Interview with a Price Fixer

I've noted elsewhere that I've been spending some time getting a handle on the WoW economy, and wanted to report from time to time of my adventures in the auctionhouse (AH). Today, I wanted to talk about the AH and price fixing, and to share with you a few thoughts from a practitioner of what can only be described as "Economic PvP." His name is Alex Tabony and below the fold we discuss the nature of the AH, the problems with relying on certain types of add-ons, and how you can game others within the AH.

Read on...

Basics

As anyone who has spent 5 minutes there will tell you, the AH is as much fun as a high level dungeon and seriously more dangerous.  In an instance if you don't know what you're doing then you're going to lose your life; whereas in the AH you are going to lose your shirt. When I first wandered into the AH I figured that it was going to take months to get a handle on prices, market fluctuations, and so on. And then I discovered Auctioneer.  Auctioneer is one of the most indispensible addons in the game: you use it to scan prices in the AH, and it builds a database of previous auctions.  Then when you want to create an auction or bid on an auction, Auctioneer gives you some guidance as to what a reasonable price would be, where the market has been going, and so on.  I've come to rely on it so much that when Auctioneer was (briefly) broken by the recent 1.8 patch I was literally unable to set auctions or bid on anything but wool and linen cloth (which I totally pwn on my server and so know what prices are going to fly on any given day).

There is only one problem with Auctioneer: it is so damn good that people using it start to think that it's infallible.  And more than this it masks some of the issues with the AH system in WoW.  Anyone who thinks about the way that AH works will quickly realize that the pricing and information that it generates is something less than that which we expect in typical marketplaces.  As a quick reality check, compare the AH with, say, eBay.  In eBay you have an indication of who is bidding on an auction, what their bid is, how long before the end of the auction, and what a fair price for the item might be.  On the AH the information is restricted to short-medium-long-very long time periods before expiry, no indication of whom you're bidding against, and no certainty that the person who set the auction isn't shill-bidding against you with his/her alt.  (At State of Play 3 Andy Zaffron from Sony mentioned that they were banning accounts that were shill-bidding in EQ2 by monitoring IP numbers, but this is, of course, pretty easy to defeat).  Also, the reliance on Auctioneer by pretty-much-everyone-playing-WoW means that if you know how Auctioneer derives its pricing recommendations then it's possible not only to play the economic game but also to game other people who use Auctioneer to play the economic game.

Which is where our interview begins.  As I was researching this question I happened to find a really helpful online guide Making Money in World of Warcraft, written by Alex Tabony and posted on his Out Fox The Net site.  Alex explains some of the ways to make money in the AH, and included some references to how one can manipulate the market using the limitations of the AH and Auctioneer.  I thought that it would be interesting to interview him about the marketplace of the AH, how to play the economic game, and how to manipulate the market.  He was kind enough to agree to be interviewed:


Interview with a Price Fixer

Terra Nova: Thanks for speaking with us.  Could you give us an idea of how you got into the economic game in WoW?

Alex Tabony: I am what you might call a causal hardcore power gaming altaholic. The level treadmill is a big challenge to me but I get bored with it pretty quickly. In order to offset the grind I primarily start new characters. Secondarily I also analyze the gaming system in order to find the most efficient path to goals.

Early on I decided that having a good set of equipment would help so I tried crafting. I tried everything and ran into the walls of those systems. However I figured out that crafting / disenchanting was an easy money making technique. This also took me to the AH where I started to pay attention to prices.

One day when putting up my greater magic essence I noticed that there were some auctions for essence that were placed much cheaper than my "regular" price. At the time I was kind of annoyed that someone was "ruining" the market price like that.

A little later the internal light bulb flickered. I ran back to the AH and purchased the under priced essence. The light flickered again at my mailbox and I put the purchases essence back on the AH for my "regular" price.

Everything sold and I felt so very rich. Not long after that I figured out Auctioneer and that is how I got my start.

TN: This is, I think, a pretty common experience; I remember the day that the light bulb went off over my head. From there did you learn the lesson that there is no "regular price"? The market in WoW is very sophisticated in most respects but it's not like the real world where there are large numbers of substitutes for most products: in real life if I don't like the price for this shirt then I can buy another one, and so the economic substitute effect controls prices. In WoW if you need a [Large Glimmering Shard] then that's pretty much all that will do the job. So a smart operator with a large warchest can buy everything in that category and set a new "regular price," just like Allakhazam's Sclark suggests in World of Warcraft Economics (See section 5, "Controlling the Market").

AT: Yes, exactly, there is no spoon and the price of anything on the AH is whatever the players decide to price it at. The magic in the AH system is that there are a lot of people in game who will follow other people's lead. That makes other people's leads powerful.

Auctioneer re-enforces this. Based on what I see, I am guessing that the way most people use Auctioneer is by simply following its suggestions and possibly tweaking the results a little bit. This means that if "everyone" is selling item X for 1g, then Auctioneer will be telling players using it that item X is worth 1g. It generally works fine for the player too. Auctioneer is great.

As you note Auctioneer locks you in due to its good data tracking and analysis. Since keeping track of long term prices is more than most people are willing to do so what Auctioneer suggest becomes the market rate. There is little to do a reality check against as far as item prices go; players are already willing to pay more for trade items then crafting will return, equipment price is ultimately based on player whim etc.

The player/Auctioneer system is reasonably predictable. It determines the market rate in some defined way, it undercuts by x% etc. So it becomes a sort of player guided artificial intelligence. If you can figure out what factors go into its results, you might be able to control it by controlling those factors.

This is fertile ground! There are not that many major factors controlling this system and we do have access to some of them.

That Allakhazam guide is good however I do things differently. First off I do not stick with any one item for very long. That guide seems to be advocating a longer term control of an item’s market. I am not ambitious in that way and I do not have to deal with the draw backs that the article mentions i.e. player resentment, excessive time. It may (or may not) be more profitable to control things long term, but that doesn't really interest me.

I do not want to be a cartel. I'd rather look for the most efficient point that I can access the market and grab what I can.

TN: So none of the things that you've talked about to this point involve anything other than normal market practices. I mean, as long as you are within a capitalist system, it's perfectly ethical and legal to buy when an item is underpriced and then flip it to be bought out at a higher market-cleared price. And the fact that you can push prices up above some arbitrary price isn't a problem either: in an efficient market if you push the prices beyond the market cleared price then others will sell you their stock at the inflated price and, unless you have limitless cash, you can't buy them out forever.

But your mention of Auctioneer brings me to the entry in your online monograph about how to manipulate prices. So how do you use Auctioneer to do that?

AT: I use Auctioneer against its user. This is my kind of PvP.

Just to back up a step, I have to say that I really do not like the way that bots have been used in MMOGs for the most part. Some uses like buffbots don’t bother me in most situations but combat and skill building macros do. Way back in the day I became a murderer killing town macroers in UO. I like interacting with humans and becoming immersed in these games. When people are polluting the atmosphere I like to strike back.

Getting off of the soapbox and back to the topic… As I said before I see the way many people use Auctioneer as a bot like tool and from my casual observation I assume there are also shopping bots in game. As I also said Auctioneer does work and as noted people become dependant on it.

Bidbroker and Percentless are the main functions that people use. They both work about the same way. They look for under priced items – either under priced buyout with percentless or low bids on auctions about to expire with bidbroker. Both are tied to the high sell point that the tool tracks. So being able to control the HSP is the way to control the users of this tool (and similar tools whatever they may be).

I have not analyzed how Auctioneer determines what it does very carefully, but I do know it isn’t hard to manipulate. It keeps statistical data on past auctions and determines the HSP (and whatever other factors) based on that. Well it is easy enough to buy up under priced items and price your items as you wish. So in a few days of controlling an items price, the HSP will start to get set to what you have been selling at. Once the HSP is set we can place an item for sale at a price low enough to trigger a percentless/bidbroker scan.

Here is a fictional example. Say item X typically sells for 1g and there are maybe 2-10 auctions up at any one time for it. I come along and buy everything out and re-price them to 10g. No one buys. I continue buying anything the other players put up at lower prices (typically some at ~1g and others at increasingly higher prices per Auctioneer). After a few days I will put up an item at 5g. It sells.

Why? Well someone did a bidbroker/percentless scan and found my item. The bot (human + Auctioneer) buys it bases on the “deal” it seems to be compared to the HSP. The parameters of this example vary depending on different things but it illustrates the idea. The most important part is picking the right item. You’ll need some stock of it and enough money to buy up under priced auction that would spoil the HSP.

Once you get that first bite you know you have a working system. From there you can maintain the price and drop an “under priced” item here and there or you can give up control of the price and let it decay. Letting it the price decay is what I generally do. If you do that it is easy to dump your remaining stock at a good price and not worry about spending all of your waking life managing auctions.

TN: This is probably a good time to wrap up the posting. I imagine that there will be some comments on this, so we should leave it there. Alex, thanks for talking with us.

AT: My pleasure. Thanks.


Comments on Interview with a Price Fixer:

says:

Nice interview and good guides. I've come to pretty much the same conclusions while I've been playing the market. Others grind mobs for gold, I grind the auction house.

By far the easiest, most time-efficient and effortless way to earn money in WoW AH is arbitrage. There are several items which are used only by a profession which is available for only one faction (Lightforge... for Alliance, ...of Elements for Horde), but these items drop in end-game instance for both sides. So when Cord of Elements drops on Alliance side they usually put it up on Alliance AH where it doesn't sell at all.

Most people either don't know it's meant for Horde shamans or they can't be bothered to go across the world to the cross-faction AH. That's where I come in. I buy the Cord from Alliance AH and send them to my alt who puts them up on cross-faction AH. I make 5-25g on each of them. At the same time the alt checks if there's any good prices on Lightforge at the cross-faction AH and puts them up on Alliance AH.

This is not something which will make you rich, but it's certainly something that pays the repair bills.

Posted Nov 19, 2005 9:21:02 PM | link

Detritus says:

When I began to play WoW last year I quickly learned the ways of the AH as I'm also interested in Economic PVP.

Naturally the weakness of all Capitalist sytems is Cartels/Price Fixing so I set about exploiting it the good old fashion OPEC way. I found semi-scarce commodities and watched them with Excel for a week. I made special note of who the players were and their price points. After establishing which commodities had the fastest sell rate/highest demand - disappearing before their time went to "short" - I contacted the top market player for the specific commodity.

This is where a highly developed nack for Social Engineering comes in, which is beyond the scope of this comment. Essentially I play on the top players greed and fear of losing his hot money maker; offering that if we work together we can both get rich which wouldn't be the case if we worked against one another. I never failed to make a new friend and thus we begain to maintain a steadily increasing selling point for the commodity.

This was before Auctioneer, and I no longer play WoW, but the principle should still work if you have a basic understanding of economics and a strong understanding of human nature.

Posted Nov 20, 2005 9:29:37 AM | link

Michael Ott says:

Thanks for the info. I am an avid AH trader. I have grown up on Skinning/Leatherworking, but I don't think those are very profitable, generally. Right now I am level 44, and I agree that the leveling grind is not for me. I have been an avid user of percentless since it came out. At first, it was incredibly profitable. I started using it at around 39 when I had 30g to my name and my mount just around the corner. Within a day, I was able to make it up to 100g through trading. Since then, I have gone through about 400 gold in 5 levels, and I have 150g bank. However, the market has dried up a little bit recently. It is getting much harder to find highly profitable items. Thanks for the info on playing the players. I will use that to my advantage.

Posted Nov 20, 2005 10:15:38 AM | link

Ken Fox says:

I'd like to try to shift the conversation away from a "WoW How To" if y'all don't mind...

Are there any games that offer in-game character types or skills that improve the economic ability of the player? It would be easy for Blizzard to offer cheaper auctions or seller features for example. In WoW terms I guess this would be a fourth skill tree available to all players.

Other meta-game professions seem possible too. Dungeon masters could play monsters to give players more challenging encouters. Artists could create new 3D models and/or textures for game objects.

These meta-game professions seem more interesting and rewarding than the in-game professions. Would they break the game?

Posted Nov 20, 2005 9:33:33 PM | link

Daniel Speed says:

Eve Online has market skills and all sorts of other skills that could be said to improve the economic ability of the player, as well as a much richer manufacturing (/crafting) system. I think it's a much more interesting platform for the study of economic gameplay than WoW.

As for other meta-professions, I'd have to say that Second Life must be the king of meta-gaming, but that said, I don't see many other games adopting user submitted content for things like art assets very readily. The obvious issue is that most games want to maintain a consistent quality and look, and that's a very hard thing to manage once if you believe that most user submitted content is just not going to be up to scratch.

Posted Nov 21, 2005 7:52:09 AM | link

Timothy Dang says:

It is very striking how easy it is to (apparently) manipulate the AH. My personal poorly controlled experiment didn't start until after Auctioneer became popular, so I can't say for sure how much is due to Auctioneer and how much is due to the nature of the game.

I say it's striking because WoW and the AH look like they not be very manipulatable. Cartels should be hard to maintain because there's anonymity, and entry is pretty easy It's certainly not costless to skill up in a new profession, but it's easy and fast for the craft professions given a decent cash stake. (Is it easier to manipulate the markets for gathering professions' output since those do require time to skill up? Or simply because crafted products (weapons, etc.) really are substitutable while recipes require specific gathered inputs?)

In any case, entry is pretty easy, and cartel enforcement should be very hard given anonymity. One explanation is that the market is too small for normal economic forces to come into play. But one of the lessons which has come out of a number of economic experiments is that the "large number of buyers and sellers" supposedly needed for efficient markets is often actually quite small (it depends on the specifics of the market, but in some cases you get clear efficiency with 4 buyers and 4 sellers). The WoW economy is much larger than this. Even if you don't allow for people entering a market, there's a good number of people involved on both sides of most commodities.

So, what is it? Is it just too costly for people who are in it for hack'n'slash to spend their time making sure they get a fair price?

Why aren't there as many stories about people manipulating prices *down*, to support their appetites for some commodity?

And does the same thing go on in other games? Or are there features of the markets in other games which prevent it?

Posted Nov 22, 2005 12:17:58 PM | link

Andy Schwarz says:

In my recent paper in the USF IP Law Bulletin, there's a brief mention of my career as a member of a leather padding cartel, which began, really, as conscious parallelism, at least on my part, but ultimately I got tired of signalling and just started telling folks I'd match their prices at X, and we gelled.

It worked well because demand was high enough, generally, to allow us to sweep up the small-fry who tried to undercut us, and co-opt the new entrants into the market if they grew too large to swallow up.

Now and again, I make some leather padding, even though the price is no longer worth my time, and I undercut the market (some of the sellers are my old co-conspirators) and almost universally, the cartel, not a consumer, buys me out overnight.

(This is also a handy excuse to publicize my recently published paper, which I hope the management here posts once USF has the issue on its IP Law Bulletin site)

Andy

Posted Nov 22, 2005 2:40:59 PM | link

Andy Schwarz says:

Of course, I guess actually posting the URL would help:

http://home.pacbell.net/andyhre/copyright_and_eq_final.doc

Posted Nov 22, 2005 2:41:40 PM | link

Beowulf says:

Before the casual reader of this thread jumps off to try and make a ton 'o money, a caveat that needs to be highlit and underlined (just in case all you see are $$$ signs.)

It has bee mentioned but not explicitly enough. I really want to stress that before you go about controlling a market sector, you really need to know that sector first. My area of expertise is crafting recipes, and I have made a tremendous amount of gold from that sector.

The reason I stress this is for the very flaws Auctioneer has which are mentioned in this article. It is a great tool, but it is a only a tool. It is a hammer that can just as effectively smack you on the thumb as drive a nail into wood. If you don't know your sector, you will be wasting a lot of gold.

The AH is a fantastic mini-game, and the only thing that keeps me playing after leveling four 60 characters. The funny thing is that except for the AH game, I really have nothing I spend my gold on anymore... that's kind of sad in a way.

Posted Nov 29, 2005 2:06:31 PM | link