Issues with stock pricing and difficulty level

3) Difficulty level changes need to reset the "ready" state of all players when one player changes their difficulty level. I hosted a game and everyone was set to manager, but then right before I hit the Play button, one of the players must have changed their difficulty level.

That's a really good point. I'll pass that along.

Thanks for all the feedback!

-Scott-

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Soren_Johnson

Join Date 04/2008

+29

The stock price is not a linear relation to your actual cash on hand, especially as the values get higher and higher. There is a dampening effect so that a company with $5m in cash might only be worth $2m on the stock market. Without this effect, games might never end. (If I am reading your question correctly. Please post a video if I am being confused.)

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Soren_Johnson

Join Date 04/2008

+29

Also, I wish there was a video of case #2 as that is not supposed to happen...

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#2 I wonder if it was due to a network issue. Probably your replay would no nothing about it, if it wasn't transmitted to your PC.

#3. I was just thinking that when I was reading someone talking about trying to get everyone in a room to go CEO level. I wonder if it makes sense to allow different handicaps in a public game. I guess if you know each other it might, but it could be difficult to manage with strangers.

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egable

Join Date 09/2002

+5

The problem with pricing is that it really makes no sense. It would be equivalent to buying 2.5 million cash with 1.5 million cash. And that's not even talking about other assets. If it is an economic game, it needs to at least follow basic math principles. Otherwise it is more about who knows all the peculiar quirks of the game vs who actually played the best game.

Think about it in real life. If you could buy a company for 1.5 mil that had 2.5 mil cash on hand, you would do it, right? Then you would drain the cash and sell the assets and walk away with the profit. But nobody on earth would value a company at less than what they had cash on hand.

It totally makes sense to depreciate the physical assets. But cash is cash and you don't buy it on a discount.

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Quoting egable,

reply 5

The problem with pricing is that it really makes no sense. It would be equivalent to buying 2.5 million cash with 1.5 million cash. And that's not even talking about other assets. If it is an economic game, it needs to at least follow basic math principles. Otherwise it is more about who knows all the peculiar quirks of the game vs who actually played the best game.

Think about it in real life. If you could buy a company for 1.5 mil that had 2.5 mil cash on hand, you would do it, right? Then you would drain the cash and sell the assets and walk away with the profit. But nobody on earth would value a company at less than what they had cash on hand.

It totally makes sense to depreciate the physical assets. But cash is cash and you don't buy it on a discount.

Well yes you would do that and if that company had just suffered a serious write down to price per share without suffering a loss to book value, do to a loss of intangibles like good will or brand loyalty or heavy shorting then there are situations where their stock price would not reflect their book value and be at a pretty serious discount... this does happen.

Having said that I was just in a situation where I was in a pretty low rank in the game and the lead player was snowballing and had spent most of his cash buying up 2 other competitors I was able to buy him out even though I was way below him in revenue and stock value (granted he had a lot of debt which made this easier) this immediately put me in the drivers seat and I snowballed the game from there. It did feel a little unrealistic.

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I thought that at first too egable. Think about this in terms of a non-hostile takeover though. You could potentially buy a company with very small percentage out of pocket, due to the magic of leveraging. Thinking in non-business terms, you can buy a house with a little money down. You are leveraging that other companies 2.5 million cash (basically letting the owner keep it as part of the acquisition, so it kind of becomes immaterial, except for a percentage added to your down payment. I know you can't take this example too far, because you should be taking on a large level of debt as part of the buyout, but the point is, it does server a purpose in the game, and it can be rationalized in real world terms.

I think where I, and probably you, struggle, is understanding exactly what drives the price of the buyout that your competitor must pay. We want to understand what to do to increase the price that the other guy has to pay the quickest. I don't know that answer yet.

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Well even in the stock market world if a company has more cash than liabilities the stock value tends to atleast follow the cash-liabilites value. (the logic being that this cash is left for the shareholder no matter what happened. Other assets than cash are more fickle as it is always a question if book value is the true asset value) And most of the time stock prices are actually much more, especially for growth driven investments. Ofcourse this would only kick in if you are actually having more cash than liabilities.

Or uhm yeah I realize it is really not that simple to make a simple valuation for this game. Would it be possible to show the current valuation method?

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egable

Join Date 09/2002

+5

Quoting EMH2006,

reply 8

Well even in the stock market world if a company has more cash than liabilities the stock value tends to atleast follow the cash-liabilites value. (the logic being that this cash is left for the shareholder no matter what happened. Other assets than cash are more fickle as it is always a question if book value is the true asset value) And most of the time stock prices are actually much more, especially for growth driven investments. Ofcourse this would only kick in if you are actually having more cash than liabilities.

Or uhm yeah I realize it is really not that simple to make a simple valuation for this game. Would it be possible to show the current valuation method?

I agree. In the real world, the general way to value a stock is based on assets - liabilities and then factor in earnings per share and cash flow per share. The assets - liabilities calculation forms the basis for your company's value. However, when comparing two companies whose base value is equal, the one with higher cash flow per share and higher earnings per share is worth more on a per-share basis. The 10-to-1 rule for free cash flow per share and earnings per share is a good rule to follow, even in the game. If it is above $10 per share for each dollar of earnings per share or free cash flow per share, then the stock is tending towards over valued while less than $10 per share per dollar of earnings / FCF is tending towards under valued. Because it is a game, you can set it at a fixed ratio and use that to help figure out a stock price. Calculate a base stock price based on book value and then factor in earnings and FCF relative to others in the game to adjust the price up or down. That will make the stock prices tend to be higher for those who are doing better and lower for those who are doing worse. It will very quickly sort out who the strong player(s) are vs who the weak ones are.

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I really need to study the tool tip over stock price more, but I have a theory on your buyout valuation. Given Soren's comments, cash provides a diminishing return on stock value. However, stock holdings in other companies may not. I have played a few AI games where I own all, except for the final buyout, in a couple of companies, and they own me. I say to myself, I'll just sell some stock in one company to generate cash to buy the other. As soon as I hit the sell button, bam, I'm bought out. So, I'm thinking that if you want to drive up your own value, don't have cash on hand, if you can spend it on stock. And don't sell to generate cash reserves if you're currently in a position to be bought out yourself, it will only exacerbate the situation.

Of course, in my situation example above, I couldn't spend any more on stock, because it was already bought up. So, is it a cash race? And, is it better to hold commodities than it is cash? How are resources valued in your stock price, compared to their value if you sold them? I'll bet that if you have a huge chunk stored up, sell half, the value of the remaining half drops and there goes your stock value again.

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egable

Join Date 09/2002

+5

Quoting Tigershawk,

reply 10

I really need to study the tool tip over stock price more, but I have a theory on your buyout valuation. Given Soren's comments, cash provides a diminishing return on stock value. However, stock holdings in other companies may not. I have played a few AI games where I own all, except for the final buyout, in a couple of companies, and they own me. I say to myself, I'll just sell some stock in one company to generate cash to buy the other. As soon as I hit the sell button, bam, I'm bought out. So, I'm thinking that if you want to drive up your own value, don't have cash on hand, if you can spend it on stock. And don't sell to generate cash reserves if you're currently in a position to be bought out yourself, it will only exacerbate the situation.

Of course, in my situation example above, I couldn't spend any more on stock, because it was already bought up. So, is it a cash race? And, is it better to hold commodities than it is cash? How are resources valued in your stock price, compared to their value if you sold them? I'll bet that if you have a huge chunk stored up, sell half, the value of the remaining half drops and there goes your stock value again.

I played a game at lunch today where a level 2 guy bought out a level 5 competitor simply due to a brief period of high cash flow. A couple minutes later, he upgraded to level 5 and steamrolled the remainders. This sort of situation makes no sense at all. I think the biggest issue may simply be that stock value does not respond quickly enough to buying pressure. If stock prices went up faster due to buying pressure, these sorts of very quick buyouts would not happen. It would put less game value on quickly building up cash to buy stocks and more onto making an economic machine that can fuel a long buying campaign. There is no real legitimate reason a level 2 company should be able to buy out a level 5 company when they cannot even get themselves upgraded to level 5 for the same cost as buying someone who is already there. Each level upgrade should have more of an impact on stock price and each stock purchase should have more of an impact. And, cash on hand should be weighted more fairly, as well.

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Quoting egable,

reply 11

I played a game at lunch today where a level 2 guy bought out a level 5 competitor simply due to a brief period of high cash flow. A couple minutes later, he upgraded to level 5 and steamrolled the remainders. This sort of situation makes no sense at all. I think the biggest issue may simply be that stock value does not respond quickly enough to buying pressure. If stock prices went up faster due to buying pressure, these sorts of very quick buyouts would not happen. It would put less game value on quickly building up cash to buy stocks and more onto making an economic machine that can fuel a long buying campaign. There is no real legitimate reason a level 2 company should be able to buy out a level 5 company when they cannot even get themselves upgraded to level 5 for the same cost as buying someone who is already there. Each level upgrade should have more of an impact on stock price and each stock purchase should have more of an impact. And, cash on hand should be weighted more fairly, as well.

Did you consider, that this level 2 guy simply has better understanding of the game, cos you need a significant cash flow to buy out a level 5 guy unless he has so much debt that he costs nothing... that means he had to be producing the most efficient things from cash point of view, meaning he went towards a much riskier strategy which simply paid off... You should instead try understand his strategy, and I assure, good players choose when they upgrade, and when doing something else is better, just shows the game has more dimensions.

Also the thing about cash on hand, is like Soren said, if you added cash on hand to the stock price, then the game can just last forever if both players have a very even income rate. In the current system you simply have to race for victory, which pretty much guarantees a short game.

And yeah, the whole buyouting is not realistic, but I'm fine, because I see it as a game, which has player use some of their economic skill to outplay each other.

about resource values, I think they are valued of how much you would get if you would just outright sell them, if you a lot of some resource, then after the first couple hundred, all the rest cost 1$ regardless, so if you sell things gradually for good price then you will get the best value out of resources.

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I do not mind the quick buyouts if your share price is low. I do mind the cash not mattering much imho as this is very unrealistic. Cashflow and cash levels are really important metrics in real life stock markets in most cases. Example a company with cash after deducting all liablities of 100 million usd would in general atleast have a mcap of 100 mil usd or more. The earnings or bottom line usually have a multiple of 10-15 (more or less depending on industry, sector, growth oppertunities etc) so this is even more significant. Ofcourse since all companies know this they tend to inflate the earnings by how they book earnings and looses and now stuff like the actual cashflow is used for metrics of more serious investors as egable correctly points out. Ofocurse I understand from a gameplay point of view you would not want players to hoard cash since then they can very quicky buyout someone else. But then again if all players could boost stock price this way it would be hard to buy them out in the first place. Anyhow I do realize this is by no means an easy task to balance and I do have faith in Soren to make good calls on it.

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Quoting indrkl,

reply 12

Also the thing about cash on hand, is like Soren said, if you added cash on hand to the stock price, then the game can just last forever if both players have a very even income rate. In the current system you simply have to race for victory, which pretty much guarantees a short game.

And yeah, the whole buyouting is not realistic, but I'm fine, because I see it as a game, which has player use some of their economic skill to outplay each other.

It's not just unrealistic, it's silly & completely counter-intuitive. If you have enough cash on hand, you should be able to prevent a hostile takeover in any case.

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I think Soren's main issue is the difficulty of ending the game if he follows a more realistic route.

Personally I'm fine with a countdown time (3 min?) to determine the winner once the last stock has been bought (assuming stocks are valued more rationally so hence it's harder to finish it end game)

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egable

Join Date 09/2002

+5

Quoting Velusion,

reply 15

I think Soren's main issue is the difficulty of ending the game if he follows a more realistic route.

Personally I'm fine with a countdown time (3 min?) to determine the winner once the last stock has been bought (assuming stocks are valued more rationally so hence it's harder to finish it end game)

I am also fine with a countdown time, but only when two players remain AND all stocks have been bought. But the countdown time should be maybe 6 - 8 minutes to at least give a little time to see if one can buy the other. Remember, it takes about a minute to launch an off world trade, so presuming you have 2+ ports, you could conceivably launch a lot of goods in that time to buy out the other player with. If you cannot buy them out in that time, the total company value at the end of the timer would determine the victor.

But, I still believe cash matters a lot and should be able to help prevent hostile takeovers.

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