The Nightbird
Elite
- Joined
- Feb 8, 2006
- Posts
- 3,841
- Location
- Chicago, USA
- Society
- Project-Asylum Corp.
- Avatar Name
- Revan The Nightbird Evenstar
Before you read further, please answer the poll question first!
I created this thread to talk about EU using an economic framework. If this interests you, or you have nothing better to read, please continue and thanks for reading.
What motivated this thread is hearing frequent complaints from experienced players, such as: player A has to deposit too much per year to play, yet player B plays a lot but loses very little or even profits, player C opened a new account even though he shouldn't have, and finds that it is easier to profit with a young avatar, player D takes a break from EU, and finds loot is better upon returning, player E is a relatively new player, and feels as the months pass loot is slowly decreasing.
What this amounts to in my eyes is dissatisfaction over accounts seemingly being charged different amounts to play. Before I continue, please let me describe what Dynamic Pricing is using a simple example.
Scenario:
Ann is a baker, and just discovered a new recipe for a cookie that she knows is both unique and delicious, so she bakes 10 big cookies and some free samples, sets up a stand, and tries to sell them in one hour to get customer feedback. The cookies cost her 1$ each to make, and she wants to sell them at at least 2$ each since that is the price for similar sized cookies. Still, she thinks she can charge more because she thinks customers will love hers and can't buy them from anywhere else.
Over the course of the hour, 10 people who taste the free sample will be interested in buying a cookie. Of these 10, 3 people think that the cookie is good, but nothing special and are only willing to pay 2$. 5 think that it is very good and are willing to pay 3$. 2 think it is the best cookie they have ever tasted, and are willing to pay 5$.
How shall Ann price these cookies to make the most money when she doesn't know exactly how much each person is willing to pay?
Method 1: She puts up a price tag, and sets the same price for everyone. If she charges 2$, she will make 10$ from selling 10 cookies. If she charges 3$, she will make 11$ from selling 7 cookies. If she charges 4$, she will lose 2$.
Method 2: She doesn't put up a price, and when an interested customer asks for the price, she says 2$ if they describe the free sample as good, and 3$ if they say it is very good or better. She sells all 10 cookies and makes 17$.
As you can see, if Ann can make educated guesses based on information about the customer, in this case the customer's reaction, she can price accordingly to make more money. This is Dynamic Pricing. You see it done by car salesmen, real estate agents, insurances brokers, for airline tickets, even on Amazon.com, where people can pay differently for the same item.
Wait! I hope some of you will think, why not price the cookies exactly at what the customer is willing to pay? Then she could make 21$! The premise of the scenario is that Ann doesn't know the exact price each customer is willing to pay so she has to guess. She can't exactly ask each customer what they'd be willing to pay and then charge them that can she?
In Ann's example, 'method 2' splits the customers into 2 segments. In Microsegmentation (or First Degree Price Discrimination), 'method 2' is taken to the extreme and customers are charged on an individual basis due to nearly perfect information on their behavior. Instead of making another example, I will just use EU, which we are all familiar with.
In EU:
Taking the example from above further, it is clear that Dynamic Pricing is more profitable. Additionally, the higher the quality of information, the more precise the pricing will be. However, how does MA obtain such exacting information about each of us? The answer is: Why not from everything we do in EU?
Every player that has participated in the 3 main professions know, there are good and bad periods, and the general understanding is that it is a part of the Dynamic loot system. What it tells MA is, how poor of loot will we endure, how much are we willing to pay for the fun, before we stop. They obviously want to charge us as much as possible, since they are for profit.
For the purpose of this example, let's say good periods = 115% of tt spent returned as loot (since MA only deals in tt), medium periods = 85% of tt spent returned, and bad periods = 55% of tt returned.
For the players that play the same amount during good, medium, and bad periods, why not dynamically increase their medium and bad periods until their play time starts decreasing? If they purchase the same amount of gaming hours whether you charge 1$ or 5$ per hour, as a business, you charge 5$/hr. In fact, making them play less would be good for them too! Better health and social life!
For the players that play the most during good periods, less during medium periods, and stop whenever they hit a bad period, it might serve MA's interests to increase medium periods and remove the bad periods. If this significantly increases play time, MA makes more money.
Basically, if loot is reduced but play time doesn't reduce, then keep the change and lower loot more. If loot is increased and play time increases enough, then keep the change and increase loot some more (to a certain max of course, and I guess there has to be a minimum.. somewhere).
MA's ability to dynamically change loot distribution to see its effects on player participation, and collect information about the player, is virtually limitless. This gives them the ability to maximum their profit, on a player by player basis.
Dynamic!
I created this thread to talk about EU using an economic framework. If this interests you, or you have nothing better to read, please continue and thanks for reading.
What motivated this thread is hearing frequent complaints from experienced players, such as: player A has to deposit too much per year to play, yet player B plays a lot but loses very little or even profits, player C opened a new account even though he shouldn't have, and finds that it is easier to profit with a young avatar, player D takes a break from EU, and finds loot is better upon returning, player E is a relatively new player, and feels as the months pass loot is slowly decreasing.
What this amounts to in my eyes is dissatisfaction over accounts seemingly being charged different amounts to play. Before I continue, please let me describe what Dynamic Pricing is using a simple example.
Scenario:
Ann is a baker, and just discovered a new recipe for a cookie that she knows is both unique and delicious, so she bakes 10 big cookies and some free samples, sets up a stand, and tries to sell them in one hour to get customer feedback. The cookies cost her 1$ each to make, and she wants to sell them at at least 2$ each since that is the price for similar sized cookies. Still, she thinks she can charge more because she thinks customers will love hers and can't buy them from anywhere else.
Over the course of the hour, 10 people who taste the free sample will be interested in buying a cookie. Of these 10, 3 people think that the cookie is good, but nothing special and are only willing to pay 2$. 5 think that it is very good and are willing to pay 3$. 2 think it is the best cookie they have ever tasted, and are willing to pay 5$.
How shall Ann price these cookies to make the most money when she doesn't know exactly how much each person is willing to pay?
Method 1: She puts up a price tag, and sets the same price for everyone. If she charges 2$, she will make 10$ from selling 10 cookies. If she charges 3$, she will make 11$ from selling 7 cookies. If she charges 4$, she will lose 2$.
Method 2: She doesn't put up a price, and when an interested customer asks for the price, she says 2$ if they describe the free sample as good, and 3$ if they say it is very good or better. She sells all 10 cookies and makes 17$.
As you can see, if Ann can make educated guesses based on information about the customer, in this case the customer's reaction, she can price accordingly to make more money. This is Dynamic Pricing. You see it done by car salesmen, real estate agents, insurances brokers, for airline tickets, even on Amazon.com, where people can pay differently for the same item.
Wait! I hope some of you will think, why not price the cookies exactly at what the customer is willing to pay? Then she could make 21$! The premise of the scenario is that Ann doesn't know the exact price each customer is willing to pay so she has to guess. She can't exactly ask each customer what they'd be willing to pay and then charge them that can she?
In Ann's example, 'method 2' splits the customers into 2 segments. In Microsegmentation (or First Degree Price Discrimination), 'method 2' is taken to the extreme and customers are charged on an individual basis due to nearly perfect information on their behavior. Instead of making another example, I will just use EU, which we are all familiar with.
In EU:
Taking the example from above further, it is clear that Dynamic Pricing is more profitable. Additionally, the higher the quality of information, the more precise the pricing will be. However, how does MA obtain such exacting information about each of us? The answer is: Why not from everything we do in EU?
Every player that has participated in the 3 main professions know, there are good and bad periods, and the general understanding is that it is a part of the Dynamic loot system. What it tells MA is, how poor of loot will we endure, how much are we willing to pay for the fun, before we stop. They obviously want to charge us as much as possible, since they are for profit.
For the purpose of this example, let's say good periods = 115% of tt spent returned as loot (since MA only deals in tt), medium periods = 85% of tt spent returned, and bad periods = 55% of tt returned.
For the players that play the same amount during good, medium, and bad periods, why not dynamically increase their medium and bad periods until their play time starts decreasing? If they purchase the same amount of gaming hours whether you charge 1$ or 5$ per hour, as a business, you charge 5$/hr. In fact, making them play less would be good for them too! Better health and social life!
For the players that play the most during good periods, less during medium periods, and stop whenever they hit a bad period, it might serve MA's interests to increase medium periods and remove the bad periods. If this significantly increases play time, MA makes more money.
Basically, if loot is reduced but play time doesn't reduce, then keep the change and lower loot more. If loot is increased and play time increases enough, then keep the change and increase loot some more (to a certain max of course, and I guess there has to be a minimum.. somewhere).
MA's ability to dynamically change loot distribution to see its effects on player participation, and collect information about the player, is virtually limitless. This gives them the ability to maximum their profit, on a player by player basis.
Dynamic!
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