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What is my product worth?
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Henry King RJ: Business Tycoon CO: BusinessTycoon Post Rating: 1 + / - Total Posts: 83 Karma: 13 Joined: May 31, 2013 |
Posted on Nov 23, 2013 There are two measures of value in this game for all inventory. One is the market, where willing buyers and sellers meet, and the price can be high or low based on supply and demand. The second measure of value is the worth of any product based on the system value, which affects retail sales volume at different prices and also affects net worth of your company as it is the value the system uses for inventory in your warehouse.Market values can be much higher in some cases than warehouse value, and this is most common when a large player has a big quest to complete. Such quests often require or at least benefit from participation by many players in selling inventory, as well as by selling from NPC (non-player companies). NPCs sell more products to B2B requests when the offered price for buying is higher. Warehouse value is especially important for a strategy some smaller players use to increase their net worth, which is buying products which are priced at lower than warehouse value to sell back the inventory to the system. This can only be done by selling the entire company back to the system (the sell company button on the main HQ page). Some players view this as a form of exploit, but it is not illegal and it does provide a useful function in the game of getting rid of surplus inventory via what effectively becomes an export of inventory role. When buying inventory to liquidate it, the system value of that inventory becomes critically important to know, because that is what you get paid for it when you sell your company. Actually, you get 95% of system warehouse value for the inventory, less a few other fees as well, so you don't keep all the value, and thus, you have to be able to buy for less than 90% of warehouse value to expect to be able to make enough profits to make it worth doing liquidation. System warehouse value is based on a combination of quality and the base warehouse value (which can be seen on EOSpedia for all products, or which is shown anytime you click on the picture of any product in your warehouse or on a quest for that product). Base warehouse value is the value of Q0 products, and that value increases by 2% for each level of higher quality. So, value is equal to base value x (1+Q/50), which means a Q50 product is worth twice base value and a Q100 product is worth three times base value. This is not necessarily the same as market prices. Prices in the B2B market may be higher or lower than system warehouse value. When prices are enough lower than warehouse value, this creates a profitable buying opportunity for players who are able to use one of their company slots to sell back a company full of undervalued inventory to the system. This type of company is sometimes referred to as a liquidator, and some players view this as being an unfair exploit, but the only way you can benefit from using such a strategy is to find something that is in surplus supply which is being offered for sale at a discount to warehouse value. The system never appears to sell below warehouse value, so you must find another player who has too much inventory and wants to sell it cheap. If you are a small company, and want to do some product liquidation to make a few bucks and build up cash to grow your main business faster, I am happy to work with you to help you grow your cash flow faster via liquidation of inventory (applies only to companies on the NORMAL server). If you are a BIG company and want to do some liquidation of inventory, I might be willing to work with you, but I won't be as generous on terms that I would expect for profit sharing from selling off large amounts of inventory. I'd rather help small players become larger rather than to help people who are already large and who probably would be better off running their companies normally than using liquidation. Also, a large company would probably drain all my inventory that is available for liquidation sales in one day, leaving nothing for me to sell to smaller players, and I don't really prefer that as an outcome. So, if your company is relatively small, and you have only two or three companies now, you are more than welcome to talk with me about doing product liquidation for profit on the normal server. I do not view this as a bug, and instead, view it as a way of helping small companies grow their business faster, similar to the way many players have used generous salaries to help small players. |
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Henry King RJ: Business Tycoon CO: BusinessTycoon Post Rating: 0 + / - Total Posts: 83 Karma: 13 Joined: May 31, 2013 |
Posted on Dec 10, 2013 In the above post, I gave two approaches to think about product value. The first was supply and demand, which is not very useful for many players, as they want to have something a bit more concrete to look at when pricing products or deciding what to buy. The second was value in warehouse if you view the product in terms of how it would be valued at company liquidation. The second value is easy to calculate, and easy to use in pricing, but not necessarily the best approach to use in all cases, as it does tend to underestimate value of higher quality for some products that you might consider buying as production inputs.As a complement to the supply and demand pricing approach, I thought it might be useful to share a very different approach to thinking about pricing, which is to ask when a product that is selling at a premium over warehouse value is a good deal to buy. I will use one of the products that I make, and use in production, as an example. Glass can be purchased at a variety of quality levels and prices. It often sells for more than warehouse value, which would appear to be not such a good deal for the buyer. And yet, it still sells, sometimes at much higher than warehouse values. Why? If you look at glass, you might find that you could make your own glass with Q50 or buy from someone else for less than warehouse value. Let's say you could get glass or make glass with price of 4 bucks for Q50 glass, which would be 80% of the warehouse liquidation value, so a good price when looking at it from a warehouse value perspective. You also have the option to buy glass at a price of 8 bucks for Q96 glass, which is about 109% of warehouse value, or at 15 bucks, for Q120 glass (176% of normal warehouse value). Which is the best deal to buy to use in your factory? It would appear at first that the lowest price glass is the best value, and that is certainly true if you are looking at the option of company liquidation or net worth of your company after buying a lot of glass. HOWEVER, it might not be the best deal for production of products. If I am making crystal earrings, which I do produce, and which use glass, in this case, glass contributes 30% of final product quality. Each point of Q for the final product is worth the base value of earrings (130) times 2% per Q level gained, so 2.6 bucks for each quality improvement for the earrings. Since glass is 30% of product quality, each Q increase for glass is worth 30% x 2.6 bucks, or 0.78 bucks. Thus, the value of using Q96 glass instead of Q50 glass is 36 bucks more in final product value, and the value of using Q120 glass instead of Q96 glass is 19 bucks more. Therefore, I would be better off THROWING AWAY the Q96 glass and not using it at all and paying 15 bucks for Q120 glass, if I was using the glass to make crystal earrings. Even if the Q96 glass was FREE, it would cost me money to use it if I had the option of using Q120 glass for a 15 buck price with consistent supply. Stormhammer GEMs uses Q120 glass, as well as the highest quality gold, silver, and diamonds that can be made or purchased for all of its inputs. The value of higher quality inputs is far higher than the cost of these inputs when purchased from the market. |
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Henry King RJ: Business Tycoon CO: BusinessTycoon Post Rating: 0 + / - Total Posts: 83 Karma: 13 Joined: May 31, 2013 |
Posted on Dec 10, 2013 The value of any input product that you would be willing to pay for higher quality is very different for different products you may be making with that input. For example, fiberglass has a base value for Q0 in the warehouse of only 15, and only 20% of value comes from glass, so the value of Q120 glass is only about 1.44 bucks higher in terms of value it adds to the fiberglass warehouse value from production versus using Q96 glass. However, the value of higher Q fiberglass when it is used to make boats is huge, so indirectly, the value of higher quality glass may be very large if you think about how higher Q fiberglass affects the final price at which higher quality boats can be sold. But, if you are just looking at the market price of fiberglass alone, it is hardly worth spending much more to get higher quality glass to increase the quality of fiberglass production simply to sell fiberglass. |
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Tiny Hogwaffle RJ: Caligula CO: Tiny Hogwaffle Post Rating: 0 + / - Total Posts: 128 Karma: 10 Joined: Jun 3, 2013 |
Posted on Dec 10, 2013 That sure was a lot of effort put into explaining how to exploit a glitch for big bucks.
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David Archer RJ: BallC CO: BallC Post Rating: 0 + / - Total Posts: 142 Karma: 135 Joined: Apr 11, 2012 |
Posted on Dec 11, 2013 @Henry: I've had similar thoughts and the issue is mostly one of market segmentation. If you're selling glass to a boat manufacturer who is making their own fiberglass for eventual production of boats, then you can calculate the optimal pricing. The trouble comes about when you are selling to an "unknown" company on the open market since you don't have much to go by as raw or intermediate products obviously have usages in different products and thus different net values. Think about the mining company that is trying to sell coal. A steel smelting company will pay a lot more for high Q coal than the power company that derives no benefit from coal over Q0.As far as calculating the warehouse value, my greasemonkey script linked in another thread here will put the percent of warehouse value next to the unit price on all B2B listings making it trivial for liquidators to identify goods that match their criteria. It's the B2B colorizer script: http://userscripts.org/scripts/show/184526 |
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Henry King RJ: Business Tycoon CO: BusinessTycoon Post Rating: 0 + / - Total Posts: 83 Karma: 13 Joined: May 31, 2013 |
Posted on Dec 16, 2013 Actually, Hogwaffle, it was a lot of effort to point out different ways of valuing inventory. If all you want to do is exploit a glitch, then the best way is to install the script from BallC and look for anything that is selling at less than 90% of the calculated price. BallC's script makes this very easy to do, and quick to see when there are products selling for low prices, because they are green and the expensive products are red.The last point in my series of posts is to point out the fact that sometimes, a product which appears to be good value in the BallC script, or liquidation value perspective, may not be the best one to use for your factory as an input. For example, coal of Q50 selling at 11 bucks would be a good value for a liquidator, but not as good value as Q0 coal selling for 10 bucks if it is being used to make electricity (since Q does not matter for electricity production) and not as good value as Q100 coal for 22 bucks if it is being used to make silicon to produce integrated circuits. The Q100 coal is bad value in the BallC script, but much better value to use to make silicon to make ICs, since Q matters a lot when using coal for that purpose. Warehouse value matters, but it is not the whole story, and is only useful as a general guideline. On a simple note, if anyone wants to use exploit of liquidating inventory (as Hogwaffle refers to this), I have posted 184 billion of Q77 filtered water on the market right now at 84% of warehouse value (0.43 price). A nice boost in net worth for anyone who is willing and able to liquidate their company to help me get rid of some surplus inventory. And, if you just want some cheap filtered water to use in production, this is a pretty cheap price to pay. |
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