Rares prices.... (27,000+ views)

[snake6man]

hmmm... im quite angry rite now... I bout my santa hat over a year ago for 19m and now they are 17.5m. :cry: plus i lost another 1.5m off of a few prayer pots that i had, and a ton of other stuff... grrrr.

[Sly_Wizard]

What's all this talk of economic bubbles? :-k

 

 

 

Again, I think what was fueling the price rise was the fact that at the time the rares shot up, there was very little alternative to spending your cash on anything remotely as good. As my theory goes, now there are many things one can do with 300M instead of buying phats, but at the same time there are a lot fewer phats on the market, so still no bubble.

 

 

 

The price of rares always decrease periodically when new items/skills are introduced due to speculations/expectations.

 

 

 

Off the top of my head, I can't think of a single non-discontinued item who's prices have raised from year-x to year-y to account for the increase in gold floating around Runescape. As is the norm for all non-discontinued items, the further away from their introduction date we get, the lower their prices become. Coupled with the fact that the wealth of the general population is ever increasing (High alch ftw!), it's no surprise that why the price of rares have been what they have. Using the God Wars items as an example, as the price of, say, a Bandos Godsword goes downward and more people are able to afford one/already have one, then I'd expect the price of rares to go back up as rares are, in essence, an economic sponge which serve to soak up a lot of excess gold floating around the economy (Granted, one could argue that gold simply sitting in the bank isn't actually affecting prices). The only way to drive the price of rares down indefinitely would be to:

 

 

 

1.) Set a ridiculous price floor on rares or

 

2.) Remove a large portion of gold from Runescape or

 

3.) Re-drop them.

 

 

 

None of which are likely to happen anyway.

[superson]

hmmm... im quite angry rite now... I bout my santa hat over a year ago for 19m and now they are 17.5m. :cry: plus i lost another 1.5m off of a few prayer pots that i had, and a ton of other stuff... grrrr.

 

 

 

I bought my santa in early December 06 for 23.6m, and just a month ago they got up to that price again, I should have sold..

 

 

 

Lost 6.1M and counting.

[quitthegame]

 

The price of rares always decrease periodically when new items/skills are introduced due to speculations/expectations.

 

 

 

 

 

Three problems, you switched "periodically" and "when", you wrote "periodically" when you should have said "aperiodically", and "speculations/expectations" changes the price before new features are introduced, not after. If the speculations were incorrect, then the correction to reality will be more pronounced due to the market going the wrong way beforehand , but that's another story. The conflict between your authoritative manner of posting, and the fact that your very first substantive sentence contained three major flaws, is quite remarkable. I could almost believe that you write like this intentionally, just to stir things up.

 

 

 

Off the top of my head, I can't think of a single non-discontinued item who's prices have raised from year-x to year-y to account for the increase in gold floating around Runescape.

 

 

 

Some items from resource gathering skills seem to have generally trended upwards, yews, gold ore, bowstrings. Obviously finished items are in increasing oversupply, as are any nonconsumable items from drops. Runes get cheaper as RC gets new methods and more double-crafters. Most resource gathering skills have been more and more affected by botting over the years, which throws a wrench in any comparison. Do you really think that raw resources wouldn't have steadily gone up in price without the vast numbers of botters?

 

 

 

... then I'd expect the price of rares to go back up as rares are, in essence, an economic sponge which serve to soak up a lot of excess gold floating around the economy (Granted, one could argue that gold simply sitting in the bank isn't actually affecting prices).

 

 

 

How are rares sponges that soak up gold? Does the gold that you pay for one osmose into the rare itself instead of being transferred to the seller??? How do you differentiate "excess gold" from "gold which is not excess"? What exactly does it mean for the "excess gold" to "[float] around the economy?" Would it be less excessive if the gold were to circumambulate the economy with a rainbow colored parasol, rather than levitating high off the ground in a most undignified fashion?

 

 

 

The only way to drive the price of rares down indefinitely would be to:

 

 

 

1.) Set a ridiculous price floor on rares or...

 

 

 

 

 

 

How many times have I told you already, price floors are a lower limit on the price, not an upper limit. Floor. It's below you, not above you. Look up, that's a ceiling. Down, a floor. Up, ceiling. Down, still a floor. All day. Every day. Even Christmas Eve. I swear, you are doing this on purpose.

[remington]

No. In January the unbalenced trade update will go into effect. So, I'm assuming since no one can merchant them in the near future, merchants have gave up with rares, thus, causing them to "crash" in price.

 

 

 

They will still be worth allot, they just wont be merchantable for more than 3k a trade now so merchants have given up trying to merchant them so now only the people who want them are buying and the demand has gone down. Simple supply and demand.

 

 

 

Except that on "ye olde" Ge prices are plus or minus 5 percent.

 

 

 

And 5 percent of 20 million is 1 million. Plenty of possibility to merch with that.

[remington]

hmmm... im quite angry rite now... I bout my santa hat over a year ago for 19m and now they are 17.5m. :cry: plus i lost another 1.5m off of a few prayer pots that i had, and a ton of other stuff... grrrr.

 

 

 

I bought my santa in early December 06 for 23.6m, and just a month ago they got up to that price again, I should have sold..

 

 

 

Lost 6.1M and counting.

 

 

 

You won't lose anything till you sell it.

 

 

 

If long term investing isn't your bag, sell now.

 

 

 

If you can hang, keep it, the past several years are good indicators that the prices WILL go back up.

[Sly_Wizard]

Three problems, you switched "periodically" and "when", you wrote "periodically" when you should have said "aperiodically", and "speculations/expectations" changes the price before new features are introduced, not after. If the speculations were incorrect, then the correction to reality will be more pronounced due to the market going the wrong way beforehand , but that's another story. The conflict between your authoritative manner of posting, and the fact that your very first substantive sentence contained three major flaws, is quite remarkable. I could almost believe that you write like this intentionally, just to stir things up.

 

 

 

There's a more pressing problem: The fact that you're being anal retentive. Seriously. You wrote four sentences whose sole purpose were to try to point out each and every grammatical error I made. Newsflash! This isn't English class. Don't treat it as such :)

 

 

 

Some items from resource gathering skills seem to have generally trended upwards, yews, gold ore, bowstrings. Obviously finished items are in increasing oversupply, as are any nonconsumable items from drops. Runes get cheaper as RC gets new methods and more double-crafters.

 

 

 

Prices fluctuate, yes. However, as has been the trend since RSC, the price of consumables go down as more and more people engage in activities which produce those materials.

 

 

 

Most resource gathering skills have been more and more affected by botting over the years, which throws a wrench in any comparison. Do you really think that raw resources wouldn't have steadily gone up in price without the vast numbers of botters?

 

 

 

Prices would have been higher than they currently are, yes, but prices wouldn't have increased from year-x to year-y in the absence of bots. Why would they? That would make little sense, as well as violate basic principles of supply and demand. :-k Prices have steadily been decreasing on raw goods since the beginning of RS2 (Before most of the auto'ers begun playing). Therefore I want to know how you came to your conclusion, especially considering your admission above regarding price drops.

 

 

 

How are rares sponges that soak up gold? Does the gold that you pay for one osmose into the rare itself instead of being transferred to the seller??? How do you differentiate "excess gold" from "gold which is not excess"? What exactly does it mean for the "excess gold" to "[float] around the economy?" Would it be less excessive if the gold were to circumambulate the economy with a rainbow colored parasol, rather than levitating high off the ground in a most undignified fashion?

 

 

 

Do you want a real response or would you rather a smart-[wagon] reply, 'cuz it seems to me you're aiming for the latter. There's no point in debating with you if you're content to *try* to patronize me.

 

 

 

How many times have I told you already, price floors are a lower limit on the price, not an upper limit.

 

 

 

My mistake. I meant price ceiling.

[silvermist82]

The fact that you're being anal retentive.

 

 

 

what does that mean? I cant understand you're intellectual conversations...

 

 

 

sereously, what does that mean...

[quitthegame]

Newsflash! This isn't English class. Don't treat it as such :)

 

 

 

Newsflash! I've taken plenty of English classes, and in none of them have we taken an ignorant post from the intarwebz and analyzed it for grammatical mistakes. Not that that's what I did, there was one grammatical mistake, one instance of you using a word that meant the opposite of what you thought it meant, and one instance of you not understanding causation and time-sequencing in the reaction of markets to future changes. Errors in syntax, diction, and content, you went for the holy trinity and would not be denied. I don't understand your objection, really, isn't it a bit hypocritical for you to remark on me correcting your arguments?

 

 

 

Prices would have been higher than they currently are, yes, but prices wouldn't have increased from year-x to year-y in the absence of bots. Why would they? That would make little sense, as well as violate basic principles of supply and demand.

 

 

 

Inflation. Apparently inflation violates basic principles of supply and demand? I don't get that one. (Remember, we're talking about only things like logs, ores, essence, fish here, we already put all other items in a category of chronic oversupply)

 

 

 

Prices have steadily been decreasing on raw goods since the beginning of RS2 (Before most of the auto'ers begun playing). Therefore I want to know how you came to your conclusion, especially considering your admission above regarding price drops.

 

 

 

I disagree with you about when autoers began playing, that's how. I didn't "admit" anything about price drops, I made a statement that you then paraphrased badly. Where do you get off, calling that an admission? Seriously, you sounds like a third-rate lawyer.

 

 

 

Do you want a real response or would you rather a smart-[wagon] reply, 'cuz it seems to me you're aiming for the latter. There's no point in debating with you if you're content to *try* to patronize me.

 

 

 

What do I want? I want you to stop responding to my posts, twisting all my arguments into straw men which you then ineptly flail against-- then after I point out that you've twisted everything I've said into a barely recognizable form, protesting that you understand English better than I do. Since you maintain that to be the case, it's hard for me to understand how you could complain about me correcting your arguments or attempting to patronize you, as that would be an absurdity. So yea, I opt for the "there's no point in debating with me" option, you should stop. Better not respond to Qeltar either, might bring old memories of debates with you and threaten the detente.

[Sly_Wizard]

Newsflash! I've taken plenty of English classes, and in none of them have we taken an ignorant post from the intarwebz and analyzed it for grammatical mistakes.

 

 

 

...And you also don't analyze economics in English classes, either :roll:. The fact that you can only respond in a patronizing way to my posts while using really, really bad ad hominems sees to it that you're the only thing ignorant around here is you. But I digress.

 

 

 

Not that that's what I did, there was one grammatical mistake, one instance of you using a word that meant the opposite of what you thought it meant, and one instance of you not understanding causation and time-sequencing in the reaction of markets to future changes. Errors in syntax, diction, and content, you went for the holy trinity and would not be denied. I don't understand your objection, really, isn't it a bit hypocritical for you to remark on me correcting your arguments?

 

 

 

My post conveyed what I was trying to say perfectly fine, as evidenced by the fact that you understood what my post meant. Yet, for some odd reason, you took the time to try to correct me.

 

 

 

*Shrugs*

 

 

 

It would only be hypocritial of me to complain about you deconstructing my posts in search of grammatical errors if I were going to take the time to point out some of your obvious grammatical errors. But I don't, because it's a waste of time. No one, aside from you, really cares. However, since you seem to like perusing my posts in search of some error in diction/detail/syntax/structure, go ahead and knock yourself out :

 

 

 

Inflation. Apparently inflation violates basic principles of supply and demand? I don't get that one. (Remember, we're talking about only things like logs, ores, essence, fish here, we already put all other items in a category of chronic oversupply).

 

 

 

No. Even with inflation the price of raw materials trend downward, not upward. This is because, as time goes on, more and more people take up a skill, meaning more competition between sellers and lower prices. Yes, prices tend to fluctuate-- That is, they have periodic [bleep]es and dips due to changes made my Jagex in-game-- But, in the long run, prices decrease.

 

 

 

I disagree with you about when autoers began playing, that's how.

 

 

 

Out of curiosity, just how long have you been playing?

 

 

 

I didn't "admit" anything about price drops, I made a statement that you then paraphrased badly. Where do you get off, calling that an admission? Seriously, you sounds like a third-rate lawyer.

 

 

 

I paraphrased you correctly. You simply misinterpreted my post to mean what you wanted it to mean :)

 

 

 

What do I want? I want you to stop responding to my posts, twisting all my arguments into straw men which you then ineptly flail against-- then after I point out that you've twisted everything I've said into a barely recognizable form, protesting that you understand English better than I do.

 

 

 

Ahem... You so obviously love me because you'll respond to every single one of my posts (Just about) even if they're not directed at you, typically resorting so some kind of ad hominem in the process. It's amazing how you accuse me of twisting your arguments around when you so blatantly ignore any type of argument I make instead choosing to focus on some completely irrelevant topic.

 

 

 

Since you maintain that to be the case, it's hard for me to understand how you could complain about me correcting your arguments or attempting to patronize you, as that would be an absurdity.

 

 

 

How can I? Fairly easily. Anyone with a set of working eyes and grade-level reading skills would be able to see that much.

 

 

 

So yea, I opt for the "there's no point in debating with me" option, you should stop. Better not respond to Qeltar either, might bring old memories of debates with you and threaten the detente.

 

 

 

Here's how the sequence of events usually work out. I respond to someone else's posts. You then enter and proceed to insult/patronize me. I respond. You continue to patronize me. I respond. You question my reading skills. I respond then leave. You respond. Time passes. I respond to someone else's posts. You show up again... And well, you get the point.

 

 

 

*Shrugs*

 

 

 

Oh, and for the record, I don't have a problem with anyone. If you have a problem with me well... That's your problem :P

[quitthegame]

Sly, I thought you offered not to debate me anymore... was that a joke?

 

 

 

 

...And you also don't analyze economics in English classes, either :roll:. The fact that you can only respond in a patronizing way to my posts while using really, really bad ad hominems sees to it that you're the only thing ignorant around here is you. But I digress.

 

 

 

 

 

You've been slinging that ad hominem phrase a lot lately, but I suspect you don't know what it means. So, while I'd still prefer that you just stop responding to my posts, if you're going to continue, how about you give an example of an ad hominem response that I've used against one of your arguments. Just one.

[Duke_Freedom]

That's not what I mean... I'm not saying that a price bubble is a quantum effect, where the probabilities don't resolve until we take a measurement and collapse the waveform-- although I'm not denying that either. I'm approaching it with the idea that it's too complicated for us to fully understand, so I can temporarily grant your statement that something is either a price bubble or not, and still estimate the uncertainty in our specific evaluation, right?

 

 

 

They are a price bubble or they are not. Claiming anything else means you require external changes to them being a price bubble.

 

 

 

Yes, the real market is complex - reason why you have to simplify concepts and analyze the simplified situation according to normal theory, which allows for much more definite statements than arbitrary "chances on price bubbles" that don't really give us any information other than that you admittedly don't know how the markets work.

 

 

 

I don't see that as getting into a gray area, in that in my mind as soon as we start talking about phenomena so complex that we have yet to fully understand them, we're already in the gray area. Seriously, do you think your evaluation is 100% accurate, even though the market clearly exhibits chaotic behaviors?

 

 

 

I'm not aware of what significance the 'probability' of there being a bubble has to this discussion.

 

 

 

I also don't believe you're being consistent by first claiming that talking about "chances" of there being a bubble is relevant while later claiming against Agamemnus that it is not useful to discuss "probabilities" of there being a bubble - which is clearly one and the same thing. :roll:

 

 

 

I thought we were done with the "required". For any specific instance, how could one prove that the an external change was "required", not just a catalyst for a preexisting readiness to crash? Again, you're right back in the gray area of subjective evaluation.

 

 

 

Because you are unable to proof that rares would crash without external events, while I am able to defend that they would not (under certain assumptions that were true for a long time, but are now no longer true hence me not making any definite long term statements at all at the moment). I'm seriously getting tired of this and would urge you to analyze the situation of a market that has:

 

 

 

- rare items (which, if anything, only drop in supply)

 

- a stable environment

 

- steady population growth

 

- steady money supply

 

 

 

Under these circumstances, you simply can't come up with an argumentation that rares are a bubble (on the long-term), while that is exactly what you have been arguing continously everywhere.

[quitthegame]

 

They are a price bubble or they are not. Claiming anything else means you require external changes to them being a price bubble.

 

 

 

This isn't relevant to what I said. My question was simple, whether you thought there was any uncertainty in your evaluation, and though you skated around the question by continuously talking about the situation in the third person when I clearly asked you only that one simple question, I think I've finally pinned you down to a yes. But when you go around claiming that you are 100% correct, and then reinterpret events after the fact so that you are still 100% correct, that's not science, that's religion. Not much point in continuing the discussion under those parameters.

 

 

 

Yes, the real market is complex - reason why you have to simplify concepts and analyze the simplified situation according to normal theory, which allows for much more definite statements than arbitrary "chances on price bubbles" that don't really give us any information other than that you admittedly don't know how the markets work.

 

 

 

All that simplification says to me that you admittedly don't know how the markets work either ~_~. Which is fine, except you're the one claiming 100% certainty.

 

 

 

I also don't believe you're being consistent by first claiming that talking about "chances" of there being a bubble is relevant while later claiming against Agamemnus that it is not useful to discuss "probabilities" of there being a bubble - which is clearly one and the same thing. :roll:

 

 

 

No, I was telling Agamemnus that just because I maintain that a certain thing is nonzero probability doesn't mean that I want to debate over the specific probability of the event...something that would have been clear if you'd quoted that instead of badly paraphrasing it. That's a low blow.

 

 

 

Because you are unable to proof that rares would crash without external events, while I am able to defend that they would not (under certain assumptions that were true for a long time, but are now no longer true hence me not making any definite long term statements at all at the moment). I'm seriously getting tired of this and would urge you to analyze the situation of a market that has:

 

 

 

Why do I have to prove my position, but you only have to defend yours? That's ridiculously unfair.

 

 

 

- rare items (which, if anything, only drop in supply)

 

- a stable environment

 

- steady population growth

 

- steady money supply

 

 

 

Under these circumstances, you simply can't come up with an argumentation that rares are a bubble (on the long-term), while that is exactly what you have been arguing continously everywhere.

 

 

 

I provided a link to a scientific paper that came up with bubbles in conditions seemingly even less likely to produce bubbles than this one. Seems to me that's great evidence that it's possible that there could be a bubble in the prices of rares under the conditions above.

 

 

 

Well, it's a shame that it took me this long to get you to admit that you don't think there's any uncertainty in your analysis of the RS economy, despite it being done on a simplified model which should obviously introduce uncertainty, but at least we finally found what it is we disagree on. There's really no point in continuing to argue with someone who is that certain of being correct, and I can't even wait for the bubble to collapse to declare victory because you'll just find some "reason" why it collapsed that means you're still 100% right, so I'm just going to have to declare victory now by virtue of your hypothesis being non-falsifiable and therefore non-scientific--somewhat of an anti-climactic end but it is what it is.

[Duke_Freedom]

My question was simple, whether you thought there was any uncertainty in your evaluation

 

 

 

Well, it's a shame that it took me this long to get you to admit that you don't think there's any uncertainty in your analysis of the RS economy, despite it being done on a simplified model which should obviously introduce uncertainty, but at least we finally found what it is we disagree on.

 

 

 

The analysis is correct within the validity of the assumptions and simplifications. There is no room for uncertainity within the model. If you are to challenge anything then you should point out what you consider to be wrong in the assumptions and simplifications instead of just baselessly claiming that there are uncertainities in my analysis. You have never done that so far.

 

 

 

Then again your hostility is not too surprising, because you seem to be a purely theoretical mathematician who apparently does not understand the more practical approach of applied mathematics which oftenly requires the outlining of assumptions and simplifications to create a model that describes a (somewhat idealized) reality, but which is (hopefully) still applicable to analyze the reality.

 

 

 

I find your "claim on victory" rather childish. In fact, it seems you accuse me of making assumptions that assert my analysis is right, while making various claims about "the complexity of the situation which makes it *unanalyzable" yourself, which is evidently an assumption on your part that asserts you are right about uncertainity regarding a possible price bubble. So pot please stop saying the kettle is black.

 

 

 

* = In fact, if that claim would be true, then it would have extreme consequences in the sense that everyone could be right about any (ridiculous) statements they might make, as (according to the claim) the situation would be too complex to analyze whoever is right anyway.

 

 

 

Hence, I think we are done with the discussion here.

[ReapMe]

heh i just went on forums, blue phats are like under 400M

 

I sold 4 for 540=550 each just 3 months ago 8-)

[quitthegame]

 

The analysis is correct within the validity of the assumptions and simplifications. There is no room for uncertainity within the model. If you are to challenge anything then you should point out what you consider to be wrong in the assumptions and simplifications instead of just baselessly claiming that there are uncertainities in my analysis. You have never done that so far.

 

 

 

Ahh that's not what I meant :( , I'm sorry that I couldn't communicate my point more clearly before. But, that large of a misunderstanding gives me new hope for our discussion. When I said "evaluation", I didn't mean "evaluation of the model's mathematical consistency", I meant your evaluation of how often the model doesn't match reality... a probability that is important to consider, yes? Prima facie, since the model is simpler than the real world, that probability is nonzero. Your model is well-constructed within its framework, and the assumptions and simplifications are not wrong, but they are still just that, simplifications. If you are asking specifically what in your simplifications makes them different than reality, the differences are those of any standard analytic economic model: it takes the real world economy, which would be expressed as a tremendously complicated nonlinear differential equation, looks at the constant, polynomial, or periodic behavior, which can be modeled by a linear differential equation, and then decides which behavior seems significant, by a subjective interpretation, and comes up with LDE's for that behavior. Since a bubble is the kind of divergent, nonlinear behavior that this process specifically excludes, it is impossible for the model to predict or model such a bubble. If you have been thinking that I have been criticizing your model for not predicting such behavior, then there has been an error in communication, since I would never criticize your model for not doing the impossible. Since this behavior is nonlinear, and nonlinear DE's are not practically analytically solvable, the only way to study such behavior mathematically is via simulation, or a subjective process of classification. My only point has always been, that it's important when constructing such models to understand how well they actually model the real world, which, assuming the model is well constructed, doesn't consist of criticizing the model, but instead looking at history to figure out how often the real world has exhibited the nonlinear behavior that the model excludes. Ergo, I've been bringing up historical examples, instead of criticizing your model, because I think your model is great for what it is, but don't agree that modeling the linear behavior of a system helps to predict frequency of extreme nonlinear behavior. What does help to predict the frequency of such behavior? Well, that's a conversation I'd hoped to have, once I convinced you that such behavior was possible. I'm hoping that our disagreement was caused by a misunderstanding, and that this post has remedied it.

 

 

 

* = In fact, if that claim would be true, then it would have extreme consequences in the sense that everyone could be right about any (ridiculous) statements they might make, as (according to the claim) the situation would be too complex to analyze whoever is right anyway.

 

 

 

 

Scientifically speaking, everyone is assumed to possibly be right about any ridiculous statements they make, if their statements are not testable, then they are not science, if they are testable, then the tests will show whether they were right or not. Realistically, not every crackpot claim is actually tested, because time is finite, but most such claims contradict tests that have already been repeatedly conducted. It is indeed true that the class of statements that are simple enough to be reliably and repeatedly testable, and therefore possibly scientific, is vanishingly small in the universe of all possible statements, but I don't see how that is extreme consequences. I'm not sure I'm addressing your point here, since I'm not sure if you were making a scientific or philosophic point, but perhaps I guessed right.

 

 

 

- rare items (which, if anything, only drop in supply)

 

- a stable environment

 

- steady population growth

 

- steady money supply

 

 

 

I quote this to double-check that this is the model you refer to. As you can see, it matches the common procedure for creating a standard analytic model using LDE's, it looks at the emergent properties of a complex nonlinear system, and takes the significant linear properties for its assumptions. You haven't gone so far as to write out the LDE's yet, but the data is lacking in several areas so that would be a sketchy endeavor anyways. Again, it would be mathematically impossible, with this technique, to construct a model that exhibited bubble-type behavior.

 

 

 

 

 

Just for fun, let's analyze a recent bubble, to provide some perspective, and a starting point for a new discussion, not on whether bubbles are possible, but on how they form. Let's choose the dot-com bubble of the late 90's.

 

 

 

first, how does it look in your model-form:

 

 

 

- increasing companies and infrastructure, with the expansion accelerating with time

 

-relatively stable environment, short on wars or major disasters, favorable economic situation in other sectors.

 

-steady population growth

 

-steady money supply and low inflation

 

 

 

Clearly, if you do the LDE's for this situation, the prices of companies and infrastructure would change fairly steadily, first holding stable, then beginning to drop away as the amount of companies and infrastructure outpaced population growth. We know what actually happened is that the prices went on a long upward surge, lasting for many years, until the bubble reached a peak with countless unprofitable but cool-sounding companies and a vast overcapacity in laid fiber. People seemed to reason that since everyone was using the internet, just like everyone had adopted the personal computer the decade before, that the internet companies would make money like the personal computer hardware and software companies had the decade before. But, a metaphor does not a business model make, the bubble crashed, the useless companies went under, and the fiber went dark. Was a bad time, as I lived in San Jose at the time at one of those unprofitable companies :P .

 

 

 

According to the efficient-markets theorists so popular in the 70's, bubbles were a product of ill-regulated and slow markets, and wouldn't happen in today's regulated and computerized markets, a theory which took a hit in the '87 crash and another more fatal one in this dotcom crash. The irrationality theorists more recently postulate that the conception of the economic base unit as a rational actor is not accurate, that actual humans make irrational economic decisions constantly, and that this can explain bubble behavior. I believe that they are right in that humans make irrational economic decisions constantly ( the irrational ignorance of flawed business models above is only one example,), but I don't believe that this fully explains bubbles. If one looks at the economic unit in a sustained bull market, there is the short term knowledge that the commodity is extremely likely to rise again tomorrow, and the knowledge that in the long term, the commodity may crash, or it may reach a new plateau and settle down. I think that in the interaction between the weightings of each individual between the short and long term expectations for the commodity, the market may produce nonlinear behavior, which even under the assumption that each actor acts rationally, can produce a bubble. In fact, I'm not aware that economic theory considers the different weightings of short and long term expectation in its definition of a rational actor, I should go research that (I think conventionally future events are supposed to be weighted based upon the current value, derived using interest rates, but whether the bull market crashes or not would change the correct interest rate to use, which is just the kind of nonlinear self-referencing behavior I'm talking about). I should probably try to research what simulations have been done similar to my hypothesis, as well. Anyway, I hope this example helps you understand where I'm coming from.

[agamemnus]

Flammacor,

 

 

 

You make some interesting arguments, but...

 

 

 

If we assume market efficiency, so that market value = intrinsic value, then aren't we saying that bubbles are impossible?

 

Yes. That's why I said the definition of instrinsic value is not enough to define a bubble market, because that alone will be unable to define "the rest", and the definition of "instrinsic" is too broad -- it would potentially preclude a bubble market.

 

 

 

That's why people that argue under theories of efficient markets always disclaim that there are rare exceptions... because bubbles are historical fact.

 

 

 

Right, but efficient markets never cause bubbles.

 

 

 

So since we're currently discussing bubbles, it would be most unwise to use a theory that specifically disclaims that it doesn't apply to them. In experimental markets such as the one in that paper, intrinsic value is a calculation based on future earning potential. Obviously, that isn't useful for phats...

 

Why? Without any sort of bubble market the price of phats will rise all the time, and the future earnings is guaranteed and can be estimated, given we know the growth of demand and supply. (which we do, if we are to work with the condition of ceteris paribus)

 

 

 

 

but the point is that if a bubble can form absent speculation in a market where the intrinsic value is well-known, then clearly in a market where the intrinsic value is a murky concept based on rarity, a bubble can form similarly, absent speculation. That makes your definition unacceptable. It's a good definition for a certain type of bubble, though it's clearly incomplete, but I'll concede you could conduct a useful discussion of that type of bubbles using it. If you were trying to really understand bubbles though, that definition would be a bit circular, it would presuppose too much. You couldn't objectively discover all the causes of bubbles, if your definition presupposes one specific cause, right? It would at least hinder your effort.

 

It cannot. The paper you cited makes use of traders that assume irrationality where none exists if the market was efficient. In Runescape, there are/were very few irrational party hat traders because to earn this much money most players must be rational in the first place, and rationally assume this of everyone else.

 

 

 

 

 

If you were trying to really understand bubbles though, that definition would be a bit circular, it would presuppose too much. You couldn't objectively discover all the causes of bubbles, if your definition presupposes one specific cause, right? It would at least hinder your effort.

 

Again, my definition would even fit your cited paper. Those traders who assume some random percentage of others are acting irrationally are not rational themselves because they act on completely unknown values. Speculators, as I defined in somewhat casual terms, value an object at time t based on the demand of the object at time t-1. With a bit more mathematical magic, this will increase the value each tick until the demand goes lower due to fluctuations in the normal variance of the price (from actual rational non-speculative traders), sparking a re-valuation of the item for all speculative traders and driving the price down. Your irrational irrationality-sniffer traders believe the object is undervalued by other too cautious traders, so I see a parallel here.

 

 

 

 

 

 

I'm not sure the rare prices would go down after all solely based on panic, on second thought.

 

 

 

 

Based on panic, not always. Based on the closing-down of RS, definitely.

 

 

 

 

This brings to mind the common objection against the GE's slow updating, that it would impede liquidity. The question is would artificial limits to liquidity make price crashes more common, or is that not the way the causation goes? Not that I'm really against GE features causing prices to periodically crash, sounds more fun to me. :P

 

 

 

 

It would definitely impede liquidity versus a more informative G.E, because you can't check the current price of a rare (at this time), but only the "average" last day's price. You can check the price with other items by selling/buying small quantities, but there is no way to do that with rares. Against forums/the old way? Even though the "old way" was quite inefficient (you never really knew supply and demand), the price band of price uncertainty was much more narrow (not 10%). Again, the price uncertainty only exists in the G.E. because of a lack of information about previous trades. Less information means that those with many rares will be able to find this information, so it will simply take away buying and selling power from the single rares traders and put it into the hands of the dozens-of-rares traders. I don't think it will make price crashes more common as the 10% band is still there with the remaining extremely wealthy merchants still controlling the huge majority of trades -- even more than before!

 

 

 

Jagex has promised some changes to the GE. One change that can be made is to show the last 5 minute's 20 biggest trades (prices and quantities): trading transparency. Trading transparency will completely stabilize the rares market. However, Jagex has never promised trading transparency even after theoretically reading hundreds of pages of well-reasoned complaints in their own forums, and I doubt that will change. Instead, they opt to pile even more useless junk onto the GE: "a new web page is already in the works which will allow you to track item prices over a long period of time."... Note: "long" periods of time, not what is needed at all.

[baalboy5]

rares wont be untradble, everyone will be trying to sell them before Jan 1, so either they will go up or down, like always...woop-e-doo

[Monegasque07]

When you say Santa Hats will go back up, you meant like 18M or 23M?

[warren211]

I think there are several factors in the drop of rares:

 

 

 

1) RWT is gone. There used to be plenty of players who bought money with real world cash then could afford p hats. now they're ownt.

 

 

 

2) Rumors/panic. Jagex making rares untradeable? where did THAT start? why would they make em untradeable, and why would they only whisper it to a few selected players to start a crazy panic? either tell the world or keep it quiet. Pribably not true that rares will be untradeable. And then of course the rumors lead to people who panic and get others to sell their rares quickly.

 

 

 

3) Just like after construction and hunter, prices fluctuated and dropped a bit. People sold all their valuebles so they had money to get a head start on the skill. This time, people are just doing it earlier so they don't have to be sitting there waiting for the item to be sold while everyone else is starting the skill.

 

 

 

I'd say the only way to see for sure if rares will stay low priced is to wait. we have to see what summoning has in store and just wait to see how it would affect the rares. Let everyone sell their rares for cheap. The summoning hype will die, the rumors about rares untradeable will die, the panic will die. then the economy can stop fluctuating and rares will be the same.

[Duke_Freedom]

I meant your evaluation of how often the model doesn't match reality...

 

 

 

It matches reality as long as the assumptions are fulfilled. I think you are not too familiar with the procedures of applied mathematics, since you still want to place an "uncertainity probability" on the model as a whole, which is certainly not according to normal procedure.

 

 

 

Since a bubble is the kind of divergent, nonlinear behavior that this process specifically excludes, it is impossible for the model to predict or model such a bubble.

 

 

 

I also think we are still missing each other in the vague definition of a bubble as well. One of the things I am arguing against is those people that look at the price of a blue phat of 400mil now and then state that its "ridiculous" price tag must assert that it is a price bubble or that, because of the claim that rares will always go up on the long-term, they are bound to "become" a price bubble at some point in time. Sorry, but both of these arguementations are based on ignorance rather than any fundamental reasoning.

 

 

 

My only point has always been, that it's important when constructing such models to understand how well they actually model the real world, which, assuming the model is well constructed, doesn't consist of criticizing the model, but instead looking at history to figure out how often the real world has exhibited the nonlinear behavior that the model excludes. Ergo, I've been bringing up historical examples, instead of criticizing your model, because I think your model is great for what it is, but don't agree that modeling the linear behavior of a system helps to predict frequency of extreme nonlinear behavior.

 

 

 

And I have continously stated that your historic examples are uncomparable with rares. In fact, none of them even adhere to the indefinite limited supply requirement, which is rather important here.

 

 

 

Reason why I have provided applicable historical examples that actually only support the theory to be true without attaching any strings at all. I came up with comparable items like a 1933 US golden coin, famous paintings, rare post stamps. Heck, I suppose to a limited extend even gold and silver are comparable (despite not being completely limited in supply, but having a relatively low new supply versus the amount already in roulation).

 

 

 

I still want to be very clear that the statement that something will always go up on the long-term does not exclude it from experiencing extensive price loss in shorter periods of time. I think this may be our greatest miscommunication as well - I don't necessarily deny the possibility of a price bubble to "exist" on short-term periods, although I suppose that still depends on what people exactly consider a price bubble to be.

 

 

 

Gold is a good example to use therefore (despite not completely adhering to the assumption of limited supply). Over long periods of time, it has simply tracked the inflation (as is my claim with rares), but in shorter periods it has experienced extremely booming times as well as periods that one, I suppose, may refer to as bubble forming.

 

 

 

Once again - the dot-com bubble you talk about is therefore not relevant here. It was based on ridiculous profit expectations and even accounting scandals that included showing better results than that were actually made. It does not adhere to the limited supply requirement at all.

[quitthegame]

I also think we are still missing each other in the vague definition of a bubble as well. One of the things I am arguing against is those people that look at the price of a blue phat of 400mil now and then state that its "ridiculous" price tag must assert that it is a price bubble or that, because of the claim that rares will always go up on the long-term, they are bound to "become" a price bubble at some point in time. Sorry, but both of these arguementations are based on ignorance rather than any fundamental reasoning.

 

 

 

If everyone believes that rares will always go up in the long term, then that unity of opinion is a warning flag that rares may be in a bubble market. Mathematically, if EVERYONE believes that rares will always go up in the long term, than they should buy them at any price, which will further raise their price in an infinite cycle. Obviously, since the supply of money is finite, there is a price above which they will not rise, which is a contradiction. But, a warning flag is merely that, a warning flag, not a sure thing, and I agree with you that the mere existence of the claim does not imply that they are bound to become a price bubble at some future time, and I agree with your first claim unreservedly.

 

 

 

 

 

And I have continously stated that your historic examples are uncomparable with rares. In fact, none of them even adhere to the indefinite limited supply requirement, which is rather important here.

 

 

 

Well real estate is in limited supply. But anyway, I believe my reply to your next paragraph explains why the other examples are comparable in only a limited respect.

 

 

 

I still want to be very clear that the statement that something will always go up on the long-term does not exclude it from experiencing extensive price loss in shorter periods of time. I think this may be our greatest miscommunication as well - I don't necessarily deny the possibility of a price bubble to "exist" on short-term periods, although I suppose that still depends on what people exactly consider a price bubble to be.

 

 

 

Yes, it is hard to exactly define a price bubble, because of its nonanalytic mathematical nature, which is why its definitions are more subjective. Let's attempt to divorce the issue of rares always going up in the long term, from the existence of short-term bubbles, it is easy to lump them together because there exist two-way causative influences from each to each, but it's clear to me that they are still two separate issues. I agree that the overlinkage of the two was the source of our greatest misunderstandings.

 

 

 

Once again - the dot-com bubble you talk about is therefore not relevant here. It was based on ridiculous profit expectations and even accounting scandals that included showing better results than that were actually made. It does not adhere to the limited supply requirement at all.

 

 

 

It's relevant to short-term bubbles, but not useful for the second question of the long-term value of rares, I agree there.

 

 

 

I'm going to think on the long-term question, separating it from bubbles entirely, and post again when I have more time.

[quitthegame]

 

Right, but efficient markets never cause bubbles.

 

 

 

But bubbles keep appearing regardless of how many recommendations of the efficient-market theorists we follow, so perhaps it's time to ditch their theories altogether?

 

 

 

Why? Without any sort of bubble market the price of phats will rise all the time, and the future earnings is guaranteed and can be estimated, given we know the growth of demand and supply. (which we do, if we are to work with the condition of ceteris paribus)

 

 

 

So you assume no bubble market, and you assume the price of phats will rise constantly, (via assuming the demand will continue to rise constantly), now that you've assumed everything that's been under discussion, what is there left to discuss? You've assumed yourself into a small and barren corner.

 

 

 

It cannot. The paper you cited makes use of traders that assume irrationality where none exists if the market was efficient. In Runescape, there are/were very few irrational party hat traders because to earn this much money most players must be rational in the first place, and rationally assume this of everyone else.

 

 

 

Now you're assuming everyone to be rational, before discussing a paper about irrationality. Now you can have nothing useful to say about the paper...seriously, do you ever discuss a topic without assuming everything you're going to discuss on beforehand?

 

 

 

 

 

If you were trying to really understand bubbles though, that definition would be a bit circular, it would presuppose too much. You couldn't objectively discover all the causes of bubbles, if your definition presupposes one specific cause, right? It would at least hinder your effort.

 

Again, my definition would even fit your cited paper. Those traders who assume some random percentage of others are acting irrationally are not rational themselves because they act on completely unknown values. Speculators, as I defined in somewhat casual terms, value an object at time t based on the demand of the object at time t-1. With a bit more mathematical magic, this will increase the value each tick until the demand goes lower due to fluctuations in the normal variance of the price (from actual rational non-speculative traders), sparking a re-valuation of the item for all speculative traders and driving the price down. Your irrational irrationality-sniffer traders believe the object is undervalued by other too cautious traders, so I see a parallel here.

 

 

 

I don't see how your response about the paper addresses my more general philosophical arguments that you quoted. As to your actual response, basically what you're saying is an analysis that there won't be a bubble, but the paper is about how those preconditions "did" cause a bubble, I don't see what the use is of giving an interpretation that doesn't fit the data.

 

 

 

Jagex has promised some changes to the GE. One change that can be made is to show the last 5 minute's 20 biggest trades (prices and quantities): trading transparency. Trading transparency will completely stabilize the rares market. However, Jagex has never promised trading transparency even after theoretically reading hundreds of pages of well-reasoned complaints in their own forums, and I doubt that will change. Instead, they opt to pile even more useless junk onto the GE: "a new web page is already in the works which will allow you to track item prices over a long period of time."... Note: "long" periods of time, not what is needed at all.

 

 

 

I believe that Jagex has made most of their decisions about the GE with the goal of reducing server load. Data over long periods of time = less server load= what I would expect from Jagex.

[xown4g3s]

rares wont crash or become untradable

[Duke_Freedom]

I am glad we seem to be getting more on one line now, I suppose we should have started to make the distinction between short-term and long-term explicit much sooner already.

 

 

 

If everyone believes that rares will always go up in the long term, then that unity of opinion is a warning flag that rares may be in a bubble market.

 

 

 

Oh I can surely agree that unity of opinion on anything is generally a good reason to be cautious. However, as you already mentioned, it is not more than a warning signal, and in the case of rares it seems to give plenty of false alerts regarding long-term claims.

 

 

 

Mathematically, if EVERYONE believes that rares will always go up in the long term, than they should buy them at any price, which will further raise their price in an infinite cycle. Obviously, since the supply of money is finite, there is a price above which they will not rise, which is a contradiction.

 

 

 

Assuming the extremes indeed leads to contradictions, though the extremes are obviously not true anyway. Apart from there being a limited money supply at specific points of time, another indirect assumption you make here is the infinite investment horizon of potential rares buyers. In reality, investors don't buy to hold forever, but "plan" (which shouldn't be taken too literally) to sell it some time again. If they do hold forever then they are not really investors, but collectors (who actually drain the supply "on the market").

 

 

 

Either way, simple economic theory can already point out that (ceteris paribus) rares are bound to increase equally to the money supply growth / inflation as an upper bound on the long-term (under assumption of a positive or unchanging population base). If rares would increase faster in price than that, it can be proven that they will "outgrow" the total size of the economy at some point, which is impossible. (For completeness: this obviously does not forbid rares from increasing in price faster than the money supply growth / inflation during specific periods of time, although if they do so, that would - at the very least - point into the direction of bubble forming on short-term)

 

 

 

We can turn that argumentation around as well, proving that rares can't grow slower than the money supply growth / inflation either though (again all of this on the long-term and using ceteris paribus). If we would assume that rares would grow slower than the money supply / inflation, then they would become "relatively" worthless over time - this would contradict with the assumption ceteris paribus, as a new valuation of rares to being "relatively" worthless would imply a (sudden) significant change in public opinion regarding the value of rares. Hence, rares have to grow equally to the money supply growth / inflation on the long-term.

 

 

 

Ofcourse that is all nice theoretical talk, but it obviously shouldn't be taken too literally as the reality has many other factors that distort the idealized situation that is described above. Nevertheless, this theoretical approach does give an interesting insight of the situation. In fact, it is the basis of another statement I have made on many occasions, which is that rare prices roughly follow the money supply growth / inflation on the long-term.

 

 

 

Perhaps you recall our other little discussion about that, but as you can see here: I already hypothesised that statement based on theory before making any observations at all. The actual observations I did on it were, to me, only to check whether this theory actually seemed to fit in reality or not, which I believe it did. I don't really want to restart that discussion here though.

 

 

 

short-term bubbles

 

 

 

While many short-term crashes had external factors that caused them, there are certainly a few to name that were clearly based on overspeculation and market hype. Before I go further, I just want to point out that I believe the notion "short-term crash" is just as subjective as "short-term bubble", but I really don't want to get into such a debate (nor do I think it is useful to do so anyway) so I think we're better off intentionally keeping those notions vague.

 

 

 

I just discovered that I forgot to mention the most evident real short-term bubbles, which were santa hats in december 2003 and in december 2004. In anticipation of christmas 2003, santa hats were overhyped extremely, reaching heights of a whooping 300K per hat (yeah, what a ridiculous price! :D).

 

 

 

Many investors had actually stocked up santa hats in the month(s) before december 2003, hence creating an artifical supply of santas. Since many of these investors started to unload their hats around/after christmas and as the christmas market hype was over, they began to drop for 3 months, in which their prices were halved. It has to be said that all other rares were actually going up in price during this time. Once they reached rock-bottom, it still took them another 3 months before they bothered to start going up in price again.

 

 

 

The santa hat bubble in 2004 went much more rapidly, and started much sooner as well. Prices peaked at 750K at the start of december that year instead of around christmas time and lost ~45% of their peak price within about one or one and a half month time, which was then followed by another one month sideways period after which they went back up again.