Market Discussions

MD is a tiny RP community - your claim that MD interest rates reflect the rate which a trader/industrialist would use to calculate his opportunity cost of holding stock seems highly questionable to me.

Edit:

You have no idea how the risk/return structure of investments in EVE looks like in general - it might very well be that people who invest in collateralized MD offerings are extraordinarily risk averse compared to your average trader/industrialist (to the point where they don't even consider investing in even slightly more risky opportunities).

Because MD is very small this could drive interest rates on collaterlized offerings down to a point where they are no longer comparable to the (effective) interest rates risk-neutral investors would be willing to accept - one might very well get a disproportionally large increase in returns by taking only marginally greater risks.
A speculator will generally not be as risk-averse as the most risk averse MD users, so taking the "no risk" special case interest rate that is determined entirely by the most risk-averse MD users to gauge his opportunity cost is not a great idea.

Or people might be willing to pay a premium (in the form of extremely low interest rates) to keep MD "alive" because they enjoy the RP and community aspect more than they enjoy ISK.


And there are no real financial markets so each trader/speculator is facing opportunity costs that depend highly on where on the diminishing returns curve his stock of working capital happens to sit at. Again even on the stock-holding/speculation side the idiosyncrasies of a few big players can completely distort your picture.

You are right. This is one of the central limitations of calculating the prevailing interest rate, although I am attempting to look at the forgone profit of players from a general standpoint without access to closed credit markets, as rough and flawed as that my be.

Do you suggest I drop the MD colateralized loans and stick with BPO copying?



This is actually a very vibrant and relevant topic within environmental economics:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1746883
This will be another issue I will have to deal with outside of anything but the most robust of the trade good markets.



The changes in PI(UI improvements a few months after release that made it much easier to produce new goods) and CO taxation is something I will have to take into account. I am throwing around the idea of using a dummy variable in the regression for before these changes and after to avoid a omitted variable bias. What are your thoughts on this?

I also am thinking that much of the impact of taxes and the like will be absorbed in the profit calculation of beta_2.

Thank you for your input

Are you trying to calculate the EVEBOR?

First off awesome post and neat draft.. Very interesting indeed..

Just a few considerations for you..

You claim that PI does not improve over time say like researching BPOs or technological advances in RL. I am sure you could argue that, but its only partially true. First of all initially very little is know in the player base about the actual mechanics and the numbers. Then the unknown factors of distribution of resources come into play. Where are the optimal gains from extraction. Then you start getting information spread about how to actually optimize setups for each part. There are still new attempts to optimize setups coming out all the time, and each of these would almost warrant a paper by themselves. So there is progress, and usually just when "perfect" knowledge is achieved in the community, usually by some perfect 3rd party toll to be developped, and thus letting the players successfully hack the system, this is when ccp usually get around to issuing a new patch or change. So the static assumption is an issue.

Second. The effects of initial novelty interest is not mentioned? Then the actual phases of implementation and application in the community. Second phase usually is familiarization and optimizing to serve the purpose of supporting the universal demand for the goods in question, a factor that I also saw rather few details on?

The link between PI and Secondary market loans I DO NOT see any at all. The MD is usually either metagamers with too much isk to spare, RPers that want the narrative of financial services being possible to simulate, and scammers that want to try and take advantage of the potential real clients in here.

Oh and the ref EvEBor and its RL equivalent the LIbor.. seems a bit of a stretch?

I think it would be fair to say that you might need to either limit the area your looking at, or spread it out to fully consider the interdependencies.. Otherwise you end up with a measurement of data that really is like doing TA on a temperature graph!?