#### zoranc

##### Newbie
4 0
Hello folks,

I am trading virtual items of some online computer game. However I have trouble calculating the current market price of the items. If I have their price from yesterday and the history of the trades i did yesterday (buys and sales with some margin around that price), then how I should calculate the new price for today.

I considered to increase the price with every sale and decrease it with each buy with a constant value/percentage but it is clearly wrong. I know that time ie frequency of sales/buys should be considered too, but I don't know how. Is there a formula defining the market price? Maybe the algorithm calculating the price in the stock exchange would be a starting point. Any suggestion is highly appreciated!

#### wackypete2

##### Legendary member
10,229 2,055
You want an algorithm that calculates the future price of virtual items in an online computer game, and it must be accurate or presumably you would lose virtual money if the price goes against you?
I have already coded a program for that but I was only going to sell it to 89 people so it doesn't saturate the virtual market.

Peter

#### the hare

##### Senior member
2,949 1,283
It would be fun to see a chart of price history from such a game !

If the prices are derived from a simple algorithm, it'll probably be using some element of randomness in determining the price, and if so, well, further discussion falls into letting cats out of bags territory

Amusingly, his prices might just be based on actual supply and demand, but who controls the supply of these virtual items, and how ?

It's an interesting subject for debate, but why would anyone want to do this ?

#### wackypete2

##### Legendary member
10,229 2,055
The whole thing makes no sense to me, or maybe his post just isn't too clear.

However I have trouble calculating the current market price of the items
This makes no sense to me whatsoever. There is no current market price already set by supply and demand? or does some gamer actually set an arbitrary price (a calculated one?)

Peter

#### pboyles

##### Legendary member
8,072 1,303
You want an algorithm that calculates the future price of virtual items in an online computer game, and it must be accurate or presumably you would lose virtual money if the price goes against you?
I have already coded a program for that but I was only going to sell it to 89 people so it doesn't saturate the virtual market.

Peter

I think this young chap might buy a copy from you,

7NEWS - 5-year-old runs up \$2,550 iTunes bill in 10 minutes on one iPad game - News Story

#### BeginnerJoe

##### Senior member
3,329 350
You want an algorithm that calculates the future price of virtual items in an online computer game, and it must be accurate or presumably you would lose virtual money if the price goes against you?
I have already coded a program for that but I was only going to sell it to 89 people so it doesn't saturate the virtual market.

Peter

That's plain ignorant. If you don't know how to price virtual assets, you have no hope of pricing anything real. For all asset classes, virtual or otherwise, the pricing strategy is similar. It has nothing to do with taking pot shots, tossing coins or gambling.

To sell quick:

Sell Price = What people are willing to pay now

It's cheap if 75% or more of interested customers are willing to buy at that price. It is expensive if 25% or less of interested customers are willing to buy at that price. Those customers who are interested but refusing to pay the asking price are enormously valuable as a gauge for your pricing strategy. You should treat them with greatest courtesy even though they don't appear to give you a penny.

To sell higher:

Sell price = What people are willing to pay sometime in the future

It's cheap if 75% or more of interested present and future customers are willing to buy at that price. It is expensive if 25% or less of interested present and future customers are willing to buy at that price. Those customers who are interested but refusing to pay the asking price are enormously valuable as a gauge for your pricing strategy. You should treat them with greatest courtesy even though they don't appear to give you a penny.

Cheap or expensive

It's entirely up to you. Some prefer to be cheap-ass sellers. Others prefer to be premium sellers. Selling cheap creates more transactions and more work. This may be interesting for those who are easily bored. Selling expensive affords you less work so that you can go do other things. So adjust the aforementioned gauge until satisfied.

Whichever style chosen, it is best to be consistent and stay in that style. This tells the customers where you stand. Once they know your style fits theirs, they will approach you never needing to think again.

Profit margin

The profit margin is a consequence of how long you can afford holding inventory of items being sold. The longer you can hold, the greater chance the price fluctuation will reach the point you demand/find-satisfactory.

Profit is also a consequence of your salesman skills. For those who are genuinely skilled, they would be able sell a pile of snow to an eskimo, while it is snowing and the snow is falling on the eskimo's igloo all by itslef.

Additionally, profit is a consequence of your market manipulation. If you actively dry up the supply for any particular item generally and everywhere, you can set the price to whatever you like. Of course this requires capital and inventory capacity. Both are easily available, given time, if you understand the essence of how to price assets, virtual or real.

A profiteer's goal

You want to be the dam in a river of supplies. Hold them all up, and then release them to the other idiots at the price and rate of your choosing. They will respect and thank you for it, while believing you to be the best altruist/ATM-machine out there. In the mean time, you keep on growing. With size, come fame. With fame come influence. With influence come power. With power, you can change the truth, such that people are taught to accept they are exploited not because of your actions, rather it is their own inferior psychology.

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#### zoranc

##### Newbie
4 0
It would be fun to see a chart of price history from such a game !

If the prices are derived from a simple algorithm, it'll probably be using some element of randomness in determining the price, and if so, well, further discussion falls into letting cats out of bags territory

Amusingly, his prices might just be based on actual supply and demand, but who controls the supply of these virtual items, and how ?

It's an interesting subject for debate, but why would anyone want to do this ?

I guess I did not clarify it enough. So the game maker is the initial supplier of the items and they create them on a certain rate (lets say for simplicity it is constant). They also take items out of the system too. But I would ignore both of those from the discussion, because their influence on the price is most of the time very minor.

Now there is a secondary market consisting of the players themselves, who trade their virtual items (buy/sell for a virtual currency). They however change their preferences and the items shift up or down in demand and supply. Sometime the item is hot and there is lot of demand for it, then some weeks later it is less desired and players tend to sell it as they don't need it anymore. Determining those tendencies from the game itself is possible but it is very difficult.

What I would like, is to do is determine the current market price from the supply and demand itself. The measurement of those could be number of transaction I did in each direction (buy and sell). So simply said: if yesterday I sold twice as much of a certain item than I bought, with what percentage I should increase the price today to match the market trend?

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#### zoranc

##### Newbie
4 0
Discussion brought up by BeginnerJoe of positioning myself in the market is important and interesting I still stumble at much lower level - determining the proper market price.

Is my question too difficult? Did I pick a wrong section in the forum?

#### Shakone

##### Senior member
2,458 665
It's a great question zoranc, but it's not easy to answer. It's in fact quite complicated, because it depends on so many unknowns, the other traders in the player market for example and what they want to do.

There are other players selling. So if you offer to sell an item at the lowest seller's price, then slowly move it down until it trades, you've found the current market price. Do the opposite for buying.

Can your corner the market for an individual item?

#### zoranc

##### Newbie
4 0
Cornering the market is not really an option - it is just too big. And for the items that are more scarce they are also not very liquid either.

Most of the traders follow price trends. Dealers buy and sell with margine and players try to get the best deal. In general prices don't change that fast usually (so it's safe to ignore those). I would just need an algorithm/formula to measure quantitive change of the price, considering the buys/sells I did in the recent past. But I don't know how...

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