The era of rares - has it come to an end?
Posted by Duke Freedom on 08-Jun-2007 at 09:00
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I think a lot of people consider it about time that I write about the rares market again and rightly so. It's been a long time ago that I last posted up-to-date graphs of the rares prices and my own thoughts about the overall rares market. Since rares have shown a completely different price fluctuation over the last 8-10 months than they used to show in the past, I figure quite a few people want to know what the possible causes are for this. I hope this article will help people gain some insight in this and perhaps that other people can add on to the list of reasons that I consider the cause... Enough chatter about me and this article now though. 
It was long thought that rares had an unbounded potential to rise indefinitely to sky-high prices. During the period from December 2003 to September 2006, a period of nearly 3 years, rares were growing at an average of 13.5% per month, or 350% per year. In total, during that whole period, rares grew roughly a hundred times in price - this means that if you had invested 1 million in rares in December 2003, you would have owned roughly 100 million worth of rares in September 2006.
The three year long period had its downtimes as well though. For example, during the period from April 2004 to mid June 2004, the prices of rares more than halved. At the time there was a mix of reasons that caused this, ranging from the famous item duplication bug, which happened in November the year before, to the introduction of RuneScape 2 on the 29th of March 2004. Furthermore, rare prices had grown excessively in price in the recent history then too, so demand was already at a low due to speculation that the prices would be falling back in price a lot.
Comparing that situation to the one in September 2006, I wasn’t that surprised when rares started to loose a bit of ground then. Rares prices had risen excessively during the few months before that, and a stabilization period was to be expected. Basing myself on this historic data, I was somewhat expecting rares to go sideways / downwards in price for a period of about 3-4 months, after which I thought rares would be going to go up in price “like usual” again. I did add that this was under the assumption that significant market conditions that play a large role in the price development of rares (player population growth, money supply growth, amount and exclusivity of substitute goods) wouldn’t change extremely.
Click here to see a graph of the prices of small rares over the last 4 and a half years.
The prices were surely going sideways / downwards for 3-4 months. However, in opposite to my expectations, rares weren’t planning to go up in January of this year at all... So when rares went sideways / downwards for another 2 months then, making the ‘stagnation period’ take 6 months already, I was starting to wonder what was going on. I maintained the reasoning that there was no permanent reason why rares wouldn’t go up anymore, although I did realize that the addition of money drains like construction, and substitute goods like third age armor and skill capes had a negative effect on the price development on the prices of rares. However, I believed that those additions should only slow down the price growth of rares - not completely remove it.
Click here to see a graph of the prices of party hats between January 2003 and now.
Still, the market did not agree with me and the saying goes that the market is always right. Rares went sideways / downwards for another 3 months which brings us to today. In the past few weeks rares grew a bit in price again, but it’s hard to make any conclusions out of that - the current 8-10 month long period of price stagnation has had more of such temporary price increases, which meant nothing.
So where was I wrong? Well, that’s quite obvious actually. The only place where I could be wrong: in my assumptions. The fundamental aspects that previously led to the extreme increases in the prices of rares were no longer the same. Therefore, I was very happy when Jagex announced that it had reached 1 million subscribers - it gave me a new figure on subscription numbers since a long time. As you can see for yourself in the graph below I immediately discovered that the population growth was no longer anywhere near as large as it used to be. Where RuneScape’s subscriber population was growing at an average of 7% per month before, it had only grown at an average rate of 2.3% per month in the more recent history.
Click here to see a graph of the procentual growth of subscribers per month.
I do remain to believe that the current stagnation period is more a mix of reasons rather than one specific aspect that has led to this different price behavior though. Much lower population growth than before, addition of new money drains which decrease the net money creation ingame, addition of expensive alternatives for rares as status symbol like third age armor and skill capes (substitute goods), and the massive banning of gold “earned” by bots and sold by Real World Item Traders, where Jagex claims to be banning 6 billion gp a week - they all have a negative effect on the price development of rares. It seems reasonable to assume that it is all these factors together, rather than one significant factor alone, that has led to the recent sideways / downwards fluctuation of rares.
Due to the complexity of this, it is rather difficult to make any strong statements on the near and far future of rares. I personally remain slightly positive, because I do not consider the reasons to really ‘change’ the fundamental aspects that cause the rares to grow in price. I do believe all these factors together strongly slow down the speed at which rares can grow in price over time though.
While the era of rares might not be completely over, their once famous and extraordinary price development is for sure. While I maintain a half-positive stance on the price development of rares on the long term, I do want to add that I certainly don’t expect rares to grow with the 13.5% average per month or anywhere near that anymore, like they used to do in “the good old days”.
Comments
Cdub posted on 08-Jun-2007 12:28
An overdue read on rares for myself and I'm sure many others.
Realistically speaking I can't see rares dropping too significantly without throngs of people jumping on them, driving prices back up.
Blooblyblobl posted on 08-Jun-2007 13:56
I have mixed feelings about the performance of rares. I certainly liked it when my rares went up, and I was bummed out when rares stopped performing so well as soon as I caught back up to the phat market, but on the other hand the stagnation takes off some of the pressure to invest in rares or be left behind, and makes it easier for me to acquire more rares since the prices of the ones I don't have also aren't going up.
I had certainly been waiting for this article for a long time
, and I agree with the stealing of the spotlight by skill capes and third age, having been interested in skill capes since their release and becoming more interested in third age as time passes.
kiwi db posted on 08-Jun-2007 20:13
I have a theory on the economics of the rares market and how it is similar to the real life economy:
According to Duke Freedom's observations and calculations, rares were growing at an average rate of 13.5% per month for 3 years. In real life a similar growth rate has been occuring in the economies of China and India (ok. i lie, it's more like 9-12% per year :/. But the growth rate is certainly a lot higher than the normal >1-1.5% per year that most other economies target their growth so as to sustain a growing economy for as long as possible). What i am getting at here is that the rares market could vaguely be related to these two 'powerhouse' economies compared to the international economy, and how the behaviour of these two economies could affect the international economy - especially when, as Duke Freedom mentioned with such a rapid growth rate there is inevitably at least a leveling out period, or (as worst case scenario) a market 'crash'.
So now that we have (umm well and truly) reached the end of the rapid growth rate period in the rare market, i think that it is important to continue to watch the rares market, and the economy as a whole in Runescape, because the same thing could eventually happen in real life.
I will admit that the closest that i have come to training in economics is a year of Accounting (if u could even call that remotely close to economics
) in high school, and observations and theories that i have conducted myself (for my own curiosity), so if my theory is rather 'outlandish' please correct me, or heaven forbid :O completely deny any truth to it.
Oh and Duke thank you for another enjoyable article on the economy of RuneScape, it's nice to be able to see the big picture every once in a while instead of the localised, one character view of it
.
Skatedog111 posted on 08-Jun-2007 21:44
FINALLY, been waiting forever for this.
I actually think you might have hit the nail on this one, unlike the ones that are as well researched of what I see on tip.it.
But you are wrong in the sense that rares won't be at the 13.5% increase, Jagex, could accidently release an update which they thought may further reduce/slow down the icnrease of rares, while it may do the opposite. Although I don't know why jagex might do that since they know they cannot stop the growth forever, without destroying the game and the market.
Falx posted on 08-Jun-2007 23:33
Duke, you never cease to amaze me. Your detail and precise knowledge of the Runescape economy is very profound. I must say i did read that and agree with all of the aspects of why it was occuring.
Thanks again Duke.
Duke Freedom posted on 09-Jun-2007 02:05
Thanks for the feedback everyone.
In response to kiwi db:
).
Well you are certainly taking it a bit to far by saying that the RuneScape's economy / rares are "related" to the economic growth of China and India (also mind that the 13.5% growth in rares was per month, whereas economic growth in China and India is 9-12% per year
However, I suppose it is arguable that RuneScape's economy behaves quite a bit like the economies of emerging markets - I'm fairly sure most economists would be able to agree on that statement to a certain extend.
On the other side, there is a strong difference why China and India are emerging markets and why RuneScape could be considered one. The emerging market aspect in RuneScape would be mostly derived from its high population growth and all the indirect consequences of that. The emerging market aspect of China and India in RL is the fact that their economies have "stayed behind" international / western standards allowing them to "catch up" now, with as result enormous economic growth.
It will certainly be interesting how RuneScape's economy will evolve as time goes by though and as population growth may be starting diminsh even more and may eventually become zero or even negative. I'm still expecting that material prices will rise in price over time then, providing that massive autoing wouldn't prevent that from happening.
In response to Skatedog11:
. I don't think it is likely that Jagex would do anything that could cause rares prices to grow so excessively again though.
Yes, Jagex will always remain an important factor in the exact price fluctuation of rares, but since we'll never know what Jagex is and isn't going to do anyway, any discussion about that would remain purely speculative
kemikalkadet posted on 09-Jun-2007 08:54
Great read as ever Duke. I was a victim of the recent drop in rares.. i was taking a few months off so i sold up and bought a red mask for 50mil. In my abscense, skillcapes came out and i ended up having to sell my mask for 39mil =/
I ultimately think Jagex will be the biggest influence of prices, through updates creating substitutes etc. I think i'm done with rares now, instead i'll have some fun with my money instead of trying to invest.
0m3gaknight7 posted on 10-Jun-2007 11:41
What are your thoughts on the new level 60 bows? I would assume that they will have an effect smaller than but similar to whip drops. Currently only about 2800 players have level 90 slayer, which means that drops should go for a pretty penny for about a week.
Slayers will look around for things to do with their newfound piles of money, and it is likely that many will go for a nice looking hat...
1-2m price increase on rares?
Edarkness posted on 13-Jun-2007 09:39
I don't know, 0m3gaknight7. People with 90 slayers are the dedicated combatants, for lack of a better word, of Runescape (no Pest Controlling for Slayer
). I think it more likely that they go after a nice set of Third Age rather than a silly little hat.
No 83 hunters on the other hand... who's to say?
Trojann2 posted on 14-Jun-2007 10:18
I'm going to miss the "Good Ole Days"
Draegone posted on 24-Jun-2007 20:55
Rares have been a chunk of the market for quite sometime and probably
always will. fluctiations in the rares market are determined by several
factors, two examples would be construction which if you look at the party
hat graph on 6-2006 (POH came out may 31) party hats dropped. Also,
the real reason why the graph takes a startling turn and jumps
extraordinarily is due to the notorious Fightbull (and others) who did
a construction glitch. While most think of Durial321 and his massacre,
in my opinion the lesser known fightbull had a MUCH larger impact. He and
friends discovered a glitch in dungeon reward chests in where if the owner
logged out in the right time (I never really found out this in detail) the things
inside of the chest would duplicate. Well Fightbull and others began buying out the p hat market with his riches, which accounts for the large rise...
minus my side note........... in conclusion.. Many low levels complain that
party hats should be removed from the game, when if such a thing did
happen prices of many common items would sky rocket. <-- why Jagex will
never remove them, and that people will always want these items of
admiration and grandeur thus there will always be a market for them.
Mario sunny posted on 25-Jun-2007 22:05
I've always enjoyed your articles Duke Freedom, whether they be on the tip.it times or RuneHead. Thanks for the update on the economy on rares.
Moonstone391 posted on 06-Aug-2007 10:30
I have seen that some prices of the red mask and blue party hat have gone
up if u play the game recently i cant rember the the prices though..
CnConrad posted on 27-Aug-2007 11:37
I have had almost the exact same thoughts. I too thought that there would be a brief drop but they would bounce back this spring.
By the way, I have noticed Duke Freedom is no longer playing Rs. Do you have another account you have created?
Also, do you have any estimates on the number of each type of rare?
siao mage posted on 06-Oct-2007 23:28
Long time no speak
I notice you're still writing informative editorials and stumbled across these after reading some of the archived tip.it times of yours.
This article does not differ from any of your previous ones - very informative and well worded with a dictionary full of economic jargon
Have fun mate,
Rhys