Foundations For RedCat Multiverse Game Economy
In this section, we describe the economic theory behind the equilibrium pricing of figments, the most essential tradable assets in our economy. (9)
The intrinsic value of a Figment for a player comes from the player’s positive experience from using and nurturing the Figment in the RedCat Multiverse. This intrinsic value increases over time as the Figment is developed and utilized further. The direct intrinsic value of owning a Figment for a player is the discounted present value of the positive experiences that they expect to have in the future when using the Figment, minus any costs associated with developing and owning them. When a Figment is fertile, there is a second, indirect source of intrinsic value coming from breeding new Figments. The total intrinsic value of a Figment is the sum of its direct intrinsic value and its share from the total intrinsic value of its offspring, minus the cost of splicing. (Note that the latter source includes cumulative values from future generations: an offspring’s intrinsic value also includes the share from the total intrinsic value of its offspring, minus the cost of splicing.)
The financial value of a Figment depends not only on its total intrinsic value for the players but also on the market conditions, such as the demand and supply, as well as substitutability and complementarity between the Figments. In particular, for each Figment class there may be an arbitrary number of Figments that vary by their past experience. Clearly, such Figments will be imperfect substitutes for each other, where more experienced Figments are more valuable. Similarly, Figments from different classes may also be imperfect substitutes for each other. Availability of such imperfect substitutes lowers the financial value and therefore the price of Figments. With such substitutes, in general, Figment prices will be lower than their total intrinsic value, leaving some consumer surplus to the players.
There will also be complementarity between some Figments. In particular, the availability of a Figment may make another Figment more useful in a contest. Such synergies increase the intrinsic value of both Figments when they are used as a pair. Moreover, some Figment pairs will be compatible with each other for splicing, producing possibly rare new figment types. Hence, the availability of one of those pairs will increase the intrinsic value of the other to a player. Such synergies will increase the financial value and the price of such pairs.
In general, in equilibrium, Figment prices will depend on the fraction of new players and the supply of Figments that are ready to splice. The prices will rise with the growth rate of the number of players and will decrease with the supply of Figments that are ready to splice.
Fluctuations in the growth rate of the players and the supply of splicing Figments will lead to price fluctuations, which may be muted when the players understand that the demand-supply imbalance is temporary. Such price fluctuations may be harmful, as they may make entry too expensive for new players. We’ve designed splicing schemes so that the supply of splicing Figments adjusts to the prices towards stabilizing Figment prices. We will also use other financial tools, such as the temporary lease of Figments, in order to stabilize the prices.