Inside Scoop page 1

EXCHANGES... A WALK-UP IN THE PARK

by Jezz (with the help of all those who have written about exchanges before)

As promised, this week's article is about the planetary exchange and I thought I had better start by tackling the most basic concept. If you've already learned absolutely everything there is to know about the exchange, stop reading now. However, if you think there might be a couple of tidbits of information that have eluded you, read on.

What is an Exchange? Well, the exchange is the quintessential middle-man. It makes no commodities itself. All those lovely commodities are grown, mined and manufactured by the hard working populace of your planet and a lot of the goods produced on your planet never see the exchange at all. This makes sense if you picture yourself as a cereals farmer working away on your planet. If you grew cereals and knew that you needed to feed cereals to your family, you wouldn't sell your whole crop to an import/export company and then buy back what you needed for yourself at a vastly increased price. Most farmers who plan on being farmers for a while longer would take what they needed off the top, then make deals with neighbors who needed cereals too. Only the surplus goods for which there is no market on your planet ever reach your exchange, and in order to get them from the farmers your exchange has to buy them at the current value price. Then it sells them to haulers at the current selling price.

Now there are also things that your indigenous population doesn't produce enough of but needs just the same. The exchange will buy those goods from haulers at the current buying price and sell them to the needy population at the current selling price. And there you have it... prods and defs in a nutshell. Oh, I probably should mention that your exchange does make one thing... groats!

How quickly your exchange can make groats is entirely up to you and how fast your population can use up or produce those commodities. This is where those dreaded stockpile settings and spreads come in. But before you have a panic attack at the thought of spreadsheets and math, your exchange does the math for you and sensibly makes sure that its current selling price is always above its current buying price. BUY LOW, SELL HIGH. It's actually fairly hard to lose groats, though it won't seem that way when your planet is first linked.

In order to have any sort of stockpile to trade for profit, your exchange is going to have to buy the goods from your planet. Your treasury is going to decrease in size according to how many groats you turn into commodities. You decide how much you want to have stored up by setting the stockpile level and your exchange will do its best to fulfill your demands. When you first link your planet your stockpiles are all set at 800 tons and if you've left your exchange alone for 24 hours for the traders, by the time you can do anything with the stockpiles all your producers will be at or close to that level of on hand stock. In order to build the stock on hand you'll have to increase the stockpile setting. Doing this in small steps is called "walking up the exchange" as opposed to doing it in giant leaps which might be termed "flushing your treasury". We'll get to why in a bit.

Lets take a look at one "generic" commodity... Widgets. The imaginary base price for Widgets is 700ig and if I could do a "DI GENERIC" this is what I would be told about them...

Widgets: value 525ig/ton Spread: 40% Stock: current 400/min 100/max 400 Efficiency: 100%

The first thing you see is that the VALUE of the stock isn't the base price. That's because you have a surplus and you also have the amount you say you want (400 tons and a 400 ton max stockpile). The exchange doesn't need to buy more so it drops the value to about 25% off the base price. If you watch the value you'll see it move up and down around that figure by a few groats but nothing too dramatic will happen until you change either the stockpile setting up or the amount of stock on hand down by hauling it out.

At this point I need to mention the SPREAD. The spread does NOT affect the Value. The Spread affects the buying and selling prices of the commodity on either side of the value. The Value is actually your 0% spread price and what the exchange pays to your planet. You dictate how much profit you make between the value price and selling price on every deal by setting the spread. Remember that we are talking about the exchange's buying and selling price. Here's how a spread works. On a producer, if the spread is set at 6% the exchange will buy goods at the Value from the planet and sell goods at 3% above Value, giving the exchange 3% of the Value in profit on the deal. But if the spread is set at 40% the exchange will buy goods at Value and sell them at 20% above the Value, giving the exchange 20% of the value as profit. (see Fig. A.)

In other words... if the value is 525ig and the spread is 6%, the exchange will buy the commodity at 525ig (value) and sell it for 541ig (+3%) giving your treasury 16ig in profit. If the value is 525ig and the spread is 40% your exchange will buy in the commodity for 525ig (value) and sell it for 630ig (+20%) giving your treasury 105ig profit. During the walk-up, your exchange appears to lose money only because it hasn't done the second part of the deal yet... the selling to haulers. Simple?

Well it would be if the value didn't change so much! So what makes the value change? If your exchange thinks you need more widgets than you have in stock it will put the value up because you have more demand than supply. Your exchange will suddenly be paying a whole lot more and how much more depends on how desperate your exchange thinks you are to get your hands on the goods. Of course if the value goes up, the buying and selling prices go up too.

So... the main influence on the Value is the difference between what you have and what you say you want. Below you can see the effect on value and the price the exchange will pay when you increase the stockpile, if the exchange has 400 tons on hand. (see Fig B).

It's important to notice that if you have 400 tons and you set the stockpile to 4,000 tons over what you have, you really aren't doing much more damage than you would if you set the stockpile to 3,000 tons over the 400 tons you have. Logic would suggest that this is because the guy who runs around your exchange slapping price stickers on the crates has had a heart attack and expired.

The more widgets you have in stock, the less panicked the exchange gets when you have a stockpile setting above your stock on hand level. By the time you've built up 10,000 tons of widgets in your exchange you can set that stockpile all the way up to 20,000 tons in one fell swoop with a negligible effect on the value. Of course you would open your planet up for some heavy duty dumping if you did that, and allowing dumping is one way to lose a lot of groats. But we'll get into the effects of dumping in a later article.

We can wrap up this one with a few simple statements.

• Your Exchange buys at its current listed buying price if it buys from you, a factory or a merchant hauler. It pays the value or 0% spread when it buys from your planet.
• The price your exchange pays is determined by the value which is affected by how much you say you need.
• If you have very little in stock, raising the stockpiles in very small increments will help keep down the price your exchange pays for the commodities.
• A 40% spread will allow your exchange to buy deficits at 20% less than the Value from haulers and factories.
• A 6% spread will allow your exchange to buy deficits at 3% less than the Value from haulers and factories.
• If your stock on hand is equal to your stockpile setting, the value will be 25% less than the base price for that commodity whether you have 400 tons, 5,000 tons or 19,900 tons (accounting for the up and down natural movement of the value price around that). That's because you have what you say you need.

No animals or aliens were intentionally harmed during the testing (except when I tested meats and then hides and that was a veritable bloodbath.)

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