This post is part of a series on economics in board games, you can find the whole series here. If you would like to learn more about economics and better follow along with thoughts in this post then I recommend that you go back and read the previous entries in the series.
This post is about markets and what characterizes markets in board games. Understanding what characterizes a market in a game can help guide game designers in their pursuit of creating a fun and satisfying economy for the players.
First and foremost: a market is defined as a group of buyers and sellers of a particular good or service. Buyers make up the demand for a product via their pursuit of increased utility through consumption. Sellers determine the supply of a product in their pursuit of profit and cost of production.
Markets take on many different forms. Some may be highly organized in the sense that the conditions under which money changes hands is more formalized. For example, for many agricultural commodities (such as wheat, tomatoes or corn) buyers and sellers meet at a specific location at a specific time and get help from an auctioneer to determine the price.
As you might realize it is much more common for markets to be less organized. Typically buyers and sellers don’t have to meet at a specific time or place: with the rise of online shopping stores are open around the clock and buyers can click home the latest new fruit inspired technology from the comfort of their homes.
Regardless of the level of organization involved in slinging phones to hapless consumers it is still a market: some want to buy phones, and others are selling phones. Buyers know that there are several companies offering the same phone. The price and quantity supplied of a particular phone is not determined by a single buyer or seller – there is competition. (Yes, in bold: its that important.)
A competitive market is any market where there are so many buyers and sellers that each buyer or seller only has a negligible impact on the price. A seller can’t suddenly raise the price without losing out on sales. A buyer can’t demand a lower price as every individual buyer will only purchase a small amount and a seller will simply sell it to the next person instead.
Markets can also described as being more or less competitive, to illustrate I will list a couple of typical market types along with examples:
- Perfect competition: the goods in the market are identical and buyers have no preference between on seller or the other. Both buyers and sellers are plentiful and no one has influence over the market price. Both buyers and sellers are therefore classified as price takers. In practice there is no real market with actual perfect competition. The closest, and classical, example is agriculture: farmers produce almost identical carrots, potatoes etc. in large quantities, there are plenty of sellers and buyers and no single individual can meaningfully impact the price.
- Monopoly: single seller, there is only provider of a particular good and buyers must accept whatever price this seller sets. Sure, there is always the choice of not buying it but you can’t go to another seller. A common example of a monopoly is railways. Often times these are government instituted monopolies where only a single provider are allowed to run their trains on the track.
- Oligopoly: few sellers that might collaborate instead of competing. Sellers might for example agree to divide the market share amongst themselves geographically, promising not to operate in the same area as their competitors. They might also just more directly agree on a price level that is significantly higher than what the price would have been with more competition. A classic example is airline routes, where a particular route might only be operated by say, two or three providers.
In terms of board games players might, depending on theme and mechanics, be regarded as either buyers or sellers in a market. There is no shortage of games that feature some type of market. Most commonly players will be buyers in the sense that they may use their hard earned resources to purchase different items, cards etc. of some value. Other times, players take hold of a certain production – or several production and must manage the in game economy in order to amass as many products as possible.
The markets in board games are generally more organized than they are in the real world. It is rare for a game to feature a mechanic where you can simply purchase whatever you want – whenever you want. You might have to wait for your turn, go to a certain space on the board to enter a shop, or only trade under certain conditions. For example, in Catan you can only trade with the player whose turn it currently is. The reason for markets being more organized is obvious: the alternative likely provides a truly chaotic experience with players haggling left and right out of turn.
In terms of competition board games tend towards being low competition. There can only be so many players in a game and thus the amount of buyers/sellers in the market will be low. In addition, in games where there is little or no trade the players will be limited to acting as only either a buyer or seller in the market. If all players are buyers then the game itself is the only seller and therefore determines the price of goods.
The challenge for a game designer in such as setup is that the demand for a certain resource will vary across the course of a game. Commonly, the price will stay the same – there is a set price out of the box. In such a setup the game designer could be regarded as a monopolist trying to set a price for goods that maximizes the profit (fun) in the game. Too high and no one will buy; too low and everyone buys every time – the decision becomes uninteresting. The other way is to introduce some kind of way for the price of goods to vary along with demand. But then how do you measure demand? And how can you change the price of a good without making it bloated with components?
Another solution is to let the players decide the price of a good. In games that allow for trade between players the market price is decided by the players themselves instead of the game designer. If the utility (value) of a resource in a game increases, then a player will be willing to pay more to acquire it. Let’s say you only need one more stone to construct a city and win the game – suddenly you’re willing to pay almost anything to buy one stone from another player. Likewise, if you know that a player only needs one more stone to win the game then there is likely no price they could offer for you to part with said stone.
How to set the price for resources in a game and how trade influences game play are questions that intrigue me and are a topics I will likely come back to in future posts. But we’ll have to leave it for now as I need to introduce some more economic concepts before we can dive into it further. If you’re not fed up already here is some food for thought in the shape of a challenge.
Challenge: think of a mechanic that allows for the price of a resource to change across the course of a game without introducing trade between players. How would you measure demand? How would the players know when to change the price of a good? How do you make sure that prices do not spiral? Is it even possible to construct such a market in a game? Feel free to leave your thoughts below!