If You Treat the Warcraft Economy like the Real World you will Fail

My living room. I need to clean up huh?

Hey Markco!

It's Joeystar1, from Quel'dorei (and the forums). I've been following you for about a year, and have built a gold empire of 110k (I'd be well over capped by now if I hadn't kept buying the new craftable epics for my toons each patch). First of all- thanks for all you've done, not only with the tips but in creating a great community in the forums (where I have about 150 posts).

Anyways, I was interested in writing a guest post for you (though you might call it a "user mail" since I don't have a blog myself). It's about why WoW and the real world economies are NOT the same thing, like most people say. Here's the text that the post would use (feel free to add on an introduction if you like):

One of the most common things you hear from people is how the WoW economy is just like the real world economy. They're wrong. There are several important ways in which the WoW economy is drastically different, and these are things that drastically alter how you should play the AH. You might know about a lot of the things I'm going to bring up, but not in this context, and hopefully by thinking about it this way you'll be able to better utilize the auction house.

1. There is no variance in quality with WoW goods.

This is probably the most recognized difference between WoW and the real world, as it’s probably the most important.

I’ll be using the example of ice cream, just to keep you all interested. In the real world, let’s just say that my favorite flavor of ice cream is strawberry, and I want to go out and buy some strawberry ice cream right now. Where can I get it? There’s Baskin and Robbins, Carvel (if you’re out on the East Coast), as well as some varieties from Dreyer’s and similar companies at my local grocery store. Who am I going to choose? I know that I like the Baskin and Robbins variety the most, so chances are I’ll be buying my ice cream there, even if it’s 10% more expensive than the version at the grocery store. The name of the game is having the highest quality product.

Let’s take this same situation in a WoW context. I’m a mage, and I need a Glyph of Molten Armor. Where can I get it? There’s one seller on the AH, there’s another seller on the AH, there’s another seller on the AH. (We’re going to ignore trade chat and other methods of buying goods, as most mass-marketing in WoW happens in the AH, in terms of selling produced goods). Who am I going to choose? One seller’s glyph is no better than another seller’s glyph to me, so I’m just going to buy the cheapest glyph. The name of the game is having the cheapest product.

You can see why this difference is a big deal. If you want to sell stuff, chances are you need to have the lowest price to do so. There are a few exceptions, on goods like Netherweave Bags that move in a heartbeat. But in general, you need to try and keep your goods at the cheapest price, whether this means undercutting more often or at more strategic times, after your competitors log off.

2. WoW goods are all housed in one place: the AH.

Again, we’re going to ignore trade chat, as it won’t be fun advertising your glyphs one-by-one (or even by linking inscription) all day. We’ll also ignore buying glyphs the neutral AH because it has very few goods, and the possibility of the buyer crafting his own goods, because then the seller is not part of the discussion in the first place.

I’m going to change our scenario real quick. Let’s say my favorite ice cream is Dreyer’s for now. Where can I get it? I know I can get it at two supermarkets in my town, one of which is a five-minute drive from my house, the other of which is a 20-minute drive. From whom am I buying? The closer supermarket, for sure. Even if the supermarket further away has the Dreyer’s ice cream for a dollar less, I don’t want to waste my time and I’ll be spending money on gas anyways. Chances are I wouldn’t have even known that the prices were different without having looked it up beforehand. In the real world, you can find goods in many places, so location is a very big factor.

Now consider the same situation in WoW. Let’s say I want to buy my Glyph of Molten Armor. Where can I get it? Well, there’s the AH…and that’s just about it (assuming I don’t want to craft the glyph myself). From whom am I buying? Well, now I have a nice listing of all the prices, with all of the goods in one place. I’m going to buy from the cheapest seller. In WoW, you’re probably only going to find goods in one place, the AH, so price is again the key.

The message here is much the same as with the first tip: have the lowest price and you will have the most sales.

3. In WoW, there is no such thing as a tariff on goods.

A tariff is a tax paid on imports. If there’s a 15% tariff and the goods you import are worth $100, you need to pay up $15. In the real world, you’re penalized for bringing in outside goods.

The closest situation to importing in WoW is using the neutral AH to move goods between factions, and the closest thing to a tariff is the 15% AH cut on the neutral AH (normal cut is 5%). But this does NOT work like a tariff. If you post up something for 100 gold and someone buys it to give back to you on the other side, you will lose 15 gold. However, if you post up something for 1 copper and someone buys it to give back to you on the other side, you will lose NOTHING. In WoW, you’re not penalized for bringing in outside goods.

There are a couple pitfalls with the neutral AH, mainly that it’s possible to have your goods intercepted if you’re not working with someone who knows what they’re doing. I encourage you to read up on the process before you invest too much into it. But the point is, you can only gain from transferring goods from a faction with lower price to a faction with higher price.

4. In WoW, there are no antitrust laws.

An antitrust law is something that prohibits a monopoly. The U.S. has stringent antitrust laws; if you know you’re American history you know that it was a big debate in the middle of the country’s history, but it was decided that to uphold competition and protect the buyer, you could only control a certain amount of any given market. In the real world, you cannot completely dominate a market.

Luckily, this doesn’t exist in WoW. You can force your competitors out of business by undercutting them ruthlessly, controlling supply lines, jack up the prices, and swim in the gold you’ve just made. In WoW, you can completely dominate a market.

This is another important secret to success with WoW gold making: go for broke, or you’ll be just that. If you put enough effort into it and are smart about what you do, you can double, triple, quadruple your profits. I also encourage you to read up on how to control a market.

5. You’re not working in WoW from 9-5 (I hope).

When you go to work every day, you are spending the bulk of your day to make profit for you or your company. In turn, your efforts give you a salary, which you need to put food on the table for you and your family. In the real world, you have a lot of time to spend, and things REALLY matter.

Unless you’re crazy, have a lot of time, or have a boring job, you probably aren’t spending the bulk of your day playing WoW. If you fail, or make a big mistake that costs you a lot of gold, you can still have a nice warm meal and make all the gold back the next day. In WoW, you have a lot less time to spend, and things don’t matter so much.

What does this mean? First of all, you need to be as efficient as you can with your limited time. Develop a routine, get in touch with farmers to sell you goods consistently so you don’t have to go looking all the time, and use the right addons. The second part of this is that WoW doesn’t matter all that much at the end of the day. You might be thinking—is this guy trying to tell me to give up my gold-making, so he can hoard it all for himself? No, but that’s what you should try and do to your competitors: make them give up gold-making. Make their efforts hell. Make their profits disappear. Make it not worth their time anymore. They’ll eventually quit competing with you, because they know that it’s just a game and at the end of the day, they can make no gold and still have that nice warm meal.

In Conclusion

I hope you’ve got something out of this post. If you treat WoW markets like real-world one, you will do a lot worse (and drive yourself crazy playing too long). But most importantly, make sure to have fun out there, and take a swim in the summer heat every once in a while. Your mind (and your computer’s cooling fans) will thank you.

Happy gold-making,

Joeystar1 of Quel’dorei

9 comments: on "If You Treat the Warcraft Economy like the Real World you will Fail"

  1. Getting the competition out of the market seems to be the dream of every gold maker, but like the real world, it's impossible to keep someone out of "your" market, there will always be others.
    The only people doing well in a cutthroat market, are the customers.

  2. I take a little issue with the monopoly point. Ignoring american business which at this point has plenty of NEAR monopolies cough adobe ... cough autodesk. Wow included (you know the whole 65% Wow 35% everyone else user base)

    You cant control a market, you can manage it in bursts but it cant be controlled. And if you do monopolize and manually control a market long enough and efficiently enough (and im not talking about something like glyphs, im talking about market control of things like wool cloth) Blizz may step in and warn/punish you for abuse of the economy

  3. The only thing that could be similar is creativity by the player. Such as selling glyph kits in trade chat as markco talked about a couple days ago.

    This allows a player to put themself above his competition. The competition can merely only copy them to hope to achieve the same success.

  4. I periodically see blogs talking about "driving your competition out of the market". As near as I can tell, this is done by selling goods at cost or below, so you and anyone else in the market are losing money. So your competition quite reasonably goes away.

    But the only way to make money out of this new monopoly is to raise prices again. Presumably your competition didn't actually quit the game, just stopped selling glyphs/gems/bags/whatever. With people running AH scanners every day, how long do you realistically expect to sell at once-again profitable prices before a former or new competitor notices??

    An exception to this would be if you find a cheaper source for materials than your competitors, so your fire sale prices are actually still profitable for you but not for your competition, and you can maintain them permanently as the new market standard. But that would take something a lot more involved than just buying available mats off the AH-- private deals with farmers, cross-faction arbitrage, discovering the next saronite shuffle...

  5. Yeah, once you get a market controlled in wow and jack your prices up, it just makes it look that much more enticing for new people to come and enter or re-enter your same market forcing you to try to drive them out again.

    #2 reminded me of how I hated Star Wars Galaxies's auction house system. Having an auction house on each friggin planet that you had to fly to each planet seperately to load/unload/collect sales money was absolutely HORRID. On top of having to keep your own "store" style housing shop upkept as well.

    While everyone else was running around shooting, blasting, battling and exploring, I myself was a Grandmaster Tailor! LOL! I made an absolute killing, becasue you had to become a grandmaster in order to dye and create black and dark purple clothings.

    Thank the Gods of Azeroth that we get to collect from a unified auction house system.

  6. Another key difference is that you can't sell used items. There are some exceptions (Traveller's bags), but you can't resell things like armour and weapons (The good stuff). The item doesn't re-enter the market like a used car would. Basically people are forced to buy new.

  7. A few comments on controlling the market which highlight the one fact that too many think they can control a market. Unless your on 24/7 you cant control the market. You can drive prices to cost....but just as easily someone can buy them while your offline and relist till your back. Sales will happen. As Zimfia said...once people have left and you rise prices....people come back. If you really think that anyone who reads this info on this board will disappear forever from a market as prices are low....you are dreaming. I just experienced rapid and huge price declines on many items.....two weeks later....the items listed low are all gone...the people selling are gone...and the market is back to normal with 100g profit on each spellthread being sold by a few sellers who know that driving it low doesnt help us in the long run. Selling at market...and having market retain a profit is worth your while. I just wish more people would understand this concept on here. Actually, I take that back as I profit immensely from these people.

  8. With most people relying on the stats of addons to give them a price to set I normally on Tuesday and Wednesday post items I intend to sell at 99999999 (as far it will go) gold. When I come to post usually on Friday people have relied on their addon to give them a price and I come in and undercut still making a nice profit.

  9. I find the title of the article to be innocuous at best... laws of supply and demand exist and in the eight comments that follow are all examples of real world economics at work in WoW. No model of our economy exists as one can see in that every key indicator has to be adjusted when the real numbers come in... that said, models can and do present a way of teaching and learning certain aspects of how business can and should be done... WoW is one of the best at doing this in a fun way... more people's false beliefs, taught to them by college professors (read Keynsian), learn the 'truths' of the legimate and illegitimate business practices out there.... and now garnered with a nice background in micro economics, can better understand the true strengths of Mr. Adam's principles... no model is perfect.. but WoW certainly has gone a long way to teach the teenage and college aged folks about micro economics...

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