Cost - Price Inversion (Broken Market)

As an industrialist, I find the Eve marketplace quite dysfunctional. Consider an example using prices in Jita and randomly choosing the Minmatar Command Ship ‘Claymore’, the sell price for the complete ship is 271,400,00. On the other hand, the materials to build it cost 361,455,497. Why would anyone build the ship when they could sell the inputs for roughly a third more ISK?

If this were an unusual case, I could understand, but it is not unusual at all. Quite the opposite. I really did pick a random ship and I did so with complete confidence that it would illustrate the problem. In fact, it is quite difficult to find items to manufacture profitably. This market condition is stifling and highly inorganic. If the market were operating naturally, the supply of Claymores would dry up because everyone would stop manufacturing them.

I would love to hear other’s thoughts on this issue.

M.O.

EVE’s market is working as intended, and is even used as an example outside of gaming. If producers and industrialists weren’t making a profit, building ships and other items, they wouldn’t do it.

It’s an economy of scale, and smaller industrialists just can’t compete with the mega producers…

Hint: larger producers only use the market to sell their final products, they do not buy materials from the market.

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QuakeGod your response is very general. Are you saying that there is some way to manufacture the Claymore much more efficiently? How is that done? I have player owned structures that give me inexpensive manufacturing, but that cost wasn’t even part of the comparison I gave, which made it conservative. I am not aware of any specific economies of scale in Eve manufacturing. If I’m missing something, I’d really appreciate being educated.

Xeux, that argument does not really hold water. If I am going through several steps of manufacture, why would I take the next step if the value of the result will be less than the value of its inputs? I should just stop at that point and sell at the higher value.

Ok. Then continue railing at the heavens.

Its been mentioned elsewhere, you may be seeing stuff put on market before all the industry changes. So that claymore could have been built 2 yrs ago

If the price history data can be believe, there are 200 or more Claymores sold in Jita monthly. There are currently only about 60 offered for sale. I don’t think these prices are two year hold-overs. Also, this isn’t an unusual case. Choose another ship at random, you are very likely (almost guaranteed) to find the same inverted profit margin.

You are expecting EVE’s economy to function similar to a real-world economy. Despite what some people may think, this is not the case. EVE does not have a version of the SEC to control the market. Players are allowed to undercut, price gouge, form cartels, and monopolies with no oversight.

A null sec group with 200 Rorquals and 1,000 PI planets will be able to manufacture and sell said Claymore at a much lower price point than a small industrialist can. A real-world example would be a mom-and-pop electronics store selling a television for $600 to make a profit, whereas a giant company like Wal-Mart can sell that same television for $300 and make the same profit. It all depends on the scale of your operation and the diversity of your supply chain.

On occasion, things do get out of hand, and CCP has to step in, like they did with resource scarcity. In that sense I guess CCP could be considered EVE’s version of the SEC. Null sec groups were going nuts with Rorquals cranking out billions of units of ore and minerals daily for years. Capitals and super capitals were being cranked out left and right, so CCP stepped in and provided the necessary corrective action…

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I just randomly chose another ship: Paladin. Jita sale price for a Paladin, 1.2B. Cost of materials to build 1.5B. How does that make any sense? A few percent in some material efficiency hidden somewhere isn’t going to make 20% for break even, much less any sort of profit to payoff the POS or implants that provide those efficiencies.

Seriously, what am I missing? Where is the big savings that makes these builds worth doing?

you are likely using sell-order price for the build materials .

QuakeGod, why would Walmart sell the TV for $300 when it could sell the parts for $500? Are the big conglomerates selling below cost? On every ship type sold in Jita?

While I can’t speak for the mega producers, they very well could be doing exactly that. You have to consider that these large producers have hundreds of billions (if not trillions) of ISK, so losing a little bit here and there on production isn’t going to make a very big dent in their finances. They can undercut everyone else, so players start to only buy from them, driving smaller manufacturers out of the market. And there is nothing to stop them from doing it…

Getting back to the Wal-Mart analogy, how many profitable mom-and-pop stores are left? How many Wal-Marts are there? It works the same way in EVE…

bad analogy . walmart gets volume discount that smaller buyers don’t .
there’s no such difference in eve , where any player can compete using buy orders .

op is r-clicking buy-all , using sell price for the materials . quick and easy , but it does not give the true cost of building a ship .

You may well be right. I’m no economist by any means, just giving my take on it. I was beginning to wonder if what the OP was seeing only occurs with ships specifically, as I enjoy a 200% markup on many items that I manufacture.

Buggs, in my experience r-click buy-all gives a modestly conservative cost since it leaves out any manufacturing costs, broker fees and taxes. On the other hand, it leaves out material efficiency bonuses, so it’s more accurate with T2 BP where there are small material bonuses. It also leaves out the cost of the BPC itself, which is another conservative factor. Bottom line, these are small factors some on each side of the balance sheet, I don’t see anything to account for the significant disparities between cost and sale price.

QuakeGod, I make my living selling small stuff at good margins. Hell, we are probably competitors! I am more than ready to get back to manufacturing ships [Like in the good old days! I’ve been around Eve a long time.] but I can’t find any profit margins!

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for t2 ships , the biggest cost is the special bits needed . try using a researched bpc and buy orders only for the non mineral materials .
also figure using a bonused structure instead of building it in jita .
I’m not an indy player , but that should close the margin quite a bit . otherwise I’d have to speculate builders are buying up the t2 parts before they even hit the jita market , keeping the price artificially high …

There are three huge issues that you are overlooking: nullsec infrastructure, transport requirements, and market trade volumes.

I tried to suggest that nullsec industry has a big advantage compared to trying to build stuff at Jita 5-5, but you didn’t seem interested in that. So we will skip it.

The second issue is that things need to get hauled around. Eve is a big place and it becomes prohibitively difficult to haul huge amounts of input materials from deep in nullsec to Jita. For a lot of producers, they prefer to move finished products from their nullsec industrial hub to Jita, rather than making 100x as many trips to sell the input materials. The hauling issue is also, somewhat counterintuitively, why prices for minerals and other manufacturing inputs are so inflated at Jita compared to other products - because the isk/m³ is very low, so when you add hauling costs, the price rise is very significant.

The third issue is that the market for some things, like T2 components, is very thin. The items have a high price and people are willing to supply those items at those prices, but if you decided to center your entire production around those types of items, you would likely find that there are not many buyers and you would just flood the market.

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