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A Three Prong Approach to Fighting Inflation

by kieronstoff


Three years ago I wrote an article explaining inflation and showing users why it is hard to expect TNT to be able to magically fix our problems. Years on and naturally inflation is still a concern on Neopets- Given recent events I feel like it is about time to re-visit this topic in more detail. Over the years I have gained even more understanding of how the economy of Neopets works and have devised a three prong approach to fighting inflation at a massive level. After starting with a brief introduction to the economy it will move on to discuss different kinds of NP income, give more examples as to how inflation works and its causes before moving into my three pronged approach. It will discuss ways to fight inflation without causing users to rebel or complain to TNT and provide a way to increase the flow in the Neopian economy.

So what is the 'Economy'?

The economy is everything to do with user based interaction for the purposes of moving and creating items and NP. The economy can be broken down into two main parts, the Neopoint currency and Items. Neopoints are a basic form of currency which is used to buy all tradeable goods and services in Neopia. Users accumulate these points from various sources and use them to reach whichever goal they desire. Items on the other hand are released not only through giveaways but also through a system of purchasing known as restocking. The balance of neopoints to items is what creates the system we see today.

Where do neopoints come from?

There are two forms of NP income: Primary income and Tertiary income. While in one of my past articles I suggested the idea of Secondary income I now believe that it is not a needed distinction. Primary income is any form of NP which comes directly from TNT- It includes games, daily giveaway NP rewards, stock market sales, food club and the now gone Habitarium. Primary income is basically the same as a Mint in real life- this is money which creates which didn't exist before and is the primary cause of inflation. Balancing the amount of minted currency in the real world is a lot easier than doing the same on Neopets. TNT can't just say, "Today we are only printing 2 billion neopoints, get them while they last" because then the game wouldn't be nearly as enjoyable. This means that primary source neopoints pour into the economy in an unimaginable number every day, causing the value of an individual neopoint to fall. Neopoints also leave the economy every day through NP sinks, but the incoming number is insanely higher than the outgoing one.

The second form of NP income users can receive is Tertiary Income. Tertiary income is income gained from sources other than TNT aka, users. When a restocker sells the item he restocks or someone sells their plot/event/daily/battling whatever rewards the NP gained are considered Tertiary. Tertiary income is the more healthy kind of income since it represents the flow of Neopoints within the whole economy. You may get 350k for your Altador Strength Potion but that money did not just magically appear; all of it had to come from other sources. For example, 30k could have been originally from games, 100k from Habitarium, 200k from food club and 20k from shares. You have no way of knowing how long the neopoints you receive from this kind of transaction have been circling around the economy. That being said it doesn't matter to you because either way you now have the money you earned. The difference to the economy however is essentially night and day. By moving old neopoints around rather than creating new ones tertiary sources help stimulate the economy and do not decrease the value of the Neopoint.

Eventually many users who have been on Neopets for a long time see little purpose in earning the bulk of their money from primary sources. While they may still shove money in stocks and food club most of their cash comes from profits gained reselling items and prizes to other Neopian. Meanwhile the newer users fuel this economy by making the primary income which is used to fuel the older users. This cycle of NP between the new and the old is a healthy way for the economy to be and while it still causes inflation (more NP coming in than going out) it is pretty decent. Habitarium before its closure however was pumping huge amounts of NP into the economy at all levels, speeding up the inflation dramatically... but we shall come to that soon.

Supply and Demand's Impact on price

The economy works on supply and demand and it is those forces which move the neopoints around as if they were in a current. User "X" has an item, users "Y", "F" and "P" are all in the marketplace when this item is being sold. If all users wish to buy the item, user "X" is usually able to sell the item at a higher price- if none of the users wish to buy it, then "X" will have to sell low. This is demand in action- but only represents half of what is happening. The other half is when we see how many of the item "X" has is on offer to trade. If there is a huge number of this item for sale, "X" will have to sell lower, but if the item is rare "X" could sell higher. Supply and Demand works in such a way that when supply exceeds demand price will be low and when demand exceeds supply, price will be high. This is much the same as it is in real life, though on a much grander scale.

Enter inflation

Inflation on the other hand is related to the currency and thus effect on demand. When there is a large supply of Neopoint available to spend in the economy, then there are more users demanding certain items. Due to this increase in demand the cost rises. If I was to give you 10np to spend as you wish and you knew there was only 100np in existence your individual neopoint would be worth significantly more than if there was 1,000 or 10,000np in existence. Essentially this means the more which is given out by TNT means the less your NP is worth in the grand scheme of things. So if you are given 1,000np than it doesn't mean nearly as much if every user was also given 1,000 NP.

This means that one of the key causes of inflation is the amount of NP coming into the economy. Habitarium was one major culprit which I explored last article but it is not the only one. Many parts of the site give out far too many NP, but to be honest now that Habitarium will be gone there are much more pressing issues. Firstly, shops are overstocked and supply of items is growing at a much slower rate. This makes the increasing amount of NP in the economy even worse than before. Also there is abuse happening on the website from multi-account users and other forms of abuse, which naturally I can't go into here. Besides this there is artificial inflation caused by users walling up prices, as I have talked about in my long ago retired item article.

Fighting back against inflation

Naturally TNT does see this as an issue and has been attempted to deal with it, but when you are dealing with a runaway train like this what are you meant to do? TNT doesn't have a dedicated economist, nor does it have time to watch every individual item price in a world with thousands of separate markets. As of now TNT is trying many different ways to fight back against the tide of inflation, some being more useful than others. For example, when TNT sees an item which is more expensive than it should be they often drop the price dramatically by giving out huge numbers of these items through events or dailies. The problem is that making this fair is difficult and it is impossible to predict the outcome of giving out such a large quantity of items. The best way TNT has been doing to reduce inflation is NP sinks. NP sinks are any part of the website which takes user money away- preferably rewarding them so they don't feel ripped off. Examples of this are the Hidden Tower, Dr Sloth stamp auctions, the Wheel of Extravagance and the Save the Wheels event. All of these things take NP out of the economy and in doing so increase the value of an individual neopoint. The other method is mass giveaways and devaluation of expensive items.

First Prong

This leads into my first prong in my attack against inflation; making NP more valuable. This is where TNT is doing a decent job already, but without the other prongs all this can do is slow the inflation, not make the site better. NP sinks are great, especially if you can sell it to users without them knowing they are doing it. I always thought a good idea would be a world where players can donate NP and as they do the world grows larger- it gains more dailies, games, shops etc. Users would have to collectively donate billions of NP to see everything which TNT would make next, it could be the sort of thing which would go on for many months or years and players would gain advantages based on if they donated during certain phases. For example, users could get a founder's trophy for helping fund the world which would increase in complexity based on the number of stages which the player donated to. Donating to a stage could also get increasing non-NP rewards including Avatars, Sidebars and small world benefits. After the stage was completed users could donate a set amount of NP, say 100,000 or 1,000,000 NP, and get some of the stage rewards they missed. This is just one example as to how a wide scale NP sink could be made engaging and enticing for all users and would also encourage them to check back to the Neopets site frequently. The other part of this first prong TNT has already taken the first step towards as well. Closing NP 'fountains' such as Habitarium has gone a long way to improving the value of the NP. The logic behind this is that by increasing the outflow of NP and decreasing the inflow, TNT can slow the speed of inflation more effectively to help with the other two prongs.

Second Prong

The second prong is the smallest due to the fact I can't discuss it as much as the other prongs- it involves tightening TNT's defence. Additional rules and security should be put in place to remove at least part of the risk of abuse, the best one being improved security on score sending which would decrease the number of illegitimate NP forced into the economy.

Third Prong

The third and final prong is also highly important and relates to controlling the supply of items in stores. This problem has been exacerbated by TNT's giveaways and dailies and is causing a decrease in supply across the board. Because of the huge number of items which are essentially being devalued shops are becoming more and more bogged down by unprofitable stock. There are a few ways to approach this and this section will likely be the longest of the three prongs because it is very delicate to deal with. The first and simplest answer is to auto-clear shop items after they have been in stock for a certain time period, for example two full days. This clears out part of the items already, but doesn't yet solve the problem. See, the items which are clogging up the stores are also still in the stocking list and still pose a problem to restockers. Without this flow of items from the stores, prices remain high and TNT ironically gives away the items instead, but I have a different solution.

I suggest a change in rarity for all items affected by the unnatural deflation caused by being given away in events or dailies. Even if one would expect deflation would be good in a time of inflation, this kind is not as it actually increases the overall inflation problem as explained above. Firstly take a look at all items which are clogging up the stores due to being so cheap, all of these come from either events or dailies. If an item has not jumped back up in price after the conclusion of the event it should be retired and set to R180. This gets rid of a pretty huge hunk of items already, but not the most troubling set. The most troubling set is the stockable items which are being given out like candy through dailies. You can't simply retire these items as it may cause confusion when they are still given out; the problem of retired items which are not actually retired is already pretty extreme. Instead I suggest changing the rarities of items given out by dailies to one of three rarities; 101, 128 or 190. R101 since many items which are given out by daily or events are already given this tag, so it would make sense that these items now will only stock at their respective dailies. R128 is also an option due to being the first empty rarity after 101, to differentiate between the two rarities. Finally, 190, since it is another rarity in the retired family which could instead be labelled as (Dailies) in a similar light grey. Because these items would no longer stock and clog up the storefront the newer items left in a backlog would have a better time finding their price.

The final part of this third prong would likely take the most time. Once upon a time items were distributed amongst the many stores in Neopia pretty equally, but now days it seems like most items are being put into their Neopian central versions exclusively. By spreading items out amongst other stores and creating new storefronts in other worlds for common themes the amount stocking at one store would be decreased dramatically. Not only this but a larger number of storefronts would give more people the chance to be restockers since it wouldn't be so intimidating if there were other options to restock in.

By following all these three prongs simultaneously, TNT could drastically reduce the amount of inflation seen in Neopets and slow the rise of prices. But there is still an issue with even this three prong approach. To support the drastic changes to the economy proposed by this article there must be systems in place to allow new users to gain a leg up without relying so heavily on primary income. The goal of reducing inflation is not only to make items more affordable but also to lessen the gap between the mega wealthy and the normal user. To do this I suggest implementing features which will help support the redistribution of wealth without making either the rich or poor feel ripped off.

Spreading the Wealth

TNT has been seen doing these themselves for a long time- Dubloons for example are mostly gained by primary users through Coltzan's shine, treasure hunt and other places which higher end players would be less likely to frequent. Even a rich player alone cannot gather the required number of dubloons to afford the cove items which he needs to buy, leading him to buy from other users. These users sell their items to the higher players and in doing so gain a small step up. The same is evident with both the coincidence and the Battledome prizes. Higher end users rarely have huge numbers of worthless items and even if they did eventually they would run out. By forcing users to buy these items for their stat increases and one day avatars through coincidence you are pushing the NP back down from the wealthy to the poor. This means that the poor have to rely less on earning primary income (and thus cause less inflation issues). The same is evident with the codestones, faeries and nerkmids commonly won through the Battledome. This helps fix the "rich get richer" problem which TNT has by creating rewards beyond neopoints for these high users to aim for. Once more I have a few ideas of similar ways to exploit this possibility without causing a feeling of unfairness amongst the userbase.

Right now the wealthiest players on Neopets are the Restockers and Battlers. Right now most of the redistribution strategies are being aimed at them and it is the best place to start. Imagine if you will a daily where a general gives out a token once per day to all who visit. This token can be of several levels, wood, bronze, silver, gold, platinum and diamond each with increasing amounts of rarity. These tokens would allow users a single fight with a rare specially made Battledome opponent which would be classed as a "league opponent". Each token would have one opponent option at first but over time as required TNT could release more as the tokens devalue. When a user beats the token enemy they are given a wooden medal of achievement and every 5-10 victories after that their token would upgrade in a similar fashion to the tokens themselves. These enemies would have to re-implement the HP increase mechanic so that it became more difficult each time. Users may find themselves wasting tokens and having to buy/earn more, but overall it would keep flowing. There would also be a high score list for each opponent which would showcase the users which had beaten the opponent the most times- this would replace the medal in the profile and be used as a badge of honour. The medals and trophies earned would be displayed at the bottom of the user lookup under game trophies and depending on the level of the medal would come with different item prizes with an avatar at the top. This would create motivation for avatar collectors, trophy collectors and battlers alike to both buy and use the tokens from other users while the users who decide not to battle could bask in the profits they gain by selling the tokens. You could also have a 10:1 merge option with tokens to their higher form, which would help remove the risk that one token would become devalued.

Another option which is more aimed towards players who customise pets and some restockers is the idea of Petslot Rental Scrolls. These scrolls could be earned as a semi-common prize during a new daily and would give the player a 5th pet slot (or 6th with premium) for a determined period of time. The scrolls would come in 1 day, 5 day, and 30 day varieties and would be another item which lower players could earn and sell to the wealthier. Players could buy and activate as many scrolls from other users as they would like and most would likely pre-buy several years of the extra slot. Once the scroll rental period times out however they are unable to access their pet and must buy another rental scroll to use, transfer or display this pet on the user lookup. This plan would not only allow players to have their long awaited 5th or 6th slot but would also be a very effective way at keeping Neopoints flowing around the economy. Unlike a NC based pet slot this would be more achievable by the average Neopian and would require very little in the way of playing around.

Finally, more places such as the Kadoatery which encourage users to buy items from lower users to get non-NP rewards. Really that is what it comes down to in its entirety. These strategies create incentive for wealthy players to share part of their wealth without causing them to feel like they are being milked even without profit being given in return. On the other hand, newer users would not feel left out by missing these prizes and the gap would slowly shrink rather than grow. These users could also use their newfound wealth to hopefully have a step up towards becoming more wealthy players by giving them a chance to invest in stocks, Battledome weapons and the like without introducing inflation causing NP into the economy.

In conclusion, fighting inflation is a very difficult task and will take time no matter which solution is used. TNT has taken the first important steps by removing Habitarium, but without further strategies the result will only be a slowdown of inflation rather than a complete halt. By using my three-pronged approach to fighting inflation we may see a chance at ending inflation much more effectively than previously experienced. Clearing stores to keep supply numbers growing, increasing NP value through selective sinks and curtailing abuse combines to become an effective medicine. Add on the idea of re-distribution to help promote currency flow and Neopets could be well on the way to a less inflated future. This article outlined several examples as to how these prongs could be approached but there are likely many more ways to target these problems in a similar way. The hope of this article is that TNT will be able to work out the best way to help reduce inflation, and that you the user will understand more about this problem in-depth.

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