How are item prices ultimately determined?

[Socks_]

I feel as though I have a decent grasp on the workings and the basics as well as the essentials of the economy, but how are item prices ultimately determined?

 

Are item prices determined by the amount of trades for an item at that price? If that's the case, then aren't the item's prices arbitrarily determined by what people are willing to pay?

I feel as though this isn't the case, but if it is, I guess it makes sense.

 

If the situation is more complex than this, could it possibly be that item prices are ultimately determined by the value of refined metal and consequently keys? 

 

I feel as though these conjectures might be wrong, but I at least wanted to provide my thoughts.

[ᴾᴾᴹ Shuffle Spy]

From an economic standpoint, the prices of items are determined by market equilibrium between buyers and sellers. If the price people will pay is lower than what others are willing to sell for, then nothing will sell until the buyers' prices rise or the sellers' prices drop.

 

From a suggestion standpoint, item prices are determined based on sales, using sellers and buyers in the event that a) there are no sales (there's a whole non-Unusual suggestion guide here https://forums.backpack.tf/topic/36705-rules-for-non-unusual-suggestions/) or b) they suggest certain sales are outliers.

 

Item prices aren't necessarily determined by the value of Refined and Keys. Refined is priced now, unless I'm wrong, by dividing the cash sale price of Keys by their price in Refined. If Keys rise from, say, 42 Refined to 43 Refined, then the price of Refined will often drop and vice versa. When the price of Refined drops, people can buy more Refined, and subsequently are often willing to pay more Refined for items to get rid of all of their Refined.

[Socks_]

Thanks man. I really appreciate the response. 

[Ghost]

As an item gets added to the game people sell it at an arbitrary price because what the community is willing to pay for it is yet unknown, this goes for weapons too.
Look at weapons, without taking into consideration skins, australiums, stranges, killstreaks, etc when they get added to the game they usually go for a ref or more, this price will usually drop to 1 scrap in less than a week. Why is that?
Because first, everyone wants the "new weapon" so there's a lot of request for it but at the same time there's not many around as people didnt have time to craft or find them in big amounts, this is the first reason of the price being high initially (this applies to all items, not only weapons, the less there are, the more the item is wanted, the more it will cost), the second reason, talking about just added weapons, is that you don't know if their price is going to drop to a scrap or if is going to even increase from the initial ref, for example look at the sharp dresser or the awper hand, they are well more than a ref in value, for these reasons as a weapon gets added to the game the initial price will be around 1ref usually, sometimes even more, it depends, but still arbitrary, from there it will go up or down according to the amount being available and how many people is looking to buy.

Now, craftable weapons are surely the lowest possible tier of items but this applies to more or less everything of any tier, even the golden pan, the more pans get dropped the more are available for sale, therefore the lower the price, still its an item that A LOT of people look after and there's yet not many around, so even tho the price is going down over time its still quite high but unless Valve do something about it the price will keep going down forever until it reaches and arbitrary point where it will stop.

Starts with an arbitrary price -> adjust over time -> keep adjusting -> stop at an arbitrary price

Why does it stop at an arbitrary price? No idea tbh, after all if we are talking about an item that can be crafted or found, the number available (unless some gets destroyed or crafted) will keep increasing and increasing, while the price stay the same, why is that? Who on earth would destroy an item that has ANY value? Just sell it for metals, who on earth would craft a hat that is worth more than a craft hat? Sell it for a craft hat, then craft the craft hat and keep the difference. Sure someone will always destroy or craft them but isnt enough to lower the number being available day by day, so why doesn't the price go down to eventually zero or stop at the craft hat value? No idea.

If the number of an item keeps increasing and the players looking to buy them are more or less the same its price should, by logic, go down, this doesn't seem to happen when it reaches its final value. Why? Who decides the final price if that's not related to the
offer and demand after its initial adjustment phase? To me it looks like if a hat is bad looking it will be a craft hat, doesn't matter how many there are around and how many people want it, at the same time if a hat is good looking it will always be above the craft hat, doesnt matter if there's half a million available and only 1000 people wanting it. So, again, who decides wich is a great hat and wich is a ugly hat? No idea.

Now lets get into artificial changes to prices, look at dueling mini games, they used to be 0.33-0.44 for a long, long time, now from some days they are 0.55-0.66, as the owner of a trade bot i was able to track down when exactly it changed and the change happened instantly, literally in a matter of minutes, my explanation is that someone wanted the Dueler hat and bulk bought A TON of dueling mini games, leaving as the only available classifieds, the ones of people/bots selling them for higher prices (0.66 instead of 0.44), after that if you had some dueling mini games would you sell them for 0.44 or for 0.66 like everyone else? Of course you would sell them for 0.66 and so would bots, now if you sell them for 0.66 are you going to keep buying them at 0.33 or buy them for 0.44, even 0.55 to receive all the offers and still make your profit? Of course you would do that, and bots too. This led to the price changing from 0.33-0.44 to 0.55-0.66, probabily at some point it will come back to its original value, hopefully very soon, but this shows clearly how even a single person can change the value of a high volume item like the dueling mini game.
Surely this person did it for legit reasons, i suspect to get the Dueler hat but other people do similar things for malicious intents, to bring down prices of items they want to buy or bring up prices of items they want to sell, they do this in a lot of ways, mostly exploiting the "i sell/buy at the price that other people sell/buy" way of working of bots and even people.

So yeah, its a mess, the inital price is arbitrary, it then adjusts to offer and demand, then it stops at an arbitrary price, then eventually someone will try to manipulate its price and so on, its not as simple as many people would like to think, that is all about offer and demand, its absolutely the oposite, look at what happened to earbuds when they dropped A LOT in price overnight, even tho none was added to the game, look at bots (mine included) that keep trying to match other people prices, for this reason the prices can fluctuate a lot, even leading to many refineds of difference from its "stated price" for no reason at all, its all a mess, its almost entirely arbitrary or based on luck, one day an item is worth something, the next day for no reason is worth the double or the half.

[Teeny Tiny Cat]

On 5/10/2019 at 3:01 AM, Socks_ said:

Are item prices determined by the amount of trades for an item at that price? If that's the case, then aren't the item's prices arbitrarily determined by what people are willing to pay?

 

I feel like this sentence makes no sense. Basing the displayed price on the commonly traded value is the opposite of arbitrary. Arbitrary would be if price mods just picked a random price out of thin air and set the backpack.tf price to that.

[Ghost]

13 minutes ago, Teeny Tiny Cat said:

 

I feel like this sentence makes no sense. Basing the displayed price on the commonly traded value is the opposite of arbitrary. Arbitrary would be if price mods just picked a random price out of thin air and set the backpack.tf price to that.

I think what he means is not that price mods decide wich price an item has, instead the fact that the backpack.tf price is a snapshot of what an item used to cost at a specific date, item prices flucutate a lot on daily basis, even hourly, all you need to do is make a suggestion with enough evidence of sales happened in a moment when the price was high (and it gets priced high) or when it was low (and it gets priced low), who makes the suggestion ultimately decides when to do it, if he should do it today, tomorrow, this week or the next, as long as he can provide enough evidence of sales and other people agree that in the time frame when the suggestion was made the price was is in fact that one, it gets accepted, leading to a situation where you can increase or lower the backpack.tf price of an item just by waiting the right moment because unless we are talking about keys and stuff like that, the next suggestion for that item is probably going to happen in months.
So yeah, with enough planning and patience the backpack.tf price can be set arbitrarly for most of the items and i think that's more or less the point he was making, of course i could be mistaken but surely doesnt look like he's implying that price mods decide prices on their own.

[Teeny Tiny Cat]

1 minute ago, Ghost said:

I think what he means is not that price mods decide wich price an item has, instead the fact that the backpack.tf price is a snapshot of what an item used to cost at a specific date, item prices flucutate a lot on daily basis, even hourly, all you need to do is make a suggestion with enough evidence of sales happened in a moment when the price was high (and it gets priced high) or when it was low (and it gets priced low), who makes the suggestion ultimately decides when to do it, if he should do it today, tomorrow, this week or the next, as long as he can provide enough evidence of sales and other people agree that in the time frame when the suggestion was made the price was is in fact that one, it gets accepted, leading to a situation where you can increase or lower the backpack.tf price of an item just by waiting the right moment because unless we are talking about keys and stuff like that, the next suggestion for that item is probably going to happen in months.
So yeah, with enough planning and patience the backpack.tf price can be set arbitrarly for most of the items and i think that's more or less the point he was making, of course i could be mistaken but surely doesnt look like he's implying that price mods decide prices on their own.

 

Yes, anyone can update a price at any time, and the price shows when it was updated. What is your point? That doesn't make it arbitrary at all and I didn't say he was implying price mods decide prices. Please go look up the definition of the word "arbitrary"

[Ghost]

57 minutes ago, Teeny Tiny Cat said:

 

Yes, anyone can update a price at any time, and the price shows when it was updated. What is your point? That doesn't make it arbitrary at all and I didn't say he was implying price mods decide prices. Please go look up the definition of the word "arbitrary"

What is my point? My point is simple: item prices fluctuate on daily basis, they oftenly have a range (sometimes quite large) in wich they oscillate over and over, let's say i want the dueling mini game price to be higher for any legit or malicous intent, right now they are being bought and sold for 0.55-0.66, got plenty of evidence as my trade bot traded an enormous amount of those for said price, i could make a suggestion and realistically be accepted as, not only i have all the evidence of this world for the amount i've bought and sold, all classifieds are for that price too.
https://backpack.tf/suggestion/5c46bd35cf6c7519416f0105

this is the previous suggestion by some user wich is a quite accurate suggestion, he used bot trades as evidence too, so can i, i see no reason why it wouldnt be accepted, but i know VERY WELL that the price is going to go back to 0.33-0.44 in few days, i've managed to track the exact moment and cause when the price gone up and it happened because of someone bulk-buying a ton of dueling mini games, leaving as the only sell offers the high price ones, then followed by the other bots as they just copy the price.
If i had any interests related to this item and i was shady enough to do something like this, i could very well fill my inventory with dueling mini games, place a suggestion with the current price and profit from it knowing that the next accepted price suggestion will happen in months or years based on the statistic on time intervals of the previous ones for the item in question.
Now the fact that i wouldnt do that means that nobody will ever do that or that nobody ever done that? I dont think so, i think instead it is a much wider phenomena than we would like to believe.
Prices for an item oscillate very oftenly, you make a suggestion and get it accepted when it is in the lower part of the oscillation and congratulations, you lowered the "official" price, do it in the higher part of the oscillation and congratulations, you increased the "official" price, knowing that the next accepted price suggestion will be in months from your.
Isn't this arbitrary? Sure arbitrary within a range but a range that you can anyway modify by bulk-buying/bulk-selling an item to adapt the range to your needs for just enough time to have your suggestion accepted.
Even if you do not manipulate the market to change the range you can still decide in wich point of the oscillation range you should place your suggestion, being able to lower or increase the price at will.

[Scott Bakula]

32 minutes ago, Ghost said:

*snip*

 

And in that situation, you would just have a second suggestion made after the first becomes obsolete.

 

When a price gets accepted, it is not set in stone for any length of time. There have been times where an item will change in price several times in a day due to an extreme market fluctuation in an effort to keep information as accurate as possible.

[Teeny Tiny Cat]

Market manipulation occurs in every market on earth and does not make suggested prices arbitrary. There are issues with suggestions, but that is not the same thing as that particular criticism. Again, go look up what that word means.