Inflation on Gaia can be explained in two parts.
- Prices, over time, will rise no matter what. So using this fact, to make gold, buy a certain item, wait a year, and the price will have gone up.
- As more money is created, the worth on the money will decrease.
Both of these will be expanded on later.
The Increase in pricesEdit
As said before, prices over time, will rise no matter what. So users questing for items should account for this factor. The increase of prices is actually needed for an economy, stagnant prices would not help, and just hurt the economy. The general misconception of inflation to some users: "People sell items for much more than it is worth, and others try to follow suit. In this way, users end up with a greatly inflated price, and no one is willing to lose a profit to bring it back down...". This statement is incorrect because prices would come down; users undercut each other to have their item sold. Look below for a more in-depth explanation of why new items drop so fast.
A user is questing an Ancient Katana. They check the price on the marketplace, save up the gold, than go to the marketplace to buy only to notice that the price has risen by another 500K. Maybe the user believing this to be underhanded inflation will protest, but it is not inflation, it is supply and demand. Which leads to the example of a new item released that complemented the Katana. Thus demand for the Katana increased, and with only a set amount of Katanas on available, the price also increased.
The supply and demand graph showing the equilibrium between the supply and demand of an item. Where the green lines meet is the equilibrium. Now, if people started buying the Katana, the supply (vertical) line would move to the left, and the price line (horizontal) would move up to meet the supply line. This would give an equilibrium that has an higher price than before.
Fall of gold worthEdit
The fall in the purchasing value of money cane be explained by this example:
A single Angelic Halo is listed in the marketplace. The seller has set the price at a certain number, 10,000G (gold). Moments pass and then twenty more people decide to sell their Angelic Halo as well, by undercutting the original price of the first seller, and the price would possibly end up as 8,000G.
This relates to inflation because as more gold is created, the worth of the gold is less. Gold is generated by being active on Gaia, particularly using features that at earns a user gold by repeated use. Every piece of gold earned makes a form of contribution to inflation.
Contributors of inflationEdit
- Booty Grab is considered a source of inflation due to its purpose as a game. With the closure of third party sites such as Dolphinmania and also the shop Phin Phang being unavailable for a period of time in early April 2011. Updates have curbed the amount of gold that is given, this drastically effected the amount of gold in the system as some users do not heavily play Booty Grab as they once did.
- Gold Chance Items, now defunct, were containers that allowed Gaians to obtain large amounts of gold with little effort. One of these items could release up to a million to billions of gold at a time. Even though they were only obtained by the Cash Shop, La Victoire, they still managed to sell despite the protest of the community.
Contributors of deflationEdit
- A Gold Sink is a method by Gaia Staff to remove gold from the Gaia Economy. Examples are any event for which users pay gold to participate i.e. Christmas 2k9, Valentines 2k11, Summer 2k11. The Gaia Shops themselves are a continuous form of a gold sink as the prices very rarely, if ever, change.
Frequently Asked QuestionsEdit
Why do new items lose value?Edit
When a Cash Shop item is new the user wants the item right away, so they buy it. Since everyone wants the item, the sellers with the Gaia Cash can sell them at high prices. As interest in the item declines, the price will gradually settle to a lower price. Soon after the item is taken out of the La Victoire the price of the item will begin to rise again.
Does the Cash Shop cause inflation?Edit
This is an common misconception for users, although there is one exception to this rule.
The reason why the Cash Shop doesn't cause inflation:
- A user buys an Monthly Collectible from the Cash Shop. They then put it on the marketplace, and another user buys it with their gold. The buyers gold is taken away and given to the seller. No gold is created in this process.
- The Chance Items are said to cause inflation by the following: When a player fails to reach a certain point, they can still get an item that has a sellback for gold. The selling of the item without exchange is new gold being generated. However, the gain from said item is minimal.
What is Artificial Inflation?Edit
Is the act of artificial inflation is caused by a single person or group of people buying out most of the items of one kind and reselling them at a higher price. It's normally caused by an experienced exchanger or guilds with large amounts of Gaia Gold. Other causes are by a group of people with quite a bit of wealth, who are inexperienced. While they may raise the price of the item, the marketplace will always fix price hiccups. When the price raises, more people realize and try to sell, causing the price to tumble back down. Artificial Inflation rarely works, and is generally frowned upon by most users.
The Gaia admins have decided that there is nothing against the rules about this tactic. While in real life cartels are prohibited by antitrust laws to protect consumers, on Gaia, there isn't necessarily consumption of items; everything can be resold after use and consumers eventually become the sellers.
The Gaia marketplace is also extremely subject to natural price fluctuation and is extremely unregulated and unpredictable.