Price manipulation clans in RuneScape + lots of Grand Exchange trading information carelessly removed from the wiki ("Not NPOV" argument)

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Price manipulation clans in RuneScape + lots of Grand Exchange trading information carelessly removed from the wiki ("Not NPOV" argument)

New postby 3ICE on Sat Dec 10, 2016 5:56 pm

This destructive edit is stupidly wasteful in my opinion. Hundreds of contributors worked hard on those sections for months. And then one overly eager keyboard warrior simply deleted everything one day. Here I've saved the text:

Prices are partly governed by the [[Wikipedia:Law of supply and demand|''Laws of Supply and Demand'']]:
*If an item is in high demand with low supply, then its price will increase.
*If an item is in low demand with high supply, then its price will decrease.
*If an item's demand matches its supply, then its price will stay the same.


====Trading Tips====
==Trade restrictions==

<small>For the Runescape Wiki price guide, see ''[[Grand Exchange Market Watch]].''</small>

*Worlds 2 and 3 for members and non-members, respectively, are popular worlds for trading items without using the Grand Exchange, especially items such as [[Partyhat]]s and any other items which are worth more than the limit of coins one may possess (2,147,483,647), which requires item bartering to make up for the deficiency between the aforementioned limit and the item's actual worth.

*Competing offers in the same price range are prioritized chronologically, so making offers early will grant availability to have your items bought/sold before anyone else.

*All offers are completed using the earlier offer's price. In other words, when the buyer's price is above or at the same amount of coins as the seller's price, the trade is completed using the earlier offer's price, so also consider making your offers later.

*To bargain, you can wait to see whether your offer is accepted and then change your price accordingly.

*Price manipulation is possible even with the Grand Exchange, so be careful. (See section ''Price Manipulation'' below for details.)

*Changing the buying offer of a product by 5% over market will generally increase the chance of buying quickly, the same is true while selling an item at 5% under market.



==Economic Effects==
=== The Grand Exchange reduces the need for constant merchanting ===

The Grand Exchange has made merchanting almost obsolete, by relatively reducing the average transaction costs of buying and selling most items. This money is said to be made up for by the convenience and ease of trading through the grand exchange. Transaction cost is the cost of finding someone to trade with, bargaining, enforcing a trade agreement, and transferring the agreed goods and/or services, all of which are expedited by The Grand Exchange. The list below illustrates how the grand exchange does this.

#Unlike a shop or player, the Grand Exchange does not make a profit.

#The Grand Exchange finds someone to trade. It searches every offer on every world. This has a drastic effect on the prices of many common items. For example, if you have to find a buyer yourself, items like bones are relatively expensive, usually around 215 coins each (many players choose not to farm them, as they only drop from low-level mobs who have little other valuable loot). With the Grand Exchange, the common marketplace makes them worth {{GEP|Bones}} coins. The same effect can happen in reverse, where a greatly varied price becomes either a much lower or a much higher uniform price.

#The Grand Exchange removes the necessity of long, often unfruitful searching and bargaining ventures. If the buyer bids higher or equal to the seller’s asking price, then the Grand Exchange instantly completes the trade. If not, then it will wait until there is a suitable transaction. More often than not, players can get away with buying things for much less than the listed price, and sell for much more than the listed price (see [[Advanced Trading Guide]]) granted that they don't mind waiting. It is for this reason that many people choose to sell or buy items before going to sleep, as The G.E has more time to find these transactions. This removes most negotiation and communication opportunity with regards to item pricing between players.

#Time taken selling is greatly reduced. It is worth noting that not only is the trade normally completed in much less time, an item waiting to be sold on the Grand Exchange takes up none of the players time, as the player is not fully preoccupied by the transaction. Whilst attempting to sell items to players, a time investment is needed to sell items to make a profit on the grand exchange it takes next to no time whatsoever.

#The Grand Exchange transfers the items halfway. Although a player still has to obtain the items and bring them to the marketplace, the Grand Exchange will bring completed offers straight to the collection box (at any bank).

This of course is still only true for when the Grand Exchange prices match the items' generally perceived value. Though most of the time the G.E lists agreeable prices, in situations where an item is worth more or less than what it is worth on the grand exchange, merchants can still do business.

==Price manipulation==

Any attempts to directly affect an item's price on the Grand Exchange takes an enormous amount of money and time, which is why it is considered unprofitable in most cases. Price manipulation seems to follow a pattern consistent with two main types and several subtypes; they are categorized differently because they work somewhat differently. The two main types are ''disclosure-based manipulation'' and ''trade-based manipulation''.

===Disclosure-based manipulation===

This occurs where a person discloses false or misleading information which has the effect of misleading other participants about the value or trading volume of a security. Every tradeable item in RuneScape is a ''security''. Disclosure-based manipulation is fraud.

====Pyramid scam====

How some [[merchant clan]] leaders use a pyramid scam on people, in five steps:
#Some merchant clan leaders secretly buy lots and lots of the same item.
#They recruit and mislead people into buying the same item at a higher price, thus raising the item's price.
#They encourage people to recruit even more people, thus creating a pyramid.
#They set a "dump price" for everyone to sell.
#They either secretly sell their item before this dump price is reached, or they suddenly announce a new dump price; in both cases many people are still buying the item. What these people are misled into buying is the item they are secretly or suddenly dumping.

The merchant clan leader (and any of his or her trusted friends/ranks in the clan) may make millions of coins in this way. They'll set the price of for example, 1,000 coins per item, to be dumped at 10,000 coins. They themselves will buy the item for 1,000 - 1,200 coins each and wait until it rises to 5,000 coins, and they'll sell the items. If the clan is big, this won't affect their merchant, or they can blame another clan.

===Trade-based manipulation===

"This is the buying or selling of a security by a person [or group] which influences or misleads other participants' perception of the value or trading volume of that security.” It has many subtypes, but only two significantly affect the Runescape economy: ''matched orders'' and ''corners''.

====Matched orders, pools, and wash sales====

Someone places an order to buy, and matches it with an order to sell: the buyer and seller are the same person. This transaction is fake because nothing is really being transferred. Matched orders manipulate prices by faking a supply and demand. A group can do this too.

Matched orders also mislead other people into overestimating the trading activities of the security that’s being manipulated, and thus—for slightly technical reasons—mislead them into underestimating the transaction cost of that security.

Matched orders and genuine orders are currently nearly impossible to differentiate on Runescape. We can only imagine account #1 posting an order to buy a dragon pickaxe for an unusual price, and account #2 selling it for a similarly unusual price. Repeated enough times and the price isn’t so unusual anymore, and that’s when the manipulation succeeded. We can also only imagine 2 million lobsters being bought and sold for the same price on the Grand Exchange, and so the Grand Exchange accounts for those numbers when it updates the price of lobsters, but the Grand Exchange currently doesn’t know whether the buyers and sellers were the same person. We don’t either. Again, matched orders and genuine orders are currently nearly impossible to differentiate on Runescape.

This is no longer possible with commonly traded items because the Grand Exchange works such that buyers get the best offer, and sellers get the best offer they can get, however an item that has no activity can still easily be manipulated in this way. This is often done to odd items required for quests since people will pay thousands of percent more than the market value of the item. By manipulating the market price to keep it low, those attempting to sell the item will sell it for significantly less than its actual value.

====Corners or squeezes====

Someone buys something, raises its price, and then sells it to another person. In this transaction, a cornering merchant intends to raise price by merely monopolizing his or her competitors, whereas a genuine merchant intends to raise price by at least decreasing the overall transaction cost. (Transaction cost is the cost of conducting a trade: the time and effort of finding someone to trade with, bargaining and enforcing a trade agreement, and transferring the goods and/or services.) Corners manipulate prices by monopolizing a security in a way that increases its overall transaction cost, and this additional transaction cost burdens other buyers but not the manipulator. Again, a group can do this too.

A corner is where “a person [or group] buys up a substantial volume of a security knowing that other market participants will be forced to buy from him at a higher price.” Other buyers are forced to buy from a cornering merchant because they are left with few alternatives; the manipulator had already monopolized his competitors. By contrast, other buyers are not forced to buy from a genuine merchant because of two reasons: first, a genuine merchant often has competitors or the threat of potential competitors; second and most importantly, a genuine merchant saves them some trouble of finding someone to trade with, bargaining and enforcing a trade agreement, and transferring the goods and/or services.



==Alternate Views on Price Manipulation==

Some players argue that price manipulation is legitimate when not directly misleading other players. For example, while few would defend pyramid style clan manipulation, many would argue that solo merchandising with the effect of price manipulation is valid.

A common justification is that buyers and sellers have final say of their decision to make a transaction. Players buy items for what it is worth to them, and are aware of the price they are offering.

=="Legitimate" Grand Exchange Merchandising==

One should keep in mind that though many people share similar opinions regarding the RuneScape economy, it is still largely a player-created game. What people consider to be "legitimate" trading is entirely subjective. However, considering many players' views on economic manipulation, "legitimate" seems to entail a lack of malice or intentional damaging of the economy for personal gain. Legitimate merchandising on the Grand Exchange is not impossible, although which methods are considered legitimate is a matter of opinion.

Legitimate methods include investing in an item at a low price and waiting for the price to rise after a time before selling. This is similar to traditional investing in real life- the "hold and wait" method, since markets tend to trend upward over the long term.

"Flipping" is also legitimate as it provides liquidity to the market. This is exactly the same role that "market makers" play in real equities markets (like the New York Stock Exchange and NASDAQ). Liquidity is important for markets and valuable for regular, non-merchanting players, as can be seen in the following example: Imagine a regular seller is impatient to sell rune plate-bodies, and therefore prices them low so they sell immediately. The merchant has a buy offer sitting on the Grand Exchange, and since the offer is sitting, waiting to be filled, this buy offer is said to "add liquidity" since it is available to trade against. When the seller posts his sell offer, and it gets matched to the merchant's buy offer, the seller's offer is said to "remove liquidity" since his offer never sits on the Grand Exchange, and it knocks out the merchant's offer. The seller has thus gained convenience from the liquidity the merchant provided. Then the merchant goes and posts a sell offer for the rune plate-bodies, which will sit on the Exchange, again adding liquidity (since it's resting and waiting to be matched against). When someone buys the items, they are again benefiting from the merchant's liquidity.

"Flipping", done correctly, does not move the price of items, since a merchant who is trying to flip will check the current price and simply try to stay within the [bid-ask spread]. They profit solely from adding liquidity, rather than the longer-term up/down movement of the items and market.
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Re: Price manipulation clans in RuneScape + lots of Grand Exchange trading information carelessly removed from the wiki ("Not NPOV" argument)

New postby 3ICE on Sat Dec 10, 2016 5:57 pm

Similarly removed huge section on Price manipulation clans:

A non-combat clan that focuses on playing the market to gain profit from investments in in-game commodities. Historically they were a collaboration of players who attempted to predict natural market shifts and making advantageous investments. They used to be fairly rare, since solo-trading was easier and in some cases more profitable. However, their numbers have gone up dramatically since the introduction of the Grand Exchange.

These second generation price-manipulation clans (commonly called "merchanting", or "merching") are significantly different than their predecessors. They do not rely on natural market fluctuations to raise and lower prices. Instead they pool their wealth together and buy out the entire stock of a particular item. This is intended to trigger a massive price increase due to the Grand Exchange picking up the increased (albeit artificial) demand. When the increasing price hits a certain mark, the clan sells their items, netting a profit. Most of the clans, if not all, claim to be "Merchanting" or "Group-merchanting" and state that price manipulation (as the actual nature of clan) is not illegal, and there is no scam in it.

These clans are often heavily criticised because their operations are price manipulation. They are also criticised for interfering with the gameplay of all those who are not in the clan, because it is often difficult or impossible to buy any items which are currently being bought out by a price manipulation clan, causing an interchange (or multiple ones) of oligopoly and oligopsony. Others accuse the founders and higher ranked members of the price manipulation clans of scamming players, because they often buy and sell items to be price manipulated earlier than their members, which leads to an increased profit for themselves and a decreased profit or a loss for their lesser members.

Jagex has reacted to the criticisms of price manipulation clans by forbidding them to, on the RuneScape Forums, promise huge profits, telling players exactly what to buy and when, and asking that players advertise the clan in-game Jagex has also posted an informational sticky on the Forums to educate players about price manipulation clans and the dangers that go along with joining one.

Apart from the informational sticky, Jagex has said that no further action against price manipulation clans will be taken for the time being. In a price manipulation clan discussion thread, Mod John H clarified Jagex's position on the matter, saying that they did not believe price manipulation clans were as big of a problem as many believed. He said that since they were not creating nor destroying wealth (merely redistributing it) and because all items on the Grand Exchange could be obtained other ways, price manipulation clans were not breaking rules as long as they followed the new forum rules.

Example
Name of clan changed in the below example.
Clan "Kidmercher" advertises for members by sending existing members to the GE on as many worlds as possible. The existing members are rewarded with Clan rank if they do this enough. On joining new members are instructed to buy Chaos Talismans at maximum market price, and sell at 13000 coins. This is at the time, say 4k and falling in price. Members wishing to express concern at this strategy find they have insufficient rank to talk in the clan channel.

Analysis
This strategy has a number of major flaws.

The price for most items is set by supply and demand, for example one can trade Runecrafting guild tokens for a chaos talisman. Increasing the price of the talisman will encourage people to acquire it by other means (either for their own use or to resell) thus increasing the overall supply of the item - in the RuneScape economy this is the total number of the item in circulation, particularly in the GE. This will damp the items price increase meaning more resources are needed to increase the price - effectively the clan needs to either soak up the additional supply or affect market sentiment in such a way that others buy it. Furthermore, demand is also elastic so if price rises, apart from speculators, people will seek alternative goods (such as a Chaos tiara), manage without or delay purchase.
Margin: the items need to be bought at the GE max and yet they will need to be "dumped" at the GE min. Given that there is a limited natural demand for the item (due growth in player base, to it being lost, destroyed, collected, left in idle or banned accounts or used, depending on the item) which is less than the demand (artificial added to natural) that caused the price rise, this will generally take as long as - or longer than the price rise, therefore an overall loss will be sustained.
Market information: Given that the price to sell is set at 13k - and this is public knowledge, a rational player (including clan members and leaders) will sell just before that price to ensure their items sell, say at 12,500 to allow for margin and a GE update. However wise players will realise this, and the consequence that the price will never actually make 13k, but peak at 12,500 and so sell at a still lower price, say 12k. This reasoning continues by induction and severely damps voluntary attempts by groups to manipulate market prices in this way.
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Re: Price manipulation clans in RuneScape + lots of Grand Exchange trading information carelessly removed from the wiki ("Not NPOV" argument)

New postby DieKralle on Mon Dec 12, 2016 10:54 am

Holy shit :O. I don't think I want to read that now. I'm saving it up for later. I'm not even playing RuneScape.
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Re: Price manipulation clans in RuneScape + lots of Grand Exchange trading information carelessly removed from the wiki ("Not NPOV" argument)

New postby 3ICE on Mon Dec 12, 2016 4:01 pm

Maybe it's a good thing they removed it :) Now the article is much shorter.

But still, they should have MOVED this valuable information to its own article somewhere. Instead of mods vandalizing their own wiki with mass blanking entire sections...
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