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Economies of Scale

Author
Sigras
Conglomo
#1 - 2011-12-07 11:10:24 UTC
It occurred to me the other day, that the only reason to join a corporation is for social or military reasons; this seems strange to me because IRL the reasons people make corporations are financial.

This is because of the economic theory of economies of scale which is absent from Eve . . . while this doesnt make much sense to me, I cant think of a good way to add it into the game, so here I am hoping that someone more intelligent than I can come up with a way to inject the idea of economies of scale into the game.
Alisarina
Center for Advanced Studies
Gallente Federation
#2 - 2011-12-07 11:17:06 UTC
if your meaning how to incorporate economy of scale into the game it already kind of, in a weird kind of way, already is in the game sort of maybe. In BP ME research. I know it's not really economy of scale (IE the bigger something is the more 'free' space you have in it be it physical size or other medium).

People form corps with others more for the social and military uses sure, however there are a fair few of alliances composed of single person run indi corps with 1-4 alts in them making their own profits away from everyone else in the alliance, but are together for the same reasons as before. Their relationship seems to be more of a sub contractor I guess? And the 'alliance' is more of a large company and the corps are it's subsidiaries as there are no other corporate direct translation to an alliance in eve that I can think of, except maybe multi-national but that doesn't work in my mind.

Yes I rambled there, I'm tired but was interested enough to put a reply down.
Skippermonkey
Deep Core Mining Inc.
Caldari State
#3 - 2011-12-07 11:26:27 UTC
OP is forever alone

COME AT ME BRO

I'LL JUST BE DOCKED IN THIS STATION

Akita T
Caldari Navy Volunteer Task Force
#4 - 2011-12-07 12:55:46 UTC  |  Edited by: Akita T
Sigras wrote:
I can't think of a good way to add [...] the idea of economies of scale into the game.

Pretty simple, actually, and can be done at a whole lot of levels, but the question is, do we want to do it ?

For instance, you can start even as low as the mining bottom level - having each additional mining laser on a single rock improve yield on all mining lasers on that particular rock proportional to the individual yield (with a small but significant constant multiplier).

Let's pause for a second and think about this first simple possible change.

For starters, you need to consider that this means mining solo just got relatively worse, and you just gave incentives for a mining blob (whereas before the only useful blob was one of combat ships).
You also need to decide which should be at the same level as the current baseline - that is, if you should nerf solo mining and have it balanced at the current yields for a certain new base yield total, or if you should leave solo mining as is and just let it go up from there ; also, you need to determine whether to cap the bonus at some value or just let it rise freely with more people added (i.e. only have it self-limit via size of mining ship cargohold size).
Either way, you are noticeably altering the rate at which minerals enter the economy, it just depends how much and in which direction. And the knock-on effect if you alter it towards an increase is that minerals get cheaper, maintaining overall miner income somewhat the same regardless of increased yields... until we reach the IER breakeven and blowing up manufactured ships for insurance instead of bothering to sell them becomes all the rage again... at which point CCP might re-adjust the insurances and miner income would keep on re-approaching pre-change levels, but only while in a larger group.
The end effect of adding economies of scale to mining at least doesn't do all that much good in the end, while complicating things. On the other hand, it does promote (or rather, borderline forces) mining blobbing, which could be a boon for the typical miner suicide-gankers.
Meh.

...

Let's just jump to the last step where you can add economies of scale, the final item manufacture.
In case of T1 items, yes, that's only the second and final step, but there's also T2/T3 items, and there you can add economies of scale at each manufacture step, in reactions, in invention and reverse engineering and so on and so forth. But let's just consider the final manufacture process.
How to easily implement economies of scale into this ?
Quite simple, actually, but not easy.
First, have the initial setup time of a manufacture line be well in excess of manufacturing of a single unit, and make ISK costs of the manufacture line matter more too.
On top of that, you can have the overall manufacture time not be linear with amounts of runs produced, but have a more pronounced sub-linear progression than just what's given by the newly added initial setup time.
Add to this a reduction in setup time per line and in overall manufacture time for each ADDITIONAL line at the same location manufacturing the same product, both at the same time AND in the immediate future. In fact, make it so that the line maintains the "memory" of the last manufactured item, and if you select to manufacture a new batch of the item it's already setup for, the initial setup time is reduced to zero (since it's already configured for that item type).
Heck, maybe even add a hefty ISK cost for retooling the line on top of the rest of the current costs.
The final touch could be a (slight) discount in manufacture material needs beyond what's possible with a single line the more lines in the same location work on a particular type of item.

All in all, this would make producing any particular item the cheapest (by far) by having all 50 manufacture lines in a particular station constantly churning out the exact same item.
But again, do we really want that ?
On one hand, a single station could very well fulfill the needs of some particular class of items on a game-wide level to such a degree that even after taking into account likely hauling costs, it's still cheaper to manufacture it in the "bulk station" and ship it everywhere rather than manufacture it locally in sputtering batches... which is sort of weird and bad for people that want to be self-sufficient. Also, it reduces mineral needs overall, so it hurts miners (and component producers) slightly.
On the other hand, that gives a spectacular boost to the hauling profession, by making it far more needed. Also, suicide-gankers get a glut of potentially viable targets as the total volume of goods moved spikes in volume.
On the gripping hand, it reduces the total amount of needed manufacturers by boosting individual manufacturer yields AND places the advantage on those with huge amounts of capital, which means that manufacturing ceases to be an even remotely valid occupation for newbies and becomes the almost sole domain of "old (and plentiful) ISK".


In the end, overall, while the concept of economies of scale being applied to EVE sounds like a good idea at the start, once you dig around into the possible consequences, it doesn't look all that hot anymore.
It could still be an option, but quite a bit of work would be needed to make it happen, and the benefits (if any) are questionable.
Hundo Kay
Caldari Provisions
Caldari State
#5 - 2011-12-07 14:00:47 UTC
While Economies of Scale might not exist, increased profit by cooperation surely does.

A single inventor can generate way more BPC's than he can produce. Having a team of people working with him to build the T2 items allows both to make a better profit. Any time you can cpover more of the production chain the better the chances are to make/keep more of the profit.

In PI, if I have more people producing P1 goods in the corp and allow those making P2 and higher to "buy" those from the corp, rather than the market, we all save logistics costs, market taxes, and can provide the sellers a bit higher then the buy orders, and the buyers a bit lower than the sell orders. Both sides make a little more profit that might have been eaten up in market taxes.

So while a true Economy of Scales does not exist, there is value in larger groups undertaking industrial tasks.


Jenn Makanen
Doomheim
#6 - 2011-12-07 14:04:53 UTC
Mining already gets benefits of Scale. Orca + multiple hulks beats single hulk on per hulk load.

Also shows up in research, as you really need a POS to get anything done. which doesn't scale down gracefully to a single slot.

Less so on manufacturing, as you can find open slots without too much trouble in empire space. Even within a few jumps of the trade hubs.

Then there's transports. huge up front cost, but the sheer volume you can move is massive compared to an indy.
Salcon Cliff
Zephyr Corp
#7 - 2011-12-07 14:42:13 UTC
It depends on what you really mean by economies of scale. Akita's manufacturing example has been one that I have idly wondered about before - manufacturing line costs are really nothing, and switching back and forth from hour to hour is basically free, currently. This is more an example of reduced costs due to scale of manufacturing, not a reduced cost due to 'scale' of a corp, which you kind of imply that you are talking about. So, a few financial reasons to be in a corp as opposed to by yourself (or with a few alts)

High level wormholes give great profits, but you need really need a few people to make it work - a carrier pilot, a few BS, and a salvager. Larger numbers can give better returns up to a point.

Sharing of resources - a large selection of locked down BPOs in a system with a POS can be much more profitable if you have a large corp. A large POS can have a huge number of slots, much more than a single player can use. In actual game, most of our industrialists only use their full complement of available slots intermittently, so having more people is financially more efficient.

Division of duties - having purchasing agents in trade hubs, haulers available to haul, and resellers and/or manufactures in other locations all adds up to more isk per hour per player, generally speaking.

These are a few, I assume there are others, too lazy to think of them right now :).
Skorpynekomimi
#8 - 2011-12-07 18:10:58 UTC
Economies of scale do exist, just not as dramatically as in the real world. And not always in ISK.

It's cheaper in time and effort to queue up 500 of something, rather than 10 of them 50 times.

Economic PVP

Jack Traynor
Doomheim
#9 - 2011-12-07 23:14:39 UTC
Social is the only reason. Anything else is just fluff.

Next trolling topic??
Tau Cabalander
Retirement Retreat
Working Stiffs
#10 - 2011-12-07 23:29:50 UTC  |  Edited by: Tau Cabalander
I find it takes me far less effort per item to manufacture a large amount of something rather than a small amount.

Spend an evening (or two or three) setting-up manufacturing lines for the next week (or two or three).

At last tally I had about 27 billion ISK currently building. I'd never be able to do that much if I had to babysit it all.
Sigras
Conglomo
#11 - 2011-12-08 11:07:39 UTC
Well I was thinking more along the lines of something that you could do to add economies of scale without making that scale mandatory IE as Akita talked about, most forms of economies of scale FORCE people to operate in large groups . . . I was wondering if you could just give people a manufacturing speed bonus something so the more runs you put in, the less each additional run costs in time because they dont have to retool their factory, but if it were an ISK discount, I think it would force people to only build in large groups because they could do it cheaper.

I dont know if its a good thing or a bad thing, but I think it goes hand in hand with divisions of labor as something this game has needed for a long time.
Anya Ohaya
School of Applied Knowledge
Caldari State
#12 - 2011-12-08 12:13:37 UTC
Corps could be a lot more organized when it comes to specialization (of players), management etc and probably make a lot more money. Most corps are run more like gangs, clubs, or tribal communities than real world corporations.

Trouble is, who needs that sh*t in a game? And who would want to be Mitten's PA?
Balmer Banshot
Center for Advanced Studies
Gallente Federation
#13 - 2011-12-08 22:57:17 UTC
Sigras wrote:
Well I was thinking more along the lines of something that you could do to add economies of scale without making that scale mandatory IE as Akita talked about, most forms of economies of scale FORCE people to operate in large groups . . . I was wondering if you could just give people a manufacturing speed bonus something so the more runs you put in, the less each additional run costs in time because they dont have to retool their factory, but if it were an ISK discount, I think it would force people to only build in large groups because they could do it cheaper.

I dont know if its a good thing or a bad thing, but I think it goes hand in hand with divisions of labor as something this game has needed for a long time.


This already happens via ISK with station building slots. The "install cost" you pay no matter the number of runs. The more runs you make per install, the less impact that fee has on your bottom line.
Sigras
Conglomo
#14 - 2011-12-08 23:56:49 UTC
well ok, but the install cost of a factory is pathetic . . . most factories its like 1,000 isk; if thats not within your profit margin youre probably doing something wrong. . . I was thinking up to a 15% discount in time for a max run of any given blueprint; something significant
Tasko Pal
Spallated Garniferous Schist
#15 - 2011-12-09 17:17:17 UTC
I think there's several reasons:

1) Virtually all business activities can be done solo. Holding 0.0 space, making supercaps, or doing stuff in WHs takes some cooperation, but most manufacture and resource extraction doesn't.

2) Trust is near trivial to violate and there are almost no repercussions for scamming and theft.

3) Large scale operations attract griefers. And CCP has inserted many mechanisms for allowing people to cause trouble and blow stuff up, from war decs in high sec to bomber gangs in 0.0.

4) Most groups don't have a lot of skill or experience. Running a high efficiency supply chain takes a lot of planning and knowledge in addition to the raw effort.