Archive for November, 2011

Why do we buy something, and not the other thing?

November 28, 2011

People in the Grendel market simulation have needs. There are three tiers, corresponding to necessities, nice to haves, and luxuries.

How much are people willing to pay for a necessity?  Create a budget (half of current cash, for example), and divide it by the total number of necessities.  So if you have $100, and your necessities are six bread and four fruit, you’re willing to spend $10 per item.

But your necessities aren’t really six bread and four fruit.  A better approximation is “ten of something food-like.”  So if bread is selling for $12 per item, and fruit for $8, you’ll spend your budget on, for example, seven fruit and three bread, paying $102 and being slightly less happy than six bread and four fruit would make you.

Bread isn’t really selling for $12 though — that’s just what the baker told you. You could offer $10 and see what happens. Maybe he’ll accept that, or maybe he’ll make a counter-offer of $11. That might be okay.

If you wait until the end of the day, the bread might be cheaper. The fruit too, but maybe the discount is less because the fruit isn’t about to go stale. If you were buying fish, you’d probably get a really good price at the end of the day.

But if there’s not enough bread to go around, you can’t wait, because there won’t be any left to buy. People can spend energy to get to the front of the queue.

These are some of the things Grendel goes through to make the markets work.  I’ll quantify it in a later post.

Market simulation

November 25, 2011

After about ten attempts in as many years, I think I’ve finally cracked market simulation.

Tracking supply and demand in order to adjust prices does not work unless you add an artificial dampening mechanism.  Victoria 2, for example, limits the maximum divergence of a commodity from it’s “base” price.

And there isn’t just one price for a particular item; a loaf of bread in the morning is worth more than the same loaf in the afternoon.  Buyers have different resources available; supermarkets use mechanisms like coupons to charge different prices for the same product.

In the real world, prices are only indirectly related to supply and demand.  A better model is haggling, or negotiation (as it’s called for respectability).