The MasterCard Empire Strikes Back (Episode 1: Physical flow of goods)

Day 831, 07:42 • Published in Romania Romania • by 8-3=1

It is a given fact that people try to use Real Life economy, politics, etc so that they can figure out how eRepublik works. This works sometimes, but sometimes it does not work.

Today I would like to start a short series about economy in eRepublik and how it compares with the Real Life. Of course that economic activity in Real Life is more complicated and sophisticated, that is why it wouldn’t be so difficult to understand the eRepublik one.

eRepublik economy is based (at least in the actual platform) only on physical goods so we don’t have all the non-sense from RL of services, ideas etc which are worth money. eRepublik don’t allow you to sell “cleaning services” or publish newspaper articles for money.

In eRepublik there is just iron, grain, oil, diamonds, wood (as primary goods) and weapons, food, tickets, gifts, houses, hospitals, defence systems (as secondary goods). There will be some changes in the structure of primary and secondary goods but the system will remain the same- purely tangible goods.

It is a very important factor in eRepublik that primary goods are not limited. You can have 100 or 100 million companies in one region, they will still be able to extract primary goods. This means the economy can expand indefinitely and there is no conditionality from resources side.

Also it is very important to say that primary goods are only worth the value of work for extracting. There is no technology involved, there is no investment- only having a company and people working. Secondary goods are created also quite simply: primary goods + work. Again there are no additional ingredients to creating more sophisticated products.

Primary and secondary goods are sold freely on the market. The information is available to everyone so that everyone can see at any time what price other companies are selling at. This is a very open market. There are no barriers to entry or exit on the market. It is almost a perfect market, so it should reflect very accurately thru price the demand and offer of goods.

However this does not actually happen all the times and we need to understand more about consumption and storage of goods.

Consumption of primary goods is simple: they are used to produce secondary products. Consumption of secondary goods is more complicate😛 it can be either forced (by need to eat for instance) and voluntary (by using weapons to fight or by buying houses to live in).

Since consumption is forced, the food market is the only industry which has a guaranteed consumption and a flow of goods. In theory it should be simple to estimate the value of the market and predict market movements based simply on supply, demand (known consumption).

A very important aspect in pricing is the storage capacity. The difference between production (supply) and offer comes from the storage capacity. Users and orgs have a limited storage capacity, but companies have unlimited storage. Companies can hold big stocks, provided they can finance it.

When market is going down (like it’s happening now), a lot of companies choose to build up stocks hoping for an improvement in the market. A part of these stocks are actually financed with Real Life cash. The Real Life cash becomes indeed a means of financing stocks during times of peace, but this cash cannot be redeemed once the market improves. It will stay linked forever to the virtual world.