TheOneOmega
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- Oct 5, 2008
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- Marie TheOne Omega
It's not uncommon within our community to hear it suggested that the presence of traders/resellers/middlemen/etc. lowers the prices of the items traded. For example, many claim that traders are at least partially responsible for the declining value of Vibrant Sweat. However, it's not obvious to me why this purported casual relation holds. It's certainly easy to imagine a scenario where a bunch of traders compete with each other to find buyers, but it's just as plausible to picture a bunch of traders competing with each other to find sellers, thus having the opposite effect on an item's price.
For example, consider an item with a price range $1 - $1.50, for which the market is comprised of an average of 600 producers and 600 consumers (100 producers willing to sell for no less than $1, 100 willing to sell for no less than $1.10, 100 for no less than $1.20, 100 for no less than $1.30, 100 for no less than $1.40, and 100 for no less than $1.50; and 100 consumers willing to buy for no more than $1.50, 100 for no more than $1.40, 100 for no more than $1.30, 100 for no more than $1.20, 100 for no more than $1.10, and 100 for no more than $1).
Adding to this market an average of 100 non-producing/non-consuming traders (who buy for no more than $1.20 and sell for no less than $1.30) will have the immediate impact of making it harder for the 300 ">= $1.30 producers" (producers willing to sell for no less than $1.30, $1.40, or $1.50) to sell but easier for the 300 "<= $1.20 producers" (producers willing to sell for no less than $1.20, $1.10, or $1) to sell, and harder for the 300 "<= $1.20 consumers" to buy but easier for the 300 ">= $1.30 consumers" to buy. This restructured liquidity would incentivize ">= $1.30 producers" to become "<= $1.20 producers," and "<= $1.20 consumers" to become ">= $1.30 consumers," but since these are zero-sum changes, it's not apparent that they should impact the item's value. All other factors being equal, why shouldn't the item's price range remain $1 - $1.50?
For example, consider an item with a price range $1 - $1.50, for which the market is comprised of an average of 600 producers and 600 consumers (100 producers willing to sell for no less than $1, 100 willing to sell for no less than $1.10, 100 for no less than $1.20, 100 for no less than $1.30, 100 for no less than $1.40, and 100 for no less than $1.50; and 100 consumers willing to buy for no more than $1.50, 100 for no more than $1.40, 100 for no more than $1.30, 100 for no more than $1.20, 100 for no more than $1.10, and 100 for no more than $1).
Adding to this market an average of 100 non-producing/non-consuming traders (who buy for no more than $1.20 and sell for no less than $1.30) will have the immediate impact of making it harder for the 300 ">= $1.30 producers" (producers willing to sell for no less than $1.30, $1.40, or $1.50) to sell but easier for the 300 "<= $1.20 producers" (producers willing to sell for no less than $1.20, $1.10, or $1) to sell, and harder for the 300 "<= $1.20 consumers" to buy but easier for the 300 ">= $1.30 consumers" to buy. This restructured liquidity would incentivize ">= $1.30 producers" to become "<= $1.20 producers," and "<= $1.20 consumers" to become ">= $1.30 consumers," but since these are zero-sum changes, it's not apparent that they should impact the item's value. All other factors being equal, why shouldn't the item's price range remain $1 - $1.50?