The Economy

Visualizing the Economy
The economy of Entropia consists of all production, exchanging, and consumption of PED, items, and services. The values of items and services depend on supply and demand, while the value of PED is linked to actual U.S. money at a 10 PED to $1 U.S. ratio. Supply and demand is the same system that models real world free-market economies. Because of the fixed relationship between PED and actual money, several factors of supply and demand in Entropia are influenced by real world events.

Value is easiest to study in items, though services have value as well. A copy of an item is produced when it is looted from a mob, extracted from the ground, crafted, received as a gift from MindArk, etc. It then becomes part of the economy and may be exchanged between colonists. The supply of that item is increased by one. However, the demand for it does not necessarily change as a result. Therefore, the price of the item will slightly decrease. To convince yourself of this, consider the simple case of an auction for a rare, non-consumable item, which has some property such that a colonist could only have use for one copy of the item. Suppose that only one copy of this item exists. The winning bidder of the auction pays 1000 PED and receives the item, while the next highest bidder was only willing to pay 900 PED, and the third highest was only offering 500 PED. The value of the item is 1000 PED. Now suppose that a second copy of the item is produced, and another auction takes place. The runner up in the previous auction is still willing to pay 900 PED, while the winner of the last auction has no need for another copy of the item. This means that one copy of the item was exchanged for 1000 PED, and the other copy is now exchanged for 900 PED, so the average price of the item is 950 PED. The item was devalued because the supply rose while the demand remained the same. A third copy of the item being produced and exchanged would drive the average price down to 800 PED. Obviously the parameters in this example are unrealistic, as winning bidders often bid only slightly higher than the runner up. However, this is a simplified model of how supply can affect price. Demand can be pictured similarly; if two copies of the item are exchanged, but the second bidder no longer desires to purchase the item, the average price of the item becomes (1000 + 500) / 2 = 750 PED, which is less than 950 PED.

Most items in Entropia have a Trade Terminal Value. This is the price that any Trade Terminal, Local Trader, or Technician will pay for the item. The Market Value of an item is almost always greater than or equal to its Trade Terminal Value, as any seller would be wiser to sell the item for its Trade Terminal Value than to sell it to another colonist for less. For limited (L) items, Market Value is expressed as a percentage of Trade Terminal Value, so an item with a Market Value of 205% and a current Trade Terminal Value of 200 PED would be worth 410 PED on the secondary market. For unlimited items, Market Value is expressed as an addition to Trade Terminal Value, so an item with a Market Value of TT + 205 and a current Trade Terminal Value of 200 PED would be worth 405 PED on the secondary market. To view the Trade Terminal Value of an item, click "Show Basic Information" in the "Item Info" window. To view the Market Value of an item, click "Market Value" in the "Item Info" window or the right-click popup menu. The Market Value of an item is subcategorized by the Tier of the item. You can also view a history of an item's auction sale prices by clicking one of the graph buttons in the "Market Value" window. Sales trends are also tracked.

The final consideration is that some items are consumable. Examples of commonly consumed items include limited items and crafting materials. Nearly any item may be consumed by selling it to any Trade Terminal, Local Trader, or Technician. Consuming a copy of an item has the opposite effect on the economy as producing it.

How the Economy Affects You
The component of the economy that merits the most detailed consideration in a tutorial such as this, is the exchange of goods and services between colonists. Production and consumption are important pieces of the economy as well, but hunting, mining, crafting, and pretty much all other Professions in Entropia are mechanically little more than the consumption of some items to produce others. There are two common ways for a colonist to interact with this component of the economy. A colonist may buy an item(s) to participate in some Profession, and sell the items he or she receives from the Profession. An example would be a colonist who purchases a gun and ammunition, hunts mobs, and sells the hunting loot. A colonist may also buy an item and sell it to someone else for a higher price, in order to earn PED. A trader, who does this regularly, is likely to engage in a greater number of economic exchanges than the hunter. Regardless of whether you partake in economic exchanges for your Professions, as a trader, or both, there are several method used to perform such exchanges, and learning about all of them is quite useful.

Private Trade
A Private Trade is an exchange of PED and/or item(s) between two colonists. One or both colonists must transfer something from their own carried Inventory to each other's. To put a fund stack or item up for offer in a Private Trade, drag it from your carried Inventory to the Private Trade window. If you notice a colonist proposing a trade in the Trade Channel, he or she is most likely offering to conduct a Private Trade.

The main advantage of Private Trading for the seller is that there are no fees associated with the exchange. This is also advantageous to the buyer, as it often means sellers offer lower prices in Private Trades than via other trading methods. To the trader, this lack of a fee is even more important than it is to others, because a trader conducts such a large number of exchanges.

Drop/Pickup
This isn't really a trading method, but it is a means by which PED or items may be transferred. If a colonist drops a fund stack or item on a flat surface, such as the ground, it may be picked up by any colonist, including, but not limited to, the one who dropped it.

The Auction
The auction is a trading method which allows sellers to offer items to buyers in exchange for PED, without need for the two parties to meet in person (they just have to be on the same planet). The auction may be accessed at any Auctioneer. A colonist who wishes to sell an item in the auction must drag it from his or her carried Inventory into the auction window, and set the starting bid and buyout prices as well as duration of time the item will be for sale. After paying an auction fee, the item is set aside in a temporary holding area (referred to as being "in the auction"), and does not belong to any colonist. If at least one bid is placed when the set time expires, or the buyout price is accepted, the PED will automatically be transferred to the seller (minus an additional auction fee, which is directly deducted from the sale price if the item sells), and the buyer may retrieve the item from the auction. If there are no bids placed, the seller may retrieve the item from the auction, either before or after the set time expires.

The main advantage of the auction for the seller is that items are continuously available to buyers, without the need for interaction from the seller. Advertising the sale of the item is not mandatory; potential buyers are very likely see it, and will have the opportunity to bid on or buy it at any time, until the auction ends. Essentially, placing an item in the auction is easier, and items which are hard to liquidate on the streets may be more likely to sell. Again, the buyer will experience similar advantages. It is less time consuming to browse the auction than to search for Private Traders, and the odds are better that you will successfully find the item you're looking for. However, the price is usually a bit higher, and there is no possibility of negotiation when you buy from the auction. It is also possible for a potential buyer to place an order for an item, specifying the desired price and quantity of the item, which will automatically be filled as soon as an applicable item is placed in the auction. This means the item will be purchased instantaneously when it becomes available. The trader, of course, inherits the benefits of the seller and the buyer.

The most common role of a trader is to bridge the gap between the advantages of Private Trade and the auction. Traders often buy low quantities of stackable items from multiple colonists via Private Trade, merge them into larger stacks, and resell them in the auction. Because a portion of the auction fee is fixed, this is more efficient than placing small stacks of items into the auction directly.

Booths and Shops
Booths and shops are pieces of property which allow their owners to display and sell items. Potential buyers may view the details of an item, and purchase it directly from the shop. A small fee is added to the purchase price if an item is bought on another colonist's property (the landowner receives this fee). Each booth or shop has a specified item point limit, but this may be circumvented by using one or more shopkeepers. A shopkeeper is a non-playable character which displays up to twenty items at a time. Items displayed by a shopkeeper may be viewed, and purchased, in the same fashion as other items in a booth or shop.

The main advantage of booths and shops for the seller is that the fee is insignificant compared to the sale price of an item. There is not a fixed portion of the fee, as there is in the auction; the fee is entirely dependent upon the sale price. It is reasonable to sell stackable items in much smaller stacks than in the auction. Additionally, there is no limit to the duration of time that the item is available for sale; it remains in the booth or shop until it is manually removed by the seller, or is purchased. Finally, as with the auction, there is no need for interaction from the seller when the exchange takes place. The main advantage of booths and shops for the buyer is that far fewer buyers visit booths and shops compared to the auction. A smart buyer will occasionally browse booths and shops, remembering the locations of potentially interesting items. These items are likely to remain available longer than items in the auction. Similarly, a trader might gain an advantage by noting the prices of potentially interesting items, and returning to the booth or shop if the Market Value of the item later increases. The booth or shop may be the cheapest place to purchase the item in this case.

Forums and Release Notes
Becoming an active member of Entropia-related forums and reading Version Update Release Notes are great ways to stay informed about the latest news in the Entropia Universe. Staying informed is very important for maintaining an understanding of the economy. Automated functions provide quick and detailed access to auction history, but educated decisions often result from having a knowledge of what events caused drastic changes in that history to occur. Version Updates in Entropia sometimes have a profound impact on the supply and/or demand of items. Insight into the past can lead to educated guesses about the future. The ability to predict links between changes to Entropia and future economic trends is perhaps the most useful tool that a buyer, seller, or trader can develop for interacting with the economy. Knowledge is power.