products before these BPs were released, and thus before the price decrease. This raises the question on the elasticity of there products, from this it seems that the products are price inelastic. What does everyone else think? --- INFOD
350125GO	Posted - 2006.01.30 18:22:00 - [2] Well it's a simple case of supply and demand. Supply is low (either naturally or artificiallEVE Online \| EVE Insider \| Forums
350125GO	Posted - 2006.01.30 18:22:00 - [3] Well it's a simple case of supply and demand. Supply is low (either naturally or artificially), yet demand does not wane, ergo high prices. Few high school students look upon the language which they speak and write as an art. Yet it is, or ought to be, the noblest of all the arts, looked upon with respect, even with reverence, and used al
Harisdrop	Posted - 2006.01.30 20:19:00 - [4] Originally by: 350125GO Well it's a simple case of supply and demand. Supply is low (either naturally or artificially), yet demand does not wane, ergo high prices. This is incorrect. The reason prices are high is not the BPO count or the cost of goods. Its the cost of time people could be doing other things. Ship builds are getting harder and harder. You take into consideration of the batch process is massive. You cant make 5 and sell each as its finished. You now have to spend your time on more specfic functions. There are plenty of players that could be building hacs but choose to do otherthings. You can not buy advance components at a reasonable price soo you make them yourself. Prices for tech II items will not go down ever, they will go up as things that make you more isk come in game. -------------------------- I have big balls of Plasma coming out of my guns.
Ghey Iislandur	Posted - 2006.01.30 20:36:00 - [5] Funny, I don't find that HAC prices are too high. And no, I don't have a BPO. I have however been spanked by a HAC in combat on at least one occassion. Considering their resistances, they are quite powerful for the isk you spend. As far as an approximate 50% profit on each. Tbh, I don't know if that's right or not. But if it is I don't think it's outlandish considering the time and effort required to build them. You would be quite suprised to know that there are some T1 items sold where the % profit is much higher than 50%. I know of a couple of items that yield a 300% profit. You can't make the total amount of isk as quickly as you would by having a HAC, but then again, you have few of the hassles and headaches trying to arrange T2 production and dealing with a backlog of orders from complaining clients. Industrial characters are in this to make a buck. They really aren't interested in making T2 affordable for everyone and frankly, why should they be? ______________________________________________ Won't you give to the Minmatar Orphans of War Charities? With your generous donation of ore or isk, we can reunite a Minmatar slave with his family.
Kyle Caldrel	Posted - 2006.01.30 22:25:00 - [6] its because people are willing to pay for them, if you cant afford them dont fly them, simple as. *******************************************************
Shinnen	Posted - 2006.01.30 22:47:00 - [7] Originally by: 350125GO Well it's a simple case of supply and demand. Supply is low (either naturally or artificially), yet demand does not wane, ergo high prices. Yes that process is called Price elasticity. The HACs seem to be price inelastic (demand not affected by high prices) Some seemed to be straying off topic, so I amended my 1st post Is it possible the average eve player is getting richer too and inflation is playing its part, or are they income elastic? --- INFOD
Shinnen	Posted - 2006.01.30 22:52:00 - [8] Originally by: Harisdrop You now have to spend your time on more specfic functions. There are plenty of players that could be building hacs but choose to do otherthings. You can not buy advance components at a reasonable price soo you make them yourself. Prices for tech II items will not go down ever, they will go up as things that make you more isk come in game. You are saying they are income elastic, another possibility. Also, long production time _does not_ generally account for high prices. The cost of components would. The opportunity cost as you say is that the producers could be doing other things, missions parhaps, something that has to be taken into account. Yet both of those factors precipitate the large waiting list - and parhaps in turn the seemingly increasing demand (longer to make product with same number of sales = less stock = more waiting list) I am theorising that neither of those factors would directly influence prices. --- INFOD
Vily	Posted - 2006.01.31 16:18:00 - [9] the thing with Heavy Assault ships is not that demand is fixed, its that demand is INCREASING, as more players with the appropriate skills are able to fly HAC's and older players do not un-learn their abilities, Demand is gradually increasing. Since SUPPLY is FIXED, and cannot be increased, this is why you see the continual growth of HAC prices. Some producers have implemented price controls, in the interest of the consumer, but the price WILL continue to increase.
Shinnen	Posted - 2006.01.31 17:59:00 - [10] yes, good point, the number of players comming into the game <> the number of players leaving. Player turnover is decreasing, something I had not considered. CCP have obviously tried to regulate these BPO owners from becomming monopolists, or from preventing the possibility of these BPOs changing hands forever, with very few being built. --- INFOD

HUGO DRAX	Posted - 2006.01.31 21:03:00 - [11] How soon before deimos sell for 400million isk each? Dont just complain, do something. Channel macrointel meet with likeminded folks, spottings,intel
Vily	Posted - 2006.01.31 21:39:00 - [12] at their current rate of growth, which is roughly about 5-10% increase per month, it wont be anytime soon for 400mil, however 200mil could easily be the norm by mid-summer
Shinnen	Posted - 2006.01.31 21:45:00 - [13] it really depends, If deimoses arent being sold for a few months and then they start to reappear at 400m then if another producer with a BPO starts to build then and utilise a predator pricing strategy by selling them at 10, 20 even 50% above production cost then the guy who was selling for 400m has been screwed over. It's possible if you buy all the BPOs in game for a while you can sell them at 300-400m until more are released into the game. It's risky playing with the economy like this, possible, yet if you don't watch out you can get severly screwed over. With possible consequences being that you lose a LOT of money, as well as time. --- INFOD
Shinnen	Posted - 2006.01.31 21:46:00 - [14] Originally by: Vily at their current rate of growth, which is roughly about 5-10% increase per month, it wont be anytime soon for 400mil, however 200mil could easily be the norm by mid-summer interesting, is this growth linear, because I very much doubt that --- INFOD
Vily	Posted - 2006.02.01 00:08:00 - [15] Originally by: Shinnen Originally by: Vily at their current rate of growth, which is roughly about 5-10% increase per month, it wont be anytime soon for 400mil, however 200mil could easily be the norm by mid-summer interesting, is this growth linear, because I very much doubt that the gorwth in price is a function of growth in demand which is a function of the growth in players. you would be correct that it is not linear, although it roughly appears to be. For general purposes the growth in price can be described as a linear function of growth in player base.
Dimitri Chandler	Posted - 2006.02.01 09:06:00 - [16] Edited by: Dimitri Chandler on 01/02/2006 09:07:35 The reason HACs, especially, are so inelastic is because of their long production time, high demand and supply oligopoly. Given the fact that it is an almost impossible supply market to get into, this situation will not change without significant intervention by CCP, or until a substitute good, eg Recon Cruisers / Tier 3 battleships / etc etc, replaces them as the luxury pvp ship of choice. I made all that up, based on my Masters degree learnings in Housing Finance. If it's complete tosh, blame my lecturers. PS can someone knock up a supply / demand curve graph that shows the potential equilibrium point if 20 new bpos were seeded? - there ya go, more economic gibberish --------------------------------------------------
Shinnen	Posted - 2006.02.01 17:46:00 - [17] A semi-viable substitute would be tier 2 BC i hope. Err.. as I tried to explain throughout the thread HACs are so income and price elastic, not inelastic. Yeh the market for producing is indeed very hard to tap into. --- INFOD
In'Nala	Posted - 2006.02.01 20:17:00 - [18] Originally by: Dimitri Chandler I made all that up, based on my Masters degree learnings in Housing Finance. If it's complete tosh, blame my lecturers. PS can someone knock up a supply / demand curve graph that shows the potential equilibrium point if 20 new bpos were seeded? - there ya go, more economic gibberish It is tosh. Price elasticity is a function of demand and nothing else. It is the slope of the demand curve at the point at which you are looking. And no, I can't really do any econometric analysis of the HAC market because I would undoubtedly end up with a really poor curve fit due to lack of data. I suspect important variables would include the total quantity of ISK available in game, number of active non-trial accounts, and perhaps the lagged number of HACs lost. Obviously I don't have access to any of that data.
Saatar Fora	Posted - 2006.02.01 20:20:00 - [19] I beleive the demand for all three of the ships that might reasonably be substitutes for eachother (t2 battlecruisers, HACs, and recon ships) is high enough that we will not see any drop in price on the HAC front. We may, however, see the price increases for HACs slow down as more people finish the skills and gain access to these other ships, balancing out the increasing demand which has resulted from the increasing player base. Most likely recon will drop somewhere around HAC level (perhaps slightly below) and command will drop somewhere a good ways above HAC level, but I doubt you'll see a return to the days of yore when even the higher end HACs were under 100 mil. ------- "wheat barley kill anything? are you oats of your mind? I corn belive you just said that, rice I'm off to bed now!" - Draximus Cane
In'Nala	Posted - 2006.02.01 20:32:00 - [20] Originally by: Shinnen Err.. as I tried to explain throughout the thread HACs are so income and price elastic, not inelastic. You were correct the first time. Price inelasticity means a steep slope of the demand curve at that point. Thus, with a unit increase of price there is less than a unit increase in quantity demanded. Demand drops little as price increases. A further complication of the market is the fact that there is a hard limit to the quantity that can be supplied. At that point the supply curve becomes perfectly vertical. The price at that point, then, is 100% determined by demand. The price of the HAC is limited only by the willingness of the consumer to pay.

Dimitri Chandler	Posted - 2006.02.01 20:43:00 - [21] please write my essay --------------------------------------------------
Tar Ecthelion	Posted - 2006.02.02 22:46:00 - [22] Sacrilege is up to around 110 - 120 mil in Tash Region ... Was only 75 mil last time I looked Price going up because of rarity of zealots maybe? ..... de gustibus non est disputandem
Maric	Posted - 2006.02.03 08:37:00 - [23] Originally by: Tar Ecthelion Sacrilege is up to around 110 - 120 mil in Tash Region ... Was only 75 mil last time I looked Price going up because of rarity of zealots maybe? No, becouse of GMs intention to boost Sacrilege very soon. Matter of days. There are one more thing should be considered when talking about T2 item prices. GMs are avare of T2 monopoly problem. We shall see game rules changing in Kali. Most likely R&D Agents will give BPCs only but much more often. Also very posible that current T2 BPOs will be turn into max run BPCs (my speculation, no GM said that). It will make more offer on market and price should drop. Kali should be releised in Summer this year.
Wyke Mossari	Posted - 2006.02.04 13:19:00 - [24] Originally by: Shinnen The HACs seem to be price inelastic (demand not affected by high prices) ... Is it possible the average eve player is getting richer too and inflation is playing its part, or are they income elastic? I don't trade HAC's so my comments are from inference based on your observations. They appear to be in-elastic, they are step increase in performance and a shiny bauble, essentially a must have when you reach a certain lvl. The have other constraints to us beyond price which limits size of the market segment. Since you know what price in-elastic means, I won't need say what your response should be :)
Jolan Kalduli	Posted - 2006.02.05 09:21:00 - [25] They could also lower the BP copy time for T2 items. Right now it takes longer to make a copy than produce an item.
Poltax Dodjor	Posted - 2006.02.05 13:35:00 - [26] Edited by: Poltax Dodjor on 05/02/2006 13:36:19 Edited by: Poltax Dodjor on 05/02/2006 13:35:50 I stupidly lost a Zealot a few days ago.. I flew all over empire trying to find a one on the market from Placid, to Kador and Tash-Murkon and up to The Citadel and Lonetrek... I found 4. In Jita. At 220million isk each! I settles for a sacrilege that I picked up in Oursulaert for about 100mil. PD.
Malazanch	Posted - 2006.02.05 22:02:00 - [27] Originally by: Vily Originally by: Shinnen Originally by: Vily at their current rate of growth, which is roughly about 5-10% increase per month, it wont be anytime soon for 400mil, however 200mil could easily be the norm by mid-summer interesting, is this growth linear, because I very much doubt that the gorwth in price is a function of growth in demand which is a function of the growth in players. you would be correct that it is not linear, although it roughly appears to be. For general purposes the growth in price can be described as a linear function of growth in player base. Demand is tied more to the growth in player skills to be able to use HACS, not growth of general player base. Brute #'s of population do not figure into the function, only the market segment in which there is demand. Thus you can also toss out dedicated miners, producers, Macro Miners, etc. Any segment besides the rather invested PvP player is not a part of the demand curve.
Al Thorr	Posted - 2006.02.06 15:37:00 - [28] Originally by: Malazanch Demand is tied more to the growth in player skills to be able to use HACS, not growth of general player base. Brute #'s of population do not figure into the function, only the market segment in which there is demand. Thus you can also toss out dedicated miners, producers, Macro Miners, etc. Any segment besides the rather invested PvP player is not a part of the demand curve.[/quote Many Many Hacs are used in PvE not PVP .(Ive replaced more Hacs lost by customers from PvE encounters from mission running to npc ratting ). As to brute numbers of the general population not affecting demand surely, given that there is a %age who wish to fly Hacs. and the general population increases that given %age will produce a greater strain on the demand curve. Regards Al Thorr "You cant polish a turd" - The new rendered font is living proof.
HUGO DRAX	Posted - 2006.02.07 04:26:00 - [29] I would not be surprised if HACs hit 250million in 6 months. 100K subscribers according to CCP. Dont just complain, do something. Channel macrointel meet with likeminded folks, spottings,intel
PhamNuwen	Posted - 2006.02.07 17:17:00 - [30] - the production interface is crappy und not really usefull; - the way of production costs very much more time; - for effective production I have to be a slave of a wrong design: I have to be on the right location at a certain day. Sorry, it is a game... not my life. Before RMR a could run my production continously. Now 30...60% with very much effort. __ Beat the designer: let him produce in one region ammo for a corp and 50 jmps away his HACs Cut his salary each time if a production is stopped. ---



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