A friend who was signing up to Goozex pointed this out to me. It was an interesting point that I had never considered, not yet having bought points, only trade credits.
It seems that if you buy Goozex points with cash, it is adding valueless points to the pool. All other points that users hold correspond to real goods in the member-to-member economy. Points purchased, however, turn into money held by Goozex, so the real value of those points disappears from the member economy, I assume.
The person who sent the game gets points that do not correspond to other games traded. It's more like Goozex has printed money for the receiver. So the total value of all points in the Goozex economy corresponds to the point value of all games traded plus the value of all points purchased.
Simple economics says this is unsustainable. The only way to counteract the influx of points that do not correspond to games is to raise the point cost of games until the value of games is brought back to par with the total points in the economy. Inflation.
It also seems that the members, including those who never have and never will purchase points, suck up the cost of this inflation in paying more points for games they receive than the value those points corresponded to when they received them. If this is how the cycle goes, for example my 550 points that today could buy a $30 game would only be able to get me a $20 game a year from now.
If I were to buy $5000 worth of points today, you would all see the impact of that tomorrow with a serious adjustment upward in the point value of games, because my new, fake points would be in competition with yours for the same pool of games.
Is anything flawed in this assumption? Is there any way to counteract this seemingly unstoppable inflation? Is something being done with the money that I am unaware of, that converts it back into meaningful value in the member economy?
Hopefully they would combat point inflation by increasing the cost of the points, not the point cost of the games.
Somebody get us a college economics student!
Member Since: October 19, 2006
Post-contest winner of the first Goozex Photoshop Contest
That just increases the benefit to Goozex and continues to introduce valueless points to the economy.
Yes in theory this would be correct. I have had in person conversations about this economic theory and concern, and they are all very conscious of this. I cannot speak to how this intend on addressing this, but again, they are aware of the implications of having and managing currency. It is a very interesting economy. Though I don't have the specific answers, I hold the utmost in confidence in the Goozex team in maintaining a stable economy for all and protecting the value of the Goozex point.
Goozex Forum Moderator
Join the Folding@Home Goozex team: Team Goozex #80197 We're talking to you PS3 and PC users.
I appreciate your confidence, Lurknomore, but I'd feel more reassured if someone could come up with an explanation of how the economy can be controlled at all.
Point value for games on Goozex is controlled by an algorithm that takes into account the following variables:
1. Current MSRP
2. Date released
3. Supply & Demand of games
4. Other
Example of cause/effect point fluctuations:
1. MSRP drops from $50.00 to $30.00 -- points adjust accordingly
2. Date passes certain amount of time since release (say 1 year) points adjust at pre-determined rate
3. Continuous heavy demand and low supply for a game increases point prices at a limited pre-determined rate
The supply of points does not go into point pricing of games. In your example of purchasing 5,000 points and then requesting a game, it does not change the pricing unless you are the tipping point in the demand/supply ratio to increase the price.
Another factor is that a transaction between a buyer and a seller transfers points from one account to the other. Also, the conversion of points to dollars is fixed at the rates you see on the FAQ. Meaning that 100 points is $5.00 and and this ratio is constant throughout. One economist I've spoken to about this before we launched the site said that since this is a one-way street, and you can't cash out points then the possibility for inflation does not really exist.
That said, we are conscious of our internal economics and the concept of point inflation.
Checkout Goozex Top 10 RSS List Top 10
Thanks.
You say point-to-dollar ratio is fixed and that the only thing that can increase the point cost of a game is demand. But with that relatively constant ratio, the only possible outcome for people with points is increased competition from a greater pool of points, that is, the combination of earned and purchased points.
Higher demand. Same level of supply.
In which case the point value of the game is necessarily increased.
You can increase the demand for a game without points by simply adding it to your requests. You just won't be matched b/c of the lack of points.
Many people have gotten in line for a game without points -- and this is one of the reasons for the dynamic queue position.
Demand is only half the equation. Supply is equally important. The demand for Gears of War was initially much higher than the supply. Initially Gears of War was 1,000 points and is now at 850 as supply has picked up and time has passed.
Another example is Dead Rising. This is the all time most requested game on Goozex. It is also the most traded game on Goozex.
Thanks for helping us grasp these concepts, Blackcoyote.
So, are you saying I can get whatever game I want by just waiting until it becomes obsolete?
While I wait, won't more and more people be entering the system on bought points, not bringing in any new games but still increasing the competition for the existing ones? It seems like the only thing keeping it from becoming endlessly more difficult to get a game is the inevitability that some people will give up and forfeit their points.
Hi Sassface,
We understand your concern and it is a respected point. Most people enter the system with acquired points earned from trades. I don't think games like Gears of War are obsolete. Goozex is succeeding b/c members buy into the fair trade in values for their games and have been able to get other games with their points earned. There are a lot of independent reviews on blogs and forums about Goozex that support this.
Goozex is a great solution for people that want a hassle free and fair place to trade their games. We are working hard to ensure that it continues to operate efficiently and without problems.
I don't believe that many people would want to buy points, although the odd 100 or so point purchase to get a game here and there. I joined the site to save as much money as possible on games, while getting a fair value for the games I trade away, most probably joined for the same reasons.. I have never bought points and don't intend to, if I run out,(thankfullly hasn't happened too often, but with the free trades I'm burning thru points fast) I just wait untill I trade a game away.
This is a very interesting conversation on the Goozex economy I enjoyed reading it, But I’m a social sciences guy, number make my head hurt.
That's a good point, Silentshawn, and my hope is that most members have the same assumptions about trading here. I know I do; like I said, I have never bought points myself.
The thought of runaway inflation just raises a bit of a grim spectre. I think the money value of points should be twice what it is to discourage inflation, but the profit motive discourages that, as purchased points are money directly in Goozex's pocket.
It's up to the site to regulate the player-to-player economy. I would still have a load of to-me worthless games on my shelf were it not for Goozex. For now, I will trust in the wisdom, and the enthusiasm for keeping such a good thing as Goozex going, of the staff here to keep a rein on point inflation.
Well I think we've ruled out inflation in any direct sense, but the danger remains of an overabundance of points that can't be spent. There's money going into the system and none coming out, so at some point somebody is getting back less than they put in.
I'm confident the Goozex team is putting that money to good use, and it's certainly a fantastic service that they provide, but I'd personally feel better about it if all the expenses were up-front and apparent to all involved parties. This could be done by allowing members to refund their surplus points for cash, and then raising the transaction fees to make up for lost income and the expenses involved with processing the refunds. I can also see how this would add complexity and labor, as well as harm Goozex's ability to appear competitive when held up to alternative services, but at the same time it would give members a much greater peace of mind to know that they can cash out at any time. It's a judgment call that was made, and I'm glad we've had this opportunity to discuss it.
