Interesting Article by Valve's Economist

[cleverpun]

It's a bit old (June '12) and it refers to even older data (Nov '11 - May '12)  but I thought this an interesting piece of economic analysis by Yanis Varoufakis i.e. the guy with a PHD in Econ that Valve hired.

 

Short version: it studies the potential for arbitrage over time in the TF2 economy. "Arbitrage" is taking advantage of price differences for personal gain (i.e. buy low, sell high). The results are not surprising to a casual observer--using a lot of MATH we see that the potential for profit peaks at the release of new items/sales. This is nothing new, and Mr. Varoufakis tells us the obvious; players haven't settled on a price yet.

 

But here's the fun part--he also includes a graph with the "relative" values of buds, bills, and ref for that time period. I compared that graph to TF2Finance's graph for the same period and, excusing the lack of marks on the lower part of the former, the two were actually in VERY close agreement. They both mark three major dips, and they both begin at 14 and end at ~24. The graph using valve's data is much more accurate--it has more noticeable dips and rises and shows a smoother progression--but given the differences in the data used (allllll of it vs. some of it) I'd say Finance deserves a pat on the back, if nothing else.

 

I could opine about the potential meanings, but I'd like to hear other people's thoughts on it. Read the article (it's not long at all), and skip the math if you don't have an Econ doctorate.

 

Also; I like how his software tried to spellcheck "TF2" and he didn't bother to correct it.

[base64]

His graphs are made through estimating the relative values of items solving linear equations. It represents the general "worth" of an item in barter economy. Market exchange rate converges to that, but not always. 

[Jymotion]

link: http://blogs.valvesoftware.com/economics/arbitrage-and-equilibrium-in-the-team-fortress-2-economy/

[cleverpun]

link: http://blogs.valvesoftware.com/economics/arbitrage-and-equilibrium-in-the-team-fortress-2-economy/

 

Man I got so caught up typing my text wall I forgot to include that... Im a derp

 

His graphs are made through estimating the relative values of items solving linear equations. It represents the general "worth" of an item in barter economy. Market exchange rate converges to that, but not always. 

 

I see. I barely remember high school econ, so this is all new to me.

[~shenanigans]

I read his article way back when he posted it. It confirmed some of the things I had noticed, like the arbitrage potential in the TF2 market. The similarity between his compiled graph and base64's graph is striking; he also makes a note at the very end, to the effect of wondering what will happen if there was a sort of real-time system of tracking trades. Well, look at the market today. Arbitrage potential on keys has been significantly reduced (one can't buy keys at 3.66 to flip them for 4, they muts buy at 4 and flip for 4.11). Are we slowly getting closer to equilibrium?