Burn Jita: An Industrial Perspective

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Despite being in TEST, I feel smarter having read this. You seem to have explained a wonderful example of how straight Econ-101 Supply\Demand dramatically oversimplifies true market behavior.Thanks a bunch for this - I hope I get to apply it somehow in the near future.
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Agreed, this is a wonderful piece that is quite insightful.Thank you Lockefox.
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nice article
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Good analysis of market, I always been intrigued how eve market mirrors the RL markets in some respects. It make sence since EVE market in someways controlled by people with the same behavior patterns as forex or futures traders.If only CCP developed the market trading to more advanced level where you could short sell, place put options, stop loss level, profit take, I would never undock.
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A genuinely good read and excellent analysis. Bravo!
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This is now bookmarked on Firefox for me
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Dangerously close to "Eve is [a] Real [teaching tool]."
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You're completely discounting the fact that people were assembling and running corp/alliance contracts for thrashers, brutix, tornados, and catalysts prior to . Those people had months to prepare pre-fitted hulls, so when the market went nuts, they could profit and adjust. I personally was manning about 70+ contract slots throughout the event. I want to say i completed about 200ish contracts.
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What EVE needs is a player created Investment House. But there would need to be a stock market exchange created. Corp and alliances could issue public stock to raise isk. Pay dividends. Then shorting would be possible.
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I have no public metrics to track that behavior. Though that is a good explanation to why volume was depressed (beyond expectation) on the killing equipment.Unfortunately contracts remain a dark spot on the industrial data radar, since there are no out of game feeds that allow you to track that secondary market. Though, the preparation for contracts can be seen as volume spikes the week before the event, but those spikes did not drive the price like Burn Jita did.Sustained volume washes out, spikey changes are where profiteering can occur.
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How did you made those beautiful graphs?
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I do a follow up on the behind-the-scenes on my personal blog http://eve-prosper.blogspot.co...
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Thank you.
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DODIXIE FOREVER!
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Dear sirWhile the idea seems attractive at first, it would be a very flawed gameplay feature. Heavy constraints would have to be put in. That short selling for example would have to be blocked for at least 2-4 weeks when new items that are being released. Other ideas seem more valid, yes, but would have to be heavily restricted and policed because of the fact this is still a game where new content needs to be released and shifts in balance are being implemented all the time.While I like the fact that you are an enthusiastic person, it seems poorly researched.
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Your counter-intuitive plunge of mineral values, increased sales volume and price slide is simply explained by the devblogs that appeared on 26/04. The slide in sales price is quite normal, it followed the mineral prices. The increased volume of them selling is significant however, even though some of is is clearly due to the announcement in the devblog.
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Rational expectations. The average person HAS them, but the average person does not think about OTHER PEOPLE having them.This explains how ludicrous ideas like socialism can still exist in our world.
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Good perspective, great write-up. I find it very interesting that the idea of Jita as the cheapest place to get anything has actually gone out the window; there's a fair share of items on the market in hubs like Amarr that are cheaper than what's on the Jita market.
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Anywhere-But-Jita is a topic that deserves its own post. I still lack the tools to effectively analyze the whole picture yet, but it's in the to-do queue.As a manufacturer, it's incredibly difficult to justify pulling out of Jita purely because VOLUME is king to me. But as Jita becomes more and more difficult to work with, the more players will overflow to other hubs... which is good in the long run. I just lack the tools to prove it, yet.
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I don't totally agree that a stock market is a great idea for EVE (we already have a vibrant commodity market), I would like to see some sort of better mechanics for player-to-player credit. Right now it's all informal and hard to enforce, and any attempt I've ever seen as a gameplay design was laughably scammable. With the addition of a robust means of credit, I think a lot of the other desires of a virtual stockmarket would build themselves... but that's all pie-in-the-sky IMO.
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Advancing market options like that would require debt enforceability, and that's going to be tough to do. Maybe you could require a deposit bond to be placed against a short order, but then what's the point?
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How do you stop people using disposable alts to evade debts and losses?
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And even more ludicrous ideas like Objectivism.
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You could implement a credit history. When individual or corporation takes out loan that would be publicly listed in their info. If loans are discharged due to default of the borrower that person or entity would have hard time getting loans. Just like in RL if you have no credit history "new" you ether get no lenders or are considered high risk and thus loans are given out at much higher interest rate. Through API we could build entire slew of banking algorithms that would calculate you virtual FICO score based on multiple risk parameters.On the backside the lender can choose to purchase loan insurance based on value. In case of default the lender would be compensated the portion of the principal borrowed based on the level of default insurance.

As we wait for Odyssey data to shake out, there is still a lot to talk about. As it has been almost 8 weeks since Burn Jita, the data has played out and the market has returned to normal.

 

Above is an averaged report of freighter market-cost vs build-cost in The Forge (Jita) through April-May. Freighters are interesting because they are essentially 100% minerals, sell at pretty steady volumes, but have a long time-to-market. This makes it a less volatile market to watch, and thus the primary target of Burn Jita.

Activity during Burn Jita 2013 was largely as expected. The market was put on hold while Jita became impassible. This is reflected by a flat and depressed sales volume over the event, with very stable prices for materials and final product. People who prepared ahead of time already had their affairs in order, and anyone who still needed items delayed their purchases.

The strange thing to note is the weekend after. A spike in sales volume, a plunge in materials value, and a general slide in sale price. To everyone who has taken Economics 101, this seems to be completely counter-intuitive. A spike in demand should move the price of an item up, and freighters can take up to 2 weeks to go from raw minerals to finished freighter, (which is not reflected in the above graph). This picture shows the exact opposite of expected behavior.

Under the Surface

The truth of the matter is very few people are caught off guard by Burn Jita, even if pre- and post-activities outside the announced time did catch some extra prey. Unfortunately for the sponsors, word-of-mouth and news before the event warned the vast majority of potential victims. The best defense is to remember your first rule of EVE: Don’t undock what you aren’t willing to lose.

This explains the freeze on demand, and starts to explain the fallout the weekend after. What happened here was the entire industrial supply line was put on hold, but did not stop. This lead to a rubber-band effect as the floodgates opened when the routes were safe. Supply outstripped demand, and prices fell.

The most interesting thing is this isn’t so much that a particular item class saw an inverse response, but that the effects can be seen across all levels, from raw materials to finished product. Below is an amalgam of raw mineral prices over the 4 week span in question.

The other clearly illustrated point here is that this starve-and-gorge cycle was a reasonably quick event. Normality is returning at expected rates in relation to market volumes. As the mineral charts show, prices rebounded right back to normal by the following Monday. Many other products will take longer to get there, though. While the exact dips in prices are masked by scale in the above graph, they show quite clearly on the freighter build chart. Furthermore, accounting for “Real Build Time” means these cheap materials will take some time wash through the market.

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Electrical engineer by day, hard core industrial player, 10th level black belt with a spreadsheet, and aspiring app developer by night. Can be found in the #tweetfleet as @HLIBindustry