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Sunday, 26 October 2014

Plex over 800m ISK

I will just throw this out there - my view on the Plex price.



The Plex price has broken above 800m ISK yet volumes are on the decline.

Worth considering that the supply of Plex is not related to the demand for Plex in the same way that minerals and ships hulls are related, for example.

The demand for Plex is perhaps easier to think about.  The demand is some sort of a function of the growth in the Eve population and the wealth of the Eve Population.  As those increase then the demand for Plex should increase.  So far, so good.

The supply of Plex though is less obvious (or it may be and i am merely missing the point!).

The question i am wrestling with is why does a player want to buy Plex for $15?  Clearly, the answer is that the player wants to buy ISK (or, occasionally spends US$ to dual train etc).

If so, then the more ISK that $15 of Plex creates then presumably the less total US$ the player need spend to buy the total ISK that they require.

For example, if a player wanted to buy $4bn of ISK, today they would need to buy 5 Plex = spending $75.  One year ago, that $4bn of ISK would have required about 7 Plex = $105.

In other words, for a player to achieve a level of ISK then that player need not buy as many Plex today and so the supply of Plex has gone done.

(For now, lets assume that 4bn of ISK today would get the same as 4bn of ISK a year ago).

Hence, we have a situation where the demand for Plex is rising and the supply is falling.  Leads to a self-fulfilling price rise in Plex until one of the demand factors breaks and then we get a self-fulfilling price fall in Plex!

Of course, someone with a load of Plex could dump on the market and cause a fall, perhaps temporary.

CCP then has a balancing act on their hands - rising inflation leads to more ISK being required by players buying it using Plex (good for CCP, bad for the Plex price).  But rising inflation also leads to more wealth and so a rising demand for Plex (good for the Plex price).  Which will win, not clear.

8 comments:

  1. I think we're on pace to hit 1B PLEX before the end of the year.

    Demand side: PLEX is like gold... if you want to preserve your worth, and worry about inflation, you store your cash in something else.

    Supply side: I think supply doesn't match the demand unless there is some sort of PLEX sale going on. Though the cash-in prospect continues to be a driver, I think they don't account for enough volume to tip the scales back.

    PLEX - 12wks - The Forge

    The slump recently in volume looks like traders are playing a shell game with already existing PLEX, and there aren't a lot of people cashing-in.

    ReplyDelete
    Replies
    1. Great youtube cast by the way, and good slides.

      I would agree that supply is limited and not matching demand.

      Will be interesting to see if existing holders of Plex cash in.

      Delete
  2. Here's my take on it http://merchantmonarchy.blogspot.ca/2014/10/plex-prices-break-800-billion-barrier.html

    ReplyDelete
    Replies
    1. Thanks for that.

      As I commented on your post - there is also the chance that CCP is running out of confiscated Plex to sell. CCP can not so easily create Plex out of thin air to sell - if they do then they would need to account for that as a marketing expense in their Accounts. They can though create ISK to buy Plex in the market.

      In other words, CCP can force the price up but has limited ability to force the price down.

      Delete
  3. Just one detail, the US price for PLEX is $19.95 USD, not 15.

    ReplyDelete
  4. CCP told us @ fanfest that they monitor the price, but would not mind a price above the 1 bil isk.

    ReplyDelete
  5. I think any economic analysis of the PLEX price has to take into account that the demand and the supply are not equally elastic. The supply is driven by players willing to convert $19.95US into a PLEX and then into ISK. That, in turn, is going to be driven by the in-game purchasing requirements of those players.

    The demand for PLEX is principally driven by the account needs of rich players, and thus is more inelastic; it's driven by the subscription fees which are constant over time.

    ReplyDelete

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