Thursday, September 26, 2013

Price Floors: Combating Copying?

The latest update from the developers at Roblox is quite interesting. We've seen Roblox tinker with the economy before (Ie: Instituting game passes, allowing users to sell gear, trading currency/items etc.) That being said, ROBLOX has been very lenient in the past about what their users can and cannot do in terms of manipulating the economy. The latest update takes away some of that freedom by instituting a 'price floor' with the sales of clothing. This is an unwise update, as it will cause more harm than good. This update will promote pumping more Robux into the economy via users purchasing Robux, decrease visibility of clothing, and promote copying even further.

One of the principals of economics is inflation (Prices going up because there's more currency in the economy.) The clear and concise reason of Roblox implementing this update is because they want to increase revenue from users purchasing Robux. When a government (Take Roblox, for example) pumps currency into an economy, the value of that currency drops (This is known as inflation.) Inflation results in higher prices for goods, and the value of that currency dropping. This happened in Zimbabwe, when the government tried to pump money into the failing economy in an effort to fix it. The result was disastrous, the value of their currency dropped rapidly, and more money was pumped into the economy to try and fix it. This resulted in a viscous cycle, which is why Zimbabwe abandoned their national currency, and uses the currency from other countries. If the floor was set relative to the growth rate of Roblox, then there wouldn't be an issue.
One hundred billion dollars worth of Zimbabwe's currency is enough to buy three eggs.

The concept of how fast goods sell is based on something called price and demand (It's why the gas prices fluctuate randomly.) The higher the demand for an item, the higher the price. Less demand equals lower prices to try and drive demand. When gas isn't in demand, the price goes down. When gas is in demand, the price shoots up. Another factor (In my humble opinion) is visibility. If lots of people drive Ford's, the visibility of Ford's products increases, which results in more potential sales. If a lot of people are wearing a shirt in Roblox, they may say, "Hey, I like that shirt - I'm going to go in your inventory and buy it from whoever made it." With higher prices, it takes longer for users to purchase items, and users will likely hesitate and consider if the item is truly worth 25 days worth of login bonuses. This will decrease visibility for that item, and hinder sales overall (Which outweighs the benefits of increased profits.)

Copying is an issue that has plagued Roblox for a long time now (Copying of places, clothing, and models). The update is increasing the minimum that items have to be sold at - copiers that previously sold items cheap to make their items the obvious choice vs. the original creator selling it at a higher price have their potential revenue multiplied by a massive percentage. This will encourage copiers to steal clothing and sell at the new minimum, which increases their profits overall.

Some say that this update will bring higher quality items to the catalog, that it will discourage copying, or it will increase revenue.
I agree there, people will obviously be more conscious with their money. However, I believe those higher quality items are going to be copied and sold at the minimum price.
I disagree there, I believe copying will be increased due to the higher quality clothing being appealing to players (And the new price minimum being raised up.)
I partially agree, I think that the concept of supply and demand is going to come into play and reduce sales to the point of where creators are making less money vs. what they were previously making.

Roblox has an interesting idea about setting price floors to assist with the economy. However, there are far too many things that have to be set in place/corrected before price flooring can be implemented. It has potential, but for now, it's a bad idea that needs to be removed from the site until the other supporting factors are put into place.