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Subject: Is the price of buying your containers really tripled? rss

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Jacob Williams
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So the rule book claims that exercising your right of first refusal means you are paying three times the price of the auction. This doesn't feel right to me...

First and foremost, I understand how they get that figure. If you accept the high bid, you get the bid (X) and a matching subsidy from the bank (also X). So X + X = 2X. However, if you buy it yourself you pay X and lose the offer and subsidy. So -X + -X + -X = -3X.

I don't think this math is correct because buying the containers and accepting the highest bid is NOT an apples-to-apples comparison. Like real economists, the game designers are saying that opportunity cost (the bid and the subsidy) are the same as actual costs. Also, it ignores the costs incurred by loading the containers on your boat to begin with.

Here is what I think the real price of exercising the right of first refusal is: the price of the containers from the opponents shipping area plus the bid amount (assuming the origin of that container wasn't your production area).

So now when you are thinking about bidding on shipments, I think the mental math should be:

Well, the shipment is worth this amount to me but I paid X for it and getting Y. Which has more profit, the worth of the containers on my island section or the bid + subsidy (obviously subtracting out your price). So the whole 3 times malarkey should never really enter your mind.

Thoughts?

 
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Andrew MacLeod
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And when, exactly, are we playing Churchill again?
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I believe it's merely a penalty to discourage you from buying your own stuff. How is it a penalty, and why have it in the first place? The government incentive money is the only way new money comes into the game; and without it, the economy (and the game!) is broken.
 
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Tom Steynen
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amacleod wrote:
The government incentive money is the only way new money comes into the game; and without it, the economy (and the game!) is broken.

I wouldn't call it broken per-se. It does become a different experience though. But that is the most interesting aspect of this game I think. Depending on how the players interact with each other the game experience can vary wildly.

As for the OP's question:

I think the designers are just trying to say that, once your ship arrives at the island and the highest bid (let's call it X) has been determined, you have the choice of accepting the bid and gaining 2X or buying the containers yourself and paying 1X. This means you must realize that the choice to buy the containers yourself is 3X more expensive than selling them to the highest bidder.

How the containers arrive at the island and how much you paid for them is of no consequence as these values do not change with your choice of accepting or declining. All you have to take into account is if the bid is so low that it is worth losing 3 times the bid to gain the containers yourself and denying them to your opponent. Usually this is not worth it.

The rule has a use in that bidders can not underbid too much if they do not want the owner to walk away with the containers.
 
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Andrew MacLeod
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And when, exactly, are we playing Churchill again?
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I think you may have missed my point, Tom: without the extra money that the seller gets from the bank with a successful auction, no new money will come into the game. The only money will be (collectively) that with which the players started the game. In other words, the game won't work.
 
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Aaron Bohm
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As far as I remember this is the reason for Domestic Sale, which in the current rules version is labeled as a "Beginner Variant." A player can cash out $2 for a container. It can help to dig out the game a bit.

The real issue though is that sometimes bidders are stingy thus practically forcing the seller to buy his own goods (the net VP exchange is too high). This in turn means he has less cash to bid with which can further escalate the problem.

Then loans. Loans are the way money leaves the game and if people are buying their own goods AND taking loans it can sink the game. Simple solution? Don't do this.
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Agent J
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ChromiumAgeCollector wrote:
So the rule book claims that exercising your right of first refusal means you are paying three times the price of the auction. This doesn't feel right to me...

First and foremost, I understand how they get that figure. If you accept the high bid, you get the bid (X) and a matching subsidy from the bank (also X). So X + X = 2X. However, if you buy it yourself you pay X and lose the offer and subsidy. So -X + -X + -X = -3X.

I don't think this math is correct because buying the containers and accepting the highest bid is NOT an apples-to-apples comparison. Like real economists, the game designers are saying that opportunity cost (the bid and the subsidy) are the same as actual costs. Also, it ignores the costs incurred by loading the containers on your boat to begin with.

Here is what I think the real price of exercising the right of first refusal is: the price of the containers from the opponents shipping area plus the bid amount (assuming the origin of that container wasn't your production area).

So now when you are thinking about bidding on shipments, I think the mental math should be:

Well, the shipment is worth this amount to me but I paid X for it and getting Y. Which has more profit, the worth of the containers on my island section or the bid + subsidy (obviously subtracting out your price). So the whole 3 times malarkey should never really enter your mind.

Thoughts?



The price of the goods at the harbor store is a sunk cost - you've already paid it. You can't get it back. Therefore that amount should not enter the equation at all - you've already made that decision when you purchased them. It's over.

So you're shipping to the island.

You have goods.

They bid $10.

You can pay $10 and get the goods. Net financial position for you, the value of the goods on your island (x) - $10. Net cash position, -$10.

You can take the bid. Net financial position for you, +20. Net cash position, +$20.

Of course, then you have to take into account their difference in financial position if they buy it, but it's fuzzier that way.

Anyway, the difference in cash position will always be x3 - in this case, $30 difference between paying $10 and receiving $20. But that isn't really the whole story, it's really x3 less the value on your island.

But other factors come into play that also push the decision towards taking the money instead of the goods, like liquidity and game state, but that's not really the focus of this discussion.

It's important to ignore the cost you shipped the goods for, though. That's a prospective purchase - you bought it hoping their value on the island was high enough to support the purchase, and if it isn't, then you still shouldn't base your current decision on that price.
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Jacob Williams
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[q="Jythier"]Anyway, the difference in cash position will always be x3 - in this case, $30 difference between paying $10 and receiving $20. But that isn't really the whole story, it's really x3 less the value on your island....

It's important to ignore the cost you shipped the goods for, though. That's a prospective purchase - you bought it hoping their value on the island was high enough to support the purchase, and if it isn't, then you still shouldn't base your current decision on that price.[/quote]

I get the math, but I still don't agree with it. I'm concerned with the profit from the load. So in that since, I can't simply write the cost of the containers off as a sunk cost. So to me, the cash positions are:

Right-of-first-refusal: Value of the containers - cost of containers - highest bid

Highest bid: 2(Highest bid) - cost of the containers

So the differential between these two is the real cost/benefit of buying your own containers.

Side note: I feel the containers fit more into inventory cost as opposed to a sunk cost. You can shoe horn lots of things into the sunk cost category, but I'm not seeing it in this case.

 
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Tom Steynen
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ChromiumAgeCollector wrote:

I get the math, but I still don't agree with it. I'm concerned with the profit from the load. So in that since, I can't simply write the cost of the containers off as a sunk cost. So to me, the cash positions are:

Right-of-first-refusal: Value of the containers - cost of containers - highest bid

Highest bid: 2(Highest bid) - cost of the containers

So the differential between these two is the real cost/benefit of buying your own containers.

Side note: I feel the containers fit more into inventory cost as opposed to a sunk cost. You can shoe horn lots of things into the sunk cost category, but I'm not seeing it in this case.

The difference between the two is:
= (Value of the containers - cost of containers - highest bid) - (2 x highest bid - cost of the containers)
= Value of the containers - cost of containers - highest bid - 2 x highest bid + cost of the containers
= Value of the containers - 3 x highest bid

The cost of the containers is removed from the equation once you calculate the difference. All you need to consider is if the value of the containers is worth 3 x highest bid. And that is what they say in the rule book.

(Note: I am ignoring the possible gain and losses your opponent will incur. These things will probably matter for your decision as well but do not matter when you are calculating your cost for refusing the highest bid)
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Brent Wilson
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Right,

So even if you irrationally cared about the amount you paid for the containers***, the money is spent regardless of your decision to buy or sell the containers at the auction and appears equally in both calculations (and can be simplified out).


***(maybe your imaginary boss is basing your bonus on the profit margin of sold containers but ignoring bought containers)
 
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Agent J
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I didn't realize you were interested in calculating your total profit - I thought you were interested in making a decision between buying your own goods and selling to the highest bidder. My mistake.
 
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Jacob Williams
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Tekar wrote:

The difference between the two is:
= (Value of the containers - cost of containers - highest bid) - (2 x highest bid - cost of the containers)
= Value of the containers - cost of containers - highest bid - 2 x highest bid + cost of the containers
= Value of the containers - 3 x highest bid


This is brilliant. I like how you used my equations to prove the rule book.

You convinced me the rule book is correct
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Jacob Williams
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Jythier wrote:
I didn't realize you were interested in calculating your total profit - I thought you were interested in making a decision between buying your own goods and selling to the highest bidder. My mistake.


My profit is definitely the biggest factor when I'm deciding the buy the goods myself or not. I would think if you didn't use this metric you'd always accept the highest bid because 2X > -X for X > 0.
 
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Agent J
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He's looking real sharp in his 1940's fedora. He's got nerves of steel, an iron will, and several other metal-themed attributes. His fur is water tight and he's always up for a fight.
badge
He's a semi-aquatic egg-laying mammal of action. He's a furry little flat-foot who'll never flinch from a fray. He's got more than just mad skills, he's got a beaver tail and a bill.
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ChromiumAgeCollector wrote:
Jythier wrote:
I didn't realize you were interested in calculating your total profit - I thought you were interested in making a decision between buying your own goods and selling to the highest bidder. My mistake.


My profit is definitely the biggest factor when I'm deciding the buy the goods myself or not. I would think if you didn't use this metric you'd always accept the highest bid because 2X > -X for X > 0.


You need to consider the value on the island.

2X is usually greater than -X + value on your island, though.
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