Economics of dating platforms

This post is about some special aspects on the economics around dating platforms. I will discuss how price discrimination can benefit everyone, the rare phenomenon of increasing marginal returns and how incentives might make dating platforms choose to be bad at matching people with each other.

Single people use dating services (such as Tinder, Grindr, match.com among many many others) to find a partner. When they find a good match they will be off the market and stop using the platform. In other words, people use dating apps in order to find a reason to stop using them. The issue for these dating platforms is that it’s not easy to get paid for matching people with potential partners. This being said, they can’t just straight copy a business model from other companies who provide similar matching services such as matching companies to potential employees; or for another example, matching residents with housing. Different dating services use distinctive models to bring in revenue. They might charge the user to be able to use the service, have ads on the platform or allow people to use some simpler version of the app for free and then offer a premium service costing money.

It’s important to notice that a company that wants to maximize it’s profits is not necessarily a company that seeks to provide the best matchmaking service. If the company gets their revenues from ads on the platform then they want as many users as possible, not matching as many people as possible who will then leave the platform. At the same time, if the platform doesn’t manage to match any new couples, people will leave for the same reason (given that they are informed of this). So the optimal matching-strategy for the company will be different depending on what their income scheme looks like. So, if you are not paying for a service you are using, that gives you a hint that you are not the customer in their business, you are the good that they are selling. This is not to say you are being fooled, it might still be a great app if the incentives for the company are good.

Giving people access to a simple version of the app and then offer a premium version with additional features is a kind of price discrimination. The price difference obviously can’t be explained by difference in production costs, it is a way to separate out those who are willing to pay more from those who are not. If the company only had the best version of their dating platform, and charging everyone the same price, not as many people would use the app. It is therefore better for them (as in giving them more revenue) to try and filter out those willing to spend money on the dating service by offering a premium service. The free riders get to use the platform they otherwise would choose not to use so they are winners too under this model. The premium members are better off too since there are more people using the platform than before, making it a better app for finding a date. A win-win-win situation in other words.

A second aspect of dating platforms that is a bit special derives from the fact I just mentioned above. That the value of the dating service increases with the number of users. The individual user will be willing to pay more to use the app the more people are on the platform. This influences what kind of income scheme the company chooses to go with, this is why most dating services offer some free features, to get as much people to use the platform as possible. In economics jargon this concept is called increasing marginal returns. In our digital age this is becoming a more and more common phenomenon. The strength of social media platforms such as facebook, snapchat and instagram comes from the fact that so many people are using them. This changes some of the dynamics of the economy. If you succeed in getting users to your platform, you will win big time. But it’s also a lot more difficult for outsiders to compete with these giants, since only the very best get all the customers. Their monopolistic situation is however fragile, and big companies might have difficulties readjusting when circumstances change (see companies like Nokia, Microsoft and Zodac). Something small entrepreneurs can take advantage of in order to become the new king of the hill.

Dating platforms differ in interesting ways from other kind of services that people use. By thinking of what incentives motivate the actions of these companies helps us understand the reasons for their success and the mechanisms of the economy. Thanks for reading, if you have any comments, questions or other feedback, please let me know!

Big thanks to Collin Peeples for great feedback

Employment for Pokemons

A while back I wrote a longer piece on how to design a market system within the game Pokemon Go, and what aspects that I think will determine what the effects will be when the update comes. In this second blog post about economics related to the game I discuss how society in pokemon universe would be like. And what could be an awesome way to development the game further!

Let’s imagine living in a world with pokemons, very intelligent animal-like creatures with sort of super power. It does not appear to me why having them fighting each other would be such a huge thing in this world as the pokemon games make it appear. Sure there are humans forcing animals fight each other for our entertainment in our society too. But one can hardly claim it’s a big thing in the developed parts of the world. Since pokemons are intelligent enough to understand human spoken language and express emotions I doubt the practice of having pokemons fight to exhaustion or death wouldn’t engage movements fighting for pokemon rights.

From an economic standpoint there is a lot to gain from trade with pokemons, trade defined as voluntary transactions from both parties. Or if the enslavement would persist: having them do more productive tasks. The pokemons might lack the intelligence to comprehend the concept of trade, like most animals in our world. In any case, there might not be any moral reason to treat pokemons differently than we treat other animals, as property.

We see in the pokemon movies and tv-series that there actually are a lot of work that can be done by pokemons. For example there are pokemons who work as nurses in hospitals, assists with transportation services and deliver mail. Since a lot of pokemons possess supernatural abilities such as being able to create fire, electricity or poison etc. there is in fact big gains in employing pokemons to stuff that humans can’t do or do at a high cost.

Perhaps my observation sounds obvious, so let’s go into how employment for pokemons could create an interesting dynamic element in Pokemon GO. In the game there are places called Pokestops where players can receive free items such as pokemon balls and medicines. Instead of giving out these items for free, imagine these depots instead offered players quests to complete in exchange for items. Perhaps at a poke stop, the player meets a human asking for help with a task, say, building a wall or fishing for food. The player can then lend one of it’s pokemons to the person in need for an amount of time. Building a wall or carrying heavy thing might call for a strong pokemon while for fishing you might want to employ a water pokemon. Depending on how skilled and fitted for the task the pokemon is, the player is paid accordingly.

This would give players a reason to gather good pokemons of different elements and with different abilities. As the game looks today, the only reason to gather strong pokemons is to build a strong compating team, and for that task there really is only a handful of pokemons that are really valuable. I would say this is a fairly simple element that would make the game more dynamic and interesting for the players. Hopefully some game developer from niantic sees this post and makes it reality.

Potternomics part one: how do wizards get rich?

Thinking about economic aspects of the Harry Potter universe made me wonder, why are there poor people in the wizard community? The Weasleys are perhaps not very poor by the standards of muggles. But the ability to do magic could certainly be very lucrative if you lived in the muggle society, so in theory it wouldn’t be difficult for a wizard living among muggles to become very wealthy. Why then doesn’t all poor wizards migrate from the wizard community to the muggle one in order to increase their standard of living? If that were the case, then the poorest wizard in the magical community should be at least as wealthy as he would be living as a wizard in the muggle world. This of course assumes it’s easy to migrate to muggle britain from magical britain as a wizard, which might not be true due to guvernment regulations but the policies of the ministry in magical Britain will be discussed in a later post.

Even if we might be able to think of a range of creative ways to make money using magic, it’s not necessarily the case that an actual wizard could execute or even come up with any of those ideas. Wizards don’t have the same educational background that we muggles have. Almost all subjects in the Hogwarts corriculum are practical ones, for example charms, potions and defence against dark magic (full list here). And most of the time in class, they’re doing exercises to practice performing different magical skills. The students are teached how to do magic, but not to understand how or why magic actually works. For them, magic seems to be just as mysterious as it is for readers of the novels. No student, not even the star scholar Hermione is encouraged to pursue a scientific career or even to study further after graduating from hogwarts. Snir and Levy (2014) discuss the educational system in Harry Potter in more detail for the interested.

From this it’s reasonable to think that someone who grew up in the wizard society would struggle in the technically advanced muggle society. In other words, the claim that any wizard should be at least as wealthy living in the wizard community as they would have been living in the muggle one might be a correct one. Since wizards don’t reveal their magic to muggles we can’t actually know for sure whether there are wizards living among us in secret or not. But, lets imagine that there are, where then would we expect to find them? What kind of jobs would they occupy?

Magic can be very helpfull doing a lot of things. It can be used to change the shape or properties of an object, heal wounds and transport humans to give just a few examples. We can understand magic as a technology from the function it serves in society (more on this in a later blogpost). For many of the things wizards use magic for, the muggles have their own solutions.

In addition to their lack of knowledge on muggle technology and science being a limitation for them when choosing occupation, they also cunduct their business in secrecy as mentioned before. So even if wizarding healing practices could potentially complement muggle medical science in improving the quality of healthcare, wizards probably doesn’t work at hospitals since the risk of being exposed is too high. The same is true for all occupations where it would be difficult keeping magic hidden from the muggles.

It’s less likely that wizards will work in service occupations, especcially those that recuire technical knowledge. Perhaps farming, mining, fishing and forestry are sectors where wizards and witches could practise magic without risking detection. The problem with these sectors (collectively called the primary sector of the economy) perhaps is that muggles already are very productive in these areas thanks to technological avancements such as fertilizing and pest controls, genetic manipulation of breeding animals and advanced harvest and mining machinery. manufacturing (the second sector of the economy) is another possibly lucrative area for those with the ability to do magic.

In the end, things come down to what economists call comparative advantage. Which says bluntly that you should focus on producing goods or services that you are best at relative to what others are good at. And then trade with others. This is somewhat common sense, if you’re good att cooking but hate making the dishes, while your partner is a terrible cook but enjoy cleaning, then both of you would be better of if you split up the chores at home instead of both doing half of each, wich would mean you would do something you hate, and your partner would do something he or she is terrible at.

However the theory of comparative advantages makes a counter-intuitive claim. Even if a wizard is better at doing everything compared to a muggle, they would both benfit from trading with each other. Just think of a wizard healer and a muggle doctor at a hospital. The wizard healer might be able to preform twice the amount of surgeries a day compared to the muggle doctor. But working with emergency care, the wizard might be ten or twenty times more efficient at saving lifes since speed is crucial and the wizard healer is much faster getting to emergency situations by flying or teleporting compared to the muggle doctor who loses valueble time traveling in an ambulance. Even if the wizard is better than the muggle doctor in preforming surgery, to save as many lifes as possible we want the wixard to spend all his time out in field.

The claim is true of countries too, so even if a country say magical britain, is better at producing every product or service (as in producing at a lower cost) than a second country say muggle britain. They would both benefit from focusing on producing goods where they have a comparative advantage and trading with each other. This is the key to understanding how the market economy works and why the division of jobs, specialization and trade has lead to such amazing economic progress and wealth increases in the world.

Wizard might not know the norms and institutions of muggle society. But imagine you getting the magical abilities that wizards have, how would you use them to get rich? I’m assuming that you have moral values that prevents you from using magic to hurt of enslave people. And don’t forget that the statute of secrecy forbids you from revealing magic to muggles. The answer to the question is perhaps not that interesting, but trying to answer it makes us think about how the market economy works, so if you have any fun ideas, please leave a comment or send me a message.

 

Snir, A. and Levy, D., 2014. Economic Growth in the Potterian Economy. The Law and Harry Potter, edited by Franklin Snyder and Jeffrey Thomas, Forthcoming.

Why even rational participants might distort prices in betting markets

The other day I read an interesting paper that gave me a thought on why betting markets might become biased even if participants act rationally to maximize their utility. In the paper suspense and surprise (J Ely, A Frankel, E Kamenica, 2015), the authors create an economic model for suspense and surprise (sounds cool right?!) with which they examine different sports, plots in novels and races for political offices. From this I started reading some more on the literature and this quote from A Caplin and J Leahy (2001) caught my eye:

[w]e define suspense as the pleasure experienced immediately prior to the anticipated resolution of uncertainty, and posit that it is positively related (up to a point) to the amount that is at stake on the outcome of an event. This provides a simple reason for agents to bet that their emotional favorite will win in a sporting event. By betting on their favorite, agents increase their stake in the outcome, thereby heightening feelings of suspense

 

This makes intuitive sense of course, when people bet on their favorite team the game becomes more exciting and thereby increasing their utility. From the public choice literature on rational ignorance we know that since any individual voter has a very low probability of changing the outcome of an election, people don’t have the incentive to consume political news in order to make a good decision on election day. The reason instead to why people inform themselves on political issues is non-instrumental – it’s entertainment such as watching sports or reading novels. And therefore they don’t have any strong reason not to be biased in choosing what party to cheer on.

The answer to the question why people vote is probably similar to why people participate in doing a wave or cheer in a football stadium to show support to their favorite team. It’s not that sport supporters think that their participation in some way will affect the athletes to perform better. But we are social beings and like doing things in group.

This gives an explanation to why prediction markets might be biased when people with strong partisanship bet on political events. But I say might because even if it’s the case that some people act this way, it will not affect the price on the prediction market as long as the marginal trade in the market is motivated by rational actors. As J Wolfers and E Zitzewitz (2004) writes this about why irrational betting participants won’t distort the signals on a betting market, but so is true for the people betting for suspense. So even if a lot of democrats and a lot of republicans bet in order to enhance their feelings of suspense, if there are some people in the middle that act in order to win money (and there is high liquidity on the market), the predictions that derive from betting markets will be good forecasts.

references:

Caplin, Andrew, and John Leahy. ”Psychological expected utility theory and anticipatory feelings.” Quarterly Journal of economics (2001): 55-79.

Ely, Jeffrey, Alexander Frankel, and Emir Kamenica. ”Suspense and surprise.” Journal of Political Economy 123, no. 1 (2015): 215-260.

Wolfers, Justin, and Eric Zitzewitz. ”Prediction markets.” The Journal of Economic Perspectives 18, no. 2 (2004): 107-126.

Trump och brexit är inte bevis för att bettingmarknader har fel

Det är mågna som påstått att det faktum att bettingmarknaderna bedömde det som osannolikt att Trump skulle vinna presidentvalet och att resultatet av folkomröstningen i Storbrittanien skulle bli ett brexit visar att bettingmarknaderna hade fel. Det är möjligt att de hade fel, det går dock inte att avgöra utifrån ett eller två enskilda fall.

Bettingmarknader gör förutsägelser för hur stor sannolikhet det är att en viss händelse inträffar, och såvida bettingmarknaden inte ger en sannolikhet på 0% för en händelse som inträffar eller 100% för en händelse som inte inträffar så är det inte tillräckligt för att bedöma exaktheten hos förutsägelserna. För att avgöra hur väl en bettingmarknad fungerar för att ta fram information behöver man observera statistik över många händelser och över många tidsperioder.

Om jag påstår att sannolikheten att du slår en sexa när du kastar en tärning är en på sex (~17%) så skulle det faktum att när du slår tärningen och en sexa kommer upp inte betyda att mitt påstående var fel. Du skulle behöva göra om testet flera gånger för att kunna avgöra om det är något skumt med tärningen eller inte.

Det är såklart möjligt att bettingmarknaderna hade fel angående brexit och Trump, det vet jag inte. Hur det kommer sig att så många inte förstår vad som menas med sannolikhet vet jag inte heller.

För att låna ett exempel från Eliezer Yudkowsky. Ibland säger karaktären Spock i Star Strek något i stil med att ”Captain, if you steer the Enterprise directly into a black hole, our probability of survival is only 2.837%.” Ändå så lyckas de nio av tio gånger. Spock är helt enkelt värdelös på att uppskatta sannolikheter. Serieförfattarna tror att 2.837% uttrycker utmaningen i att styra rymdskeppet genom ett svart hål, ungefär som fem stjärnor på ett tv-spel.

Så om en bettingmarknad bedömer sannolikheten som 51% för tio oberoende händelser så bör vi vänta oss att hälften av händelserna infaller, varken fler eller färre. Om istället nio av händelserna infaller så kan vi dra slutsatsen att bettingmarknaden ifråga är bristfällig i sina förutsägelser.

Thought experiment on utilitarianism

Last night I came up with a thought experiment where utilitarian logic might stick in the eyes of many people, or not I’m not sure. I haven’t heard of this thought experiment before, but if someone already have written about it, I would love to hear more about it.

In this thought experiment, you are a teacher in a class where most students are normally gifted and follow the teaching corriculum without problem. Then there are a handfull of kids that are above average intelligent and are bored and held back by the slow pace. And then there are a couple of kids that are below average intelligent and struggles keeping up with the school work.

For the more intelligent kids to reach their full potential they need more focus from you as a teacher. This is true also for the struggling kids in the class. The problem here is of course that your time and energy as a teacher is limited. There is only so much time left outside of the ordinary corriculum, and so you will have to prioritize.

From a utilitarian standpoint, the best action is the one that maximizes total utility. Of course we don’t know which kids might have great success later in life, and perhaps becomes doctors and comes up with new cures for diseases, or becomes engineers and creates new fantastic software that will benefit humanity etc.

But the appropriate response to uncertainty is not turning a blind eye on the problem. Let’s assume in the experiment that the above average intelligent kids have a greater probability of creating great benefits for humanity by reaching their potential than their below average intelligent peers. Then the moral priority from an utilitarian standpoint would be for you to spend your extra time and energy on the more intelligent students, not on the less intelligent ones.

If you disagree with my analysis, please comment or send me a message.

Hur hänger orkanen Matthew ihop med bönderna i Vietnam?

Här är två nyheter som kanske inte verkar vara relaterade till varandra. Låt mig förklara hur de gör det och varför det är viktigt.

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Den ena nyheten handlar om orkanen Matthew som dödat hundratals människor på Haiti, gjort tusentals utan hem och slått ut viktiga samhällsfunktioner. Orkanen nådde Florida under fredagen och visserligen orsakade den dyra skador, men människorna i den amerikanska delstaten är inte på långa vägar i en så utsatt situation som haitierna. Med ökat välstånd har man också bättre förutsättningar att klara sig, de som drabbas hårdast av naturkatastrofer är de fattigaste.

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Den andra nyheten handlar om den otroliga förbättringen av levnadsstandarden i provinsen Bac Ninh i Vietnam efter att Samsung började etablera fabriker i området. Bönder har blivit industriarbetare och befolkningen mångdubblade sina inkomster på några år. Den första artikeln jag nämnde är en tragedi, den sen are en solskenshistoria.

Man hör ibland människor säga att vi behöver se andra värden är rent ekonomiska, att den ekonomiska tillväxten behöver begränsas eller att vi till och med inte behöver mer tillväxt. dessa människor har på senare tid börjat argumentera för att ekonomiskt tillväxt är ett hot mot mänskligheten utifrån en tanke om att det leder till en varmare värld med osäkrare klimat och mer naturkatastrofer. Saken är den att jorden inte gett mänskligheten ett harmlöst klimat som vi gjort osäkert. Nej, naturen är oförutsägbar och farlig men med ekonomisk tillväxt och ökat välstånd har vi skapat oss verktygen att hantera den.

Att välståndet sprids i världen så som i Bac Ninh är inte en lycklig slump. Det är inte heller Samsungs välvilja som lett dem till att göra detta. Samsung är ett företag som drivs av att göra vinst, detta är helt enkelt marknadsekonomi i rörelse vi bevittnar. Har man inte mekanismerna för marknadsekonomins funktion klara för sig kanske man kan intala sig att vi i den rika världen upprätthåller vårt välstånd tack vare att människor i världen lever i fattigdom. Men det stämmer inte, och det finns inte heller fog för en sådan uppfattning. Det kommer alltid finnas en rik grupp som är tidiga med att anmana ny teknologi och nya framsteg. Men om man låter marknaden ha sin gång kommer även fattiga människor ha råd med smartphones, luftkondition och byggnader som kan stå emot orkaner.
Det stora problemet är att det finns många som vill begränsa marknadsekonomin, av ideologiska skäl eller rent egoistiska. Det är för mig frustrerande eftersom det saktar ner den utveckling som skulle kunna rädda liv. I framtiden!

Pokémon GO – introducing trade

In this text I write about different aspects that will determine the success of introducing a system of trade between players in Pokémon GO and the effects from it. I write this text from an economic perspective, and not the perspective of a game designer. This will influence what theories I use in the analysis. If you have any objections, questions or other feedback, please comment on this post or sent me a message! I want to it make clear that this text is about what effects we can expect within the game from players being able to trade virtual commodities. To express it differently, the focus is not about effects outside the game or about people spending real money.

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Pokémon GO is a game that became a social movement the summer of 2016. People from all social classes and from all generations get together to share the experience both in real life and on online social platforms. This is despite the fact that the game has with very limited opportunities for interaction between players. One way to create this opportunity for interaction, making the game less of a single-player game is to make trade possible between players. This is something that Niantic CEO John Hanke has hinted is coming in a future update of the game, calling it “kind of a core element” in an interview.

When analysing how the introduction of markets to Pokémon GO would affect the gaming experience for the players, there are some things worth having in mind. What will be traded? Between whom will it be possible to trade? And how will the trade be executed? These are some questions I will be discussing in this text.

 

What’s the goal of the game?

Okey, so a good place to start might be to determine what the goal of the game is. It’s not exactly easy to determine one main objective in the game sense it’s not explicitly spelled out. Players are given an avatar with which to walk around in the game and catch monsters called “Pokémons”. To make your avatar move around the map, you need to move around yourself in the real world. Catching pokémons is done in the game by throwing pokémon balls at them. Players are called pokémontrainers which might give a hint what to do with the pokémons: you use them to duel other pokémontrainers at places called gyms. However there’s no scoreboard for how many fights you’ve won or anything. As I said there’s no end goal really, but that doesn’t discourage people from playing. Instead people make up their own goals sort of. The goal of a game in the end is about what objectives the players pursue. So one way to understand the objectives in pokémon Go is by asking how the players measure success. So when people compare achievements with other players, what do they talk about? Based on this thought, this is my understanding of what the objectives of the game are:

(A) Trainer levelimg_0921
Getting a high trainer level is done by playing the game a lot. A players trainer level is determined by their XP-count, which raises by doing activities like catching pokémons and battling at gyms.

(B) Pokédex completion
There are 151 different kinds of pokémons, and of course you want to “catch ‘em all”. Or at least having caught more than your friends have.

(C) Pokémon lineup,
To fight other trainers at gyms, you need at least a handful of strong pokémons. Comparing your strongest pokémons is therefore one way to determine who’s the better pokémon trainer.

(D) Awards and achievementsimage2
In perhaps limited degree players compare things such as total number of pokémons caught, total miles walked etc.

So why is this important? Well, when discussing how the introduction of a market system will affect the gaming experience it’s good to have some measure of what the gaming experience consists of. In the pursuit of the objectives mentioned above, the game must be balanced so that players feel it is both challenging and rewarding. If the game becomes “too hard” or “too easy”, people will get bored. Might a market make some goals too easily reached? What restrictions to the markets system might be implemented to solve these issues?

 

What is going to be traded in this market?

Firstly, trade requires that ownership is clearly defined. In a game environment like Pokémon Go, it is very easy for the developer to establish institutions for ownership. So what things can players get ownership of?image4

(1) Pokémons
Most obvious is that players can own pokémons. Players acquire ownership of Pokémons simply by catching them with Poké balls.

(2) Pokémon candy 
Pokémon candy is used to evolve and strengthen pokémons. Every pokémon has their own kind of candy, of which you get 3 pieces when you catch a pokémon, and a fourth if you choose to discard it (“transfer the pokémon to professor Oak”).

(3) Pokéstop items 
Pokéstops are places in the map where players can collect items such as eggs, poké balls and medicines which are helpful in the game.

(4) Special items
Some special items are bought in the shop in exchange for pokécoins (the Pokémon GO-currency) or rewarded players when they level up in the game. Examples of these are “luremodules”, “incenses” and egg incubators.

(5) Other items and non-item ownership
There are kinds of ownership that doesn’t show up in any player inventory but still possibly could be subject of trade. I’m thinking of the temporary position as a gym leader, stardust and trainer XP etc. To be honest I don’t believe this kind of market would be the first one to establish, I will not discuss this in great detail.

The first two categories I think are the most interesting ones and would result in the biggest change to the game, why I will focus on them.image6

Players today have the option to save the pokémons they catch or to transfer them to professor Oak in exchange of candy. Most pokémons that players catch are transferred immediately since you don’t have much use of doublets and triplets of the same type of pokémon if it’s not strong enough to qualify in your gym-competing line-up. With a market of pokémons would come the option to sell excess pokémons to other players. If they would be able to get more from selling the pokémon than from transferring it (which gives one pokémon candy), they will choose to do so and earn a profit.

When a player increases their trainer level, the pokémons they find will be stronger and stronger. This means that trainers of high level would supply the market with very strong pokémons relative to the ones that trainers of low level would. If there is no mechanism for restricting low level pokémon trainer from getting their hands on these strong pokémons then the playing field quickly would even out between low and high level trainers at gym-battles. This is not necessarily a bad thing. But it could disrupt the balance of the objective to get a good gym-competing line-up (C) since you will accuire a strong team of pokémons early in the game which won’t evolve much over time. This could be solved by only allowing trade between players with fairly similar trainer level or (perhaps more likely) that the strength of the pokémon (measured in combat power, CP) will be reduced when sold to a player of lower trainer level.

It is also possible to anticipate that the quest to “catch ‘em all” (B) suddenly would be much easier, perhaps “too” easy. New players would be able to buy almost all pokémons in the matter of days. One way to cope with this is to only allow players to buy the kinds of pokémons that they already have caught before. Basically a market of pokémons would even out the playing field between players of different levels. One way to cope with all these issues could be to instead of creating a market for trading pokémons, creating a market of pokémon candy.

A market of pokémon candy doesn’t risk disrupting the balances of the objectives being both challenging and rewarding. But it would still bring the social element of interaction between players and allow differentiation between players. Let me explain that further because this would be the most striking change to the game if a market would be introduced. Trade makes specialization possible. A player could use the market to specialize in a specific type of pokémon, such as water pokémons or fire pokémons. Why you might ask? Well it would allow players to be free to develop their own playing style and let people feel unique. As the game is today, besides choosing your team, changing the clothing of your avatar and choosing a “buddy pokémon”, there is not really much you can do to specialize and be unique.

Some Pokémons are clearly stronger in gym-battles than others, so you might ask: why would anyone sell the good ones? Because people have different preferences and different objectives. Someone who wants a strong line-up would want to buy for example a dragonite. Another player might seek to level up their trainer level, for them it would make more sense to sell their dratini candy for a lot of pidgey candys and use them to evolve quickly. If prices are allowed to change freely it will adjust so that people get along. This might result in the relative price to be set at 200 pidgey candy =  1 dratini candy. It depends on people’s preferences. If prices however not would be allowed to change according to changes in supply/demand, we would see shortages, where players who are willing to pay a higher price wouldn’t find the candy they are looking for.

 

Between whom will trade be possible?img_0996

The degree to which a market system could possibly disrupt the balance of the game objectives depend on the scope of the trading. Will there be a global market that allows you to trade with anyone in the world, or will it be a local market that only allows you to trade with players that are close by? A local market would be more consistent with the original pokémon game for gameboy, so it’s likely that this is how Niantic will design the market. But how would it be different from a global market?

A local market makes trade more difficult, it increases “transaction costs” in economics lingo. Especially in sparsely populated areas where the number of players to trade with is limited. This would increase the difference in gaming experience between people living in rural and urban areas. Which is already big due to the difference in the number of pokéstops and gyms in cities compared to rural areas. One way to balance this could be to restrict trade only to say the 100 closest players instead of say anyone within 100 meters. Another difference is that with local markets the prices would differ a lot more. For example in places with lakes where it’s easier to find water pokémons, water pokémons would then be cheaper relative to other types.

In a local market, the supply and demand would shift depending on which people are close to you, this would mean increased uncertainty when it comes to prices. In contrast, at the other extreme with a global market the relative prices would be much more stable so it would be easier for players to keep track of them.

 

How will the trade be executed?

Now to the difference between a system of barter and a monetary system. In a game environment like the one in Pokémon GO, it’s possible to design the rules for interaction between people in a way that you simply can’t do in the real world. Even though governments in most economies have a big influence over the monetary systems, there is no need of a central planner for money to establish in a society. Money as a concept evolved by itself and even if a government tried to forbid the use of money, they wouldn’t be very successful. Money is simply an item that holds value because other people accept it as payment.

In a game like Pokémon GO, the game developer however could possibly be somewhat successful in preventing money to establish. Or they can effectively control what can be bought and what can’t be bought with money. Government try this with a lot of commodities, but often do a poor job at it, that’s when black markets establish. Earlier in my text I mentioned that there is a currency in pokémon GO, “pokécoins”. This could very well be the currency for which one buys and sells pokémons or pokémon candy, but not necessarily. Niantic could create separated currency systems for different kinds of commodities if they wish. In the real world, people would want to exchange currencies and before you know it an exchange rate would exist.image7

If Niantic want’s to make the trading in Pokémon GO similar to the way it’s done in earlier games, well then we should anticipate a system of barter, as in no money. That means that to be able to engage in trade you not only have to find someone that has the pokémon you want, and someone that want’s the pokémon you have. They will have to be the same person. That will have the effect that you will have to spend a lot of time searching for someone to trade with. As a result, less trade will executed than otherwise would. Another result is that prices would be more difficult to understand, since there is no single unit in which people can measure the price of say one snorlax candy. It could be expressed as x pikachu candy, or y psyduck candy etc.

Of course people might start to use a certain candy, let’s say pidgey candy, to trade for other candies. Perhaps people start to think of prices in terms of pidgey candy (1 snorlax candy = x pidgey candy, 1 onix candy = y pidgey candy and so on). Suddenly pidgey candy would be established as money. It is of course difficult to predict, but this illustrates that even niantic might not be able to prevent money from being established.

I touched on the subject of restricting prices from changing freely earlier. One way to efficiently shut down most trade is to prevent price changes all together. So as that the only way to trade pikachu with ekans is one to one, or some other arbitrary chosen price. So, even if someone would be willing to sell 5 ekans candy for one pikachu candy, and someone willing to sell 1 pikachu candy for 5 ekans candy. It would not be possible.

If Niantic creates a monetary system, perhaps it is likely to think they will create separated currencies as I mentioned earlier. One currency that you can buy with real money, pokécoins, with which you can get “lure-modules”, pokéballs and so on. And then a second currency, “pokéyen”,”pokédollar” or whatever, that you use to buy and sell pokémon candy with! This might be a good way for Niantic to not risk losing income if players stop spending real money in the game and instead sell pokémons to buy lure-modules and stuff

 

Ending thoughts

All of the things I have mentioned as ways to “design” the market is really just different ways to restrict trade, prevent some trades from being made. In the real world trade makes both parties better off if it is voluntary. But in a game like Pokémon GO, it might risk making the game “too easy”. The benefits of introducing a market is to create more interactions between players and encouraging people to develop their own style of gaming, and making it easier for players to pursue their own goals. I hope you’re looking forward to the coming update as much as I am!

Var i Baldertåget är det bäst att sitta?

Detta inlägg handlar om hur ekonomiskt tänkande kan hjälpa oss att svara på frågan vilken plats i en berg-och-dal-bana som är den bästa.

Nu är sommaren slut och jag har jobbat mitt sista arbetspass på Liseberg för denna säsongen. Jag tänkte här utveckla ett resonemang om något som från och till diskuteras bland kollegor och med gäster: var i baldertåget det är bäst att sitta. Oftast brukar dessa diskussioner utvecklas till att handla om fysikaliska fenomen. Och visst går det att rigga ett baldertåg med massa mätinstrument för att undersöka hastigheter, accelerationspunkter, G-krafter, vindstyrkor osv för olika platser i tåget. Men svaret på frågan var som är ”bäst” att sitta behöver inte nödvändigtvis komma från någon av dessa specifika mått. Vad som är bra eller mindre bra handlar om någons subjektiva värdering, det går därför inte rakt av säga att någon plats i tåget skulle vara objektivt bättre eller sämre än någon annan. Det korta svaret på frågan var det är bäst att sitta är helt enkelt: det beror på vad du gillar.

Men för att ändå ta frågan ett steg längre: kan vi säga något om vad den genomsnittliga gästen i parken tycker? Kan vi säga något om vad den kollektiva uppfattningen bland våra gäster är? Ja, det kan vi genom att undersöka deras beteenden. Om det finns någon plats i tåget som gästerna tycker är bättre än de andra, som alltså värderas högre än andra platser, så skulle de också vara villiga att betala mer för den platsen. Vi kan med andra ord undersöka skillnader i betalningsvilja för de olika platserna. Det kanske låter som en underlig ide eftersom Liseberg inte tar olika betalt beroende på var i tåget man vill sitta. Men faktum är att gästerna ”betalar” olika höga kostnader beroende på var i tåget de vill sitta, i form av att stå i kö. Genom att undersöka skillnader i köerna för olika delar av tåget kan vi få en uppfattning för vilka platser som värderas högre av gästerna. Var är de villiga att stå längre i kö för att få sitta?

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Eftersom jag arbetat på Balder under sommaren skulle jag säga att jag har en hyfsad koll på skillnader i kölängd mellan olika platser i tåget. Det finns speciellt två trender som jag identifierar. Dels är köerna generellt längre för platser långt bak i tåget. Den kollektiva uppfattningen är alltså att det är bättre att sitta långt bak i tåget än att sitta långt fram. Den andra trenden är att kön är som längst till platserna allra längst fram. Det finns alltså något extra pirrigt med att sitta längst fram vilket väger över den första trenden jag nämnde ovan.

Till platserna näst längst fram är det generellt kortast kö till. I runda lag får man vänta i genomsnitt mellan 3-4 tåg längre längst fram jämfört med näst längst fram. Här får vi alltså en uppskattning för hur mycket bättre det är att sitta längst fram jämfört med näst längst fram enligt den genomsnittlige besökaren – ungefär 10 minuters kötid. Det är såklart ett svårtolkat sätt att mäta värde i, och möjligtvis skulle man kunna få en uppskattning i kronor om man frågade alla gäster hur mycket de skulle vara villiga att slippa kön och sedan räkna ut ett genomsnitt av resultatet, men jag tror det skulle vara svårt att få ett tillförlitligt resultat från en sådan undersökning.

Man kan såklart invända att gästerna inte nödvändigtvis vet vilken plats som är bäst, deras uppfattning innan de ska åka behöver inte överensstämma med den faktiska upplevelsen. Gästerna kan ha fel när de väljer plats i tåget. Och det är ju självklart att man kan göra fel ibland. Men om det faktiskt var så att gästerna systematiskt misstog sig i valet av plats, så skulle de efter hand lära sig och förändra sitt beteende. Låt oss tänka att det istället var så att den bästa upplevelsen får man i mitten av tåget. då skulle gästernas med tiden ändra sitt beteende och vi skulle få längre köer i mitten av tåget.

Man kan också invända mot min slutsats och argumentera att de flesta gäster inte gör ett aktivt val eller att de baserar sina val på andra faktorer, exempelvis att de vill sitta nära sina vänner osv. Men vi är intresserade av gästerna som kollektiv, och för att få en uppfattning om den genomsnittliga gästen behöver vi även räkna med de gäster som inte bryr sig om valet av plats. Om vi endast skulle räkna med gäster som aktivt väljer plats utifrån rationella kriterier skulle vi inte få ett korrekt urval för hur gästerna tänker som kollektiv.

Min teori är att om vi endast skulle räkna med ett urval av gäster som har starka uppfattningar om var i tåget de vill sitta så skulle skillnaderna i köer bli ännu större. Gästerna med ljumna preferenser är viktiga eftersom de jämnar ut skillnaderna så att vi får en mer korrekt uppfattning i frågan.

Hur ska man då tänka när man väljer plats? tja, eftersom accelerationerna kommer i uppförsbackarna när du sitter längst bak så känns det som att tåget åker snabbare. Det skickas iväg ett tåg varannan/var tredje minut, hur länge är du beredd att vänta för den platsen du vill ha?

Att åka Balder om man är tre

En varm sommardag är de tre vännerna Fanny, Mikael och Karin på Liseberg. Efter att ha stått 30 min i kö och betalat 4 biljetter var är det äntligen dags för dem att få åka Balder. Alla tre vill helst sitta längst bak, ingen vill heller sitta ensam, men de vill ändå alla tre åka i samma tåg. Hur ska de komma överens om hur de ska sitta? 

Eftersom man sitter två och två i varje rad i balder-tåget kommer någon att behöva sitta ensam, och som mest kan två stycken sitta längst bak. De skulle kunna singla slant, spela sten, sax, påse eller ta till nävarna för att bestämma vem som sitter var. Kanske hade de låtit den som tvingas sitta ensam kompenseras genom att då få åka längst bak. Men… låt oss säga att alla tre är ekonomer, hur kan vi tänka att de hade gjort då?

Ekonomi handlar om hur människor fattar beslut, och många ekonomer intresserar sig för frågor om hur man maximerar ”nyttan” (≈subjektiv tillfredsställelse) av begränsade resurser. Att sitta med någon i baldertåget eller att sitta längst bak kan vi se som begränsade resurser eftersom det i vårt tankeexperiment inte är möjligt för alla tre att få alla sina önskemål tillfredsställda. Så frågan vi intresserar oss för här är: Hur maximerar vi glädjen av åkturen?

För det första bör vi konstatera att vi ökar den totala glädjen ifall två personer sitter längst bak än om bara en gör det, (vi avfärdar alltså lösningen att den som sitter ensam kompenseras genom att få sitta längst bak). Detta innebär att någon i sällskapet kommer behöva både sitta ensam och näst längst bak.

För det andra är det viktigt att komma ihåg att hur mycket glädje man får av att åka Balder är högst subjektivt och är därför olika från person till person. Vissa älskar berg-och-dal-banor, andra fasar av bara tanken att sätta sig i baldertåget. På samma sätt är det olika hur mycket var och en värdesätter en plats längst bak jämfört med plasten näst längst bak. För att maximera den totala glädjen av åkturen vill vi att de två som värderar platserna längst bak allra mest ska sitta där. Nu uppstår frågan hur tar vi reda på vilka de är? Om vi skulle fråga dem hur gärna de vill sitta längst bak på en skala mellan ett och tio skulle vi troligtvis få ganska svårttolkade svar. Vad innebär åtta av tio? hur vet vi att Fannys tia är lika mycket som Mikaels tia?

Faktum är att det finns ett lättare sätt att mäta värde på: pengar! Vi frågar var och en av de tre vännerna hur mycket de skulle vara villiga att betala för att få sitta längst bak med någon istället för näst längst bak ensam. Låt oss säga att de tre svarar på följande vis: Mikael 10 kr, Fanny 4 kr, Karin 6 kr. Alltså: mellan alternativen att antingen sitta längst bak med någon och betala 6 kr eller att sitta näst längst bak ensam utan att betala något så skulle Fanny välja att inte betala (eftersom priset är högre än hennes betalningsvilja), Mikael skulle välja att betala (priset är lägre än han är villig att betala) och Karin hade tyckt att de båda alternativen är exakt lika bra (eftersom 6 kr är precis vad hon var villig att betala). Från detta kan vi slå fast att om Liseberg hade tagit 5 kr extra för att få sitta längst bak så hade våra tre vänner inte haft något problem att komma överens. Om Liseberg istället hade betalat 5 kronor till den som är villig att sätta sig näst längst bak så hade vi inte heller haft något problem, de tre hade satt sig på samma sätt hade blivit detsamma.

Svaret på frågan ”hur mycket är du villig att betala för en av platserna längst bak?” är också svaret på frågan ”hur mycket måste de andra betala dig för att du frivilligt ska ta platsen näst längst bak? Om Mikael och Karin betalar 3 kronor var till Fanny så kommer hon vara villig att sätta sig där frivilligt. Vi har nu kommit fram till en lösning som alla är nöjda med. Mikael och Karin har betala mindre än vad de var villiga för platserna längst bak, och Fanny har kompenserats mer än vad hon tyckte en plats längst bak var värd. Man skulle kunna säga att alla tre i detta fall gör vinster. Fanny gör en vinst på 6 kronor (3+3 kr), Mikael och Karin gör vinster på 7 (10-3 kr) respektive 3 kronor (6-3 kr).

Nu ska sägas att detta i och för sig är ett ganska komplicerat sätt att lösa ett ganska trivialt problem. Men detta sättet att tänka på kan vara väldigt användbart i mycket viktigare sammanhang. Naturligtvis har vi bortsett från sådant som möjligtvis kan krångla till det i verkligheten. Exempelvis kanske de tre vännerna känner varandra olika väl och att deras betalningsvilja därför beror på vem de skulle fått sitta bredvid längst bak. Man skulle kunna ta det som utgångspunkt för att illustrera spelteoretiska resonemang och olika typer av auktioner. Detta var lite förenklat om sättet att tänka ur ett ekonomiskt perspektiv.

Andra texter där jag skriver om ekonomi på liseberg hittas här!