Chapter 11: The Grapes of Wrath, by John Steinbeck – Part 2

To understand what happened and how it happened, it’s important to see things from a different perspective.

About an hour after the Columbus Server was brought back online and the culling announcement was made public, an emergency meeting was held between all the executives and the analytics department of the Crafting Guild. The analytics department were all basically economists who were in charge of following and predicting trends, modeling, forecasting, and enterprise level planning whereas the executives just sat at the table and pretended that they contributed something beyond taking up space.

After poring through the announcement, analysts determined that in the immediate short run, aggregate demand for equipment in the C-ranked category would spike due to 23% of the player population heavily competing against each other in order to try to get ahead or stay where they are, followed by an extreme price collapse after the culling had taken place. The price collapse was inevitable as not only would demand for equipment coming from the C-ranked cohort fall due to the need no longer being price inelastic, but also because 20% of the entire cohort’s aggregate demand would also be eliminated via death. The elimination of that segment would in turn create a massive supply glut of C-ranked equipment as not only would aggregate demand fall precipitously due to the reduced population, the estates of the recently deceased and more specifically, their equipment, would be passed down to their beneficiaries and therefore hit the market simultaneously upon liquidation. Thus it was determined that even if C-ranked equipment were no longer produced during that time, it would take anywhere from months to years for the supply glut to be eliminated by organic promotion of the D-ranked. To a lesser extent, the demand for B-ranked equipment would also fall with the population decline of the C-ranked cohort but the price collapse could be mitigated by curbing production.

As a result of the new economic reality, a certain plan was enacted.

After analyzing census data and internal data sets regarding projected C-ranked spending behaviors, various profit maximization methods and pricing strategies were modeled and it was determined that it was most profitable to sell less C-ranked equipment so long as it was charged at exorbitant premium prices than it was to sell C-ranked equipment at lower mass consumption prices. And so, the Crafting Guild opted to adopt a premium pricing strategy.

The premium pricing strategy was ideal because the Crafting Guild already possessed a virtual monopoly when it came to the production and sale of all equipment and they controlled it from the bottom up. While it was possible for everyone to engage in crafting, the ability to craft valuable equipment had very high barriers of entry. Training a craftsman takes time and resources, both of which would normally be prohibitive but could be provided to a Crafting Guild apprentice. Equipment recipes which detailed how certain products were made are closely guarded trade secrets. The Crafting Guild also enjoyed preferred vendor status when it came to bulk purchases of materials from the Hunter’s Association, which made competition difficult on a cost basis due to collusion and the creation of an equipment cartel. Having the infrastructure in place to support all of this gave the Crafting Guild a decisive advantage over the rise of independents and rivals. As a result of these barriers, there was little to no competition.

Every piece of equipment created in Butterfly’s Dream was designed to degrade on purpose. When equipment gets used, it gradually loses durability although that durability can be restored through repairs. If item durability reaches 0, the item is lost, hence the need for repairs. Equipment also needs to be leveled up as the player levels up in order to reach maximum effectiveness, which equates to an upgrade once every 5 levels. These mechanics were introduced precisely to induce artificial scarcity through planned obsolescence. Nothing needs to degrade in a virtual world – the only reason why it does is by conscious game design.

Because every piece of equipment needs to be continually repaired, it creates continuous demand for repair services but not everyone possesses the skills, knowledge, equipment, and resources required to facilitate these repairs. Even without high barriers of entry, it just wouldn’t be economical. As a result, specialization is the only logical move. However, because the Crafting Guild was so big and possessed so much infrastructure, it was able to effectively price out all of its rivals and without legislation or political will to keep them in check, nothing stopped them from dominating repair services through vertical integration. With both primary production repair services locked down, there were no substitutes or alternatives to buying equipment.

The stranglehold the Crafting Guild possessed in both the primary production of equipment and repair services also allowed them to quietly and effortlessly influence the market price at large so long as they could eliminate any remaining retail competitors on the resale or second-hand market. And so, while all the C-ranked and their loved ones were desperately grinding in the fields, the Crafting Guild spent all that time buying up C-ranked equipment from the Auction House until they gained majority control of pricing in the C-ranked consumer market. By systematically eliminating competitors and controlling the floating supply, the Crafting Guild was able to get everyone else on board with their pricing model by either matching their prices or being bought out. Thus, the Crafting Guild successfully cornered the market.

In terms of absolute quantity, the Crafting Guild only possessed about 17% of the total supply of C-ranked equipment as most of the C-ranked equipment was privately owned. However, most of that equipment was also currently being used and therefore could not be sold, or rather would not be sold in a way that would affect supply in any meaningful way. Why? Because any C-ranked individual that wanted to sell their equipment and exit could exit at a profit but then they’d have to buy similar equipment at a similar market price which for all intents and purposes, nets 0 change in supply. Therefore, all the Crafting Guild needed to do was control the floating supply – once they did that, they could set whatever price they wanted because they were the only sellers and they controlled a virtual monopoly. And that’s the problem with giving businesses a monopoly over a critical resource with inelastic demand.

The justification was easy – 20% of the C-ranked population was going to die regardless in the aggregate, it doesn’t matter who gets access to the equipment. To the Crafting Guild, the only difference was how they would be positioned in the days immediately after the culling and the months and years after. This premium pricing strategy which cornered the market through a virtual monopoly by controlling the floating supply was designed to extract the maximum possible value out of the C-ranked population and it didn’t matter who or how many people got priced out. It didn’t matter that the C-ranked would be forced to sell other assets like virtual homes to afford Crafting Guild goods and services – it was even good that all those homes would hit the market because then it would create selling pressure on real estate and depress those prices, real estate which the Crafting Guild could then buy up for cheap. Even if the Crafting Guild didn’t cause the culling themselves, they certainly took full advantage of it to trigger the biggest wealth transfer out of the C-rank class in modern history.

And so, the directive went out and every Crafting Guild branch and affiliate carried out their marching orders. It wasn’t personal. None of it was personal – it was simply economics. This is just how the free market works when it’s left alone to do what it does best. The people in charge don’t necessarily want to hurt you, they just don’t care what happens to you because they’re too concerned with what happens to themselves.

But it does make you wonder though: What would happen if you changed the words “C-ranked equipment” with something more familiar like “Healthcare” or “Housing”?

Food for thought.