By Lt_Wolf 
For the last five months I have had the opportunity of working with Chedburn to collect and analyze economic data for Torn. Of primary interest was the condition of the Points Market. Some of you may recall a thread of mine from about a year ago where I detailed how the Points Market price ceiling of $50,000 was harmful to the average player. I am happy to announce that the proposal to raise the price ceiling has been approved by the Players Committee, and has now been officially enacted. This blog post will explain why this change was made, and what you should expect to see.
Before we raised the Points Market price ceiling, this was a common sight:
And if you were lucky enough to see a point bundle for sale, it was usually sold quickly. For the last three months the average bundle of points sat on the market for only 52 seconds.
Torn’s players collectively hold about 27 million points, so why were so few players selling? This situation is easily explained by the fundamentals of Economics: the Points Market was experiencing a shortage due to a restrictive price ceiling of $50,000.
You can receive points through two primary means—you can donate to the game and receive 50 points from a donator pack, or you can purchase points in-game on the Points Market. In the Points Market, at a high price, you will want to buy fewer points than you would at a low price. Conversely, at a high price you will be more willing to sell points than at a lower price. In the Points Market there is an optimal price which will maximize the gain for the group of point sellers and the group of point buyers.
With a higher price ceiling in place, the competitive price will converge towards the optimal price. Allowing point prices to rise and fall as the market dictates benefits players who buy donator packs with real money because the 50 points they receive can now be sold for more.
When you do the math, it turns out that donator status is worth about 14,000,000 and 50 points are worth 2,500,000 (when the $50,000 price ceiling is in place). By allowing the price of points to increase, we aren’t actually increasing to cost to players who buy DPs with Torn cash. If they don’t want the points, they can sell them.
The above graph shows that the price of points naturally converged toward and stabilized at $41,000 per point (until the update on March 1st). This convergence occurs because while sellers want the highest price possible, they are willing to undercut competition to sell their points faster. As the price is driven down, more players will purchase points, driving the price up. These two forces balance to push prices toward optimality.
By raising the price ceiling, what do we expect to happen? Certainly, we expect to see price volatility on the short term. Prices could go as high as the new price ceiling, as low as (or even below) the old price ceiling, but we expect prices to stabilize between $55,000 – $85,000 per point (this is a “best-guess” estimate based on prices in the trading post).
Despite higher prices, consumers of points as a whole will be better off because more players are able to actually acquire the points they wish to consume. Instead of constantly refreshing the Points Market in hopes of getting lucky, points should be readily available when needed.
Why a price ceiling at $100,000?
Most importantly I expect the optimal price to be below $100,000, so this price ceiling should be non-restrictive. However, in the long term it is possible the optimal price could be pushed above $100,000. At that point we will want to determine why the price ceiling has been hit. Was it due to normal market pressure, inflation, or market manipulation by some players? If a price increase was due to inflation, we will want to control inflation. If a price increase was due to market manipulation, we may want to enact some player limitations.
Why did the price of points rise so high in the past, and why won’t that happen again?
The primary culprit of point prices rising in the past was inflation due to rapid creation of money. If inflation was still high, controlling it would be a primary concern.
Referring to the graph above, the issue of inflation is under control today. While there was a large jump in the quantity of money in May, the overall inflation rate is low and sustainable. High inflation would be a primary concern, but we can rest easy observing that the inflation rate is reasonable.