Financial DLC

Banking and Finance DLC for Capitalism Lab
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David
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Re: Financial DLC

Post by David »

The backbone of the proposed Financial DLC has to be a new banking system.

There are still many outstanding issues with it as discussed in this thread:
http://www.capitalismlab.com/forum/view ... =14&t=2497

Some of these issues do not have ideal solutions as of this writing. Like the stock market in the game, banks are likely to be prone to player exploits. It may end up receiving more complaints from players about exploits than the new gameplay elements that it will be able to add to the game.

Having said that, there are still possibilities that there will be new suggestions from users in the future that manage to address these outstanding issues.
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Re: Financial DLC

Post by Arcnor »

David wrote:The backbone of the proposed Financial DLC has to be a new banking system.

There are still many outstanding issues with it as discussed in this thread:
http://www.capitalismlab.com/forum/view ... =14&t=2497

Some of these issues do not have ideal solutions as of this writing. Like the stock market in the game, banks are likely to be prone to player exploits. It may end up receiving more complaints from players about exploits than the new gameplay elements that it will be able to add to the game.

Having said that, there are still possibilities that there will be new suggestions from users in the future that manage to address these outstanding issues.

That's what banks do... they exploit everything :lol:

On a serious note, the key addition I'm looking for is the ability to use my capital.

Some other additions to consider:

- Allow companies to issue bonds in much the same manner as cities do in the City simulation.
- Allow individual players to take over another company without having to use the primary company funds.
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Re: Financial DLC

Post by saffgee »

I think probably the key topic being overlooked here is the concept of risk transfer. A financial system functions primarily as a means for one party to transfer risk to another. This is why we have financial markets, banks and pretty much any financial institution - this is their sole raison d'etre. Banks are very good at risk transfer, which is why they remain some of the biggest institutions we have, despite the rise of alternate investment vehicles (like hedge funds or SPV's) that allow a far greater concentration of capital than before. Therefore, the key to making a banking system "fun" lies in the creation of a risk transfer system - aka (in this case) commodity markets - that underlies it.

Commodity markets would allow any number of fun scenarios. A fully functioning commodity market (I think global is better than local for the mechanic) would allow price fluctuations and potential shortages/gluts. This can be a benefit or a challenge for both the cash rich and the cash strapped. The next logical step then is commodity "hedging", which alone is surely worth a full DLC - built a factory to produce plastics ? What if the price of oil rises so much that it is simply no longer viable to do so ? Hedging would allow you to lock in a future price for an amount of oil, thereby making the plastics business not only viable again, but ensuring a healthy profit in the event the price does indeed rise. What if the price drops - well you still benefit by cheaper oil for your factory, just not as much as if you were unhedged. I realise there are game concepts here that challenge the real world logic of this sort of mechanic, but that actually makes the concept easier to implement rather than harder. For example, banks could allow (for a fee) cash settled futures trading, thereby removing the need for physical delivery - essentially your financial transaction makes or loses money, whilst your actual physical transaction (eg you buy oil from an AI company) still happens in the same immediate and slightly unrealistic way it always does. Brokerages and exchanges could also find a use in such a mechanic. None of the existing game concepts would need to change, but there is a whole new layer of complexity for the player. Pure commodity trading firms (for example much like say Vitol or Mercuria) could trade not only the futures markets, but also bunker physical product (eg oil) for sale for profit at a later date.

The function of price setting itself however will remain the element the AI and player can compete on, but it will increasingly be driven by a) the global market price of the product b) the availability of local resources/product c) the transportation cost of solving a shortage/glut. Adding in addition an evolved transportation mechanic to a commodity market DLC would then be the stuff of legend. Imagine owning the biggest freight company, warehousing as much oil as you can find and then buying or selling a bucketload of oil futures - only to see political tensions either rise or fall (thereby making the oil price rise or fall) and then losing your shirt or becoming richer than Scrooge McDuck depending on which way you bet. When an oil shortage becomes a reality for one of the cities on your map, you release your oil again and the freight company makes a killing from both price and shipping it to that city. Surely this is way more interesting than deciding about bank loans and such things. I've worked in commodity markets my whole life and I can honestly say I have never experienced a dull day. With the right implementation, these mechanics would be an unbelievable addition to an already great game. There are many ways we could make financial markets or banks work for the game, but commodity markets wold be the most accessible way to do so. Banks or banking can then be allowed to evolve further in future updates without the need to get banking "right" in its entirety the first time. They essentially just become service providers to a risk transfer mechanic (which is actually exactly what they do irl).
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Re: Financial DLC

Post by Arcnor »

saffgee wrote:I think probably the key topic being overlooked here is the concept of risk transfer. A financial system functions primarily as a means for one party to transfer risk to another. This is why we have financial markets, banks and pretty much any financial institution - this is their sole raison d'etre. Banks are very good at risk transfer, which is why they remain some of the biggest institutions we have, despite the rise of alternate investment vehicles (like hedge funds or SPV's) that allow a far greater concentration of capital than before. Therefore, the key to making a banking system "fun" lies in the creation of a risk transfer system - aka (in this case) commodity markets - that underlies it.

Commodity markets would allow any number of fun scenarios. A fully functioning commodity market (I think global is better than local for the mechanic) would allow price fluctuations and potential shortages/gluts. This can be a benefit or a challenge for both the cash rich and the cash strapped. The next logical step then is commodity "hedging", which alone is surely worth a full DLC - built a factory to produce plastics ? What if the price of oil rises so much that it is simply no longer viable to do so ? Hedging would allow you to lock in a future price for an amount of oil, thereby making the plastics business not only viable again, but ensuring a healthy profit in the event the price does indeed rise. What if the price drops - well you still benefit by cheaper oil for your factory, just not as much as if you were unhedged. I realise there are game concepts here that challenge the real world logic of this sort of mechanic, but that actually makes the concept easier to implement rather than harder. For example, banks could allow (for a fee) cash settled futures trading, thereby removing the need for physical delivery - essentially your financial transaction makes or loses money, whilst your actual physical transaction (eg you buy oil from an AI company) still happens in the same immediate and slightly unrealistic way it always does. Brokerages and exchanges could also find a use in such a mechanic. None of the existing game concepts would need to change, but there is a whole new layer of complexity for the player. Pure commodity trading firms (for example much like say Vitol or Mercuria) could trade not only the futures markets, but also bunker physical product (eg oil) for sale for profit at a later date.

The function of price setting itself however will remain the element the AI and player can compete on, but it will increasingly be driven by a) the global market price of the product b) the availability of local resources/product c) the transportation cost of solving a shortage/glut. Adding in addition an evolved transportation mechanic to a commodity market DLC would then be the stuff of legend. Imagine owning the biggest freight company, warehousing as much oil as you can find and then buying or selling a bucketload of oil futures - only to see political tensions either rise or fall (thereby making the oil price rise or fall) and then losing your shirt or becoming richer than Scrooge McDuck depending on which way you bet. When an oil shortage becomes a reality for one of the cities on your map, you release your oil again and the freight company makes a killing from both price and shipping it to that city. Surely this is way more interesting than deciding about bank loans and such things. I've worked in commodity markets my whole life and I can honestly say I have never experienced a dull day. With the right implementation, these mechanics would be an unbelievable addition to an already great game. There are many ways we could make financial markets or banks work for the game, but commodity markets wold be the most accessible way to do so. Banks or banking can then be allowed to evolve further in future updates without the need to get banking "right" in its entirety the first time. They essentially just become service providers to a risk transfer mechanic (which is actually exactly what they do irl).

Sounds great! I like this idea and think it should be considered.
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eleaza
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Re: Financial DLC

Post by eleaza »

We really should pull this thread and current topic together
http://www.capitalismlab.com/forum/view ... 97&p=18269

Lots of the ideas are similar. And financial DLC probably should and need a new banking system to back it up. I like the primary futures market's function as a stabilizer for manufacturers, and it will be like buying from a giant global warehouse. However I wonder how would AI and human players risky behavior might have effect on this. Maybe we should have like 3 stages system, a complete free all over the place local price (the current mechanics), a local price joined commodity futures price, and a global futures price.

As to the freight idea, I like it, but I don't know if it's an integral and necessary part of this though. A purely abstract and automatic freight calculation seems to also work with it.
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derekg52
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Re: Financial DLC

Post by derekg52 »

Great ideas, I think tender offer for a whole company buyout needs to be in this. It could also leverage issuing bonds in order to pay for the acquisition (if approved).
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williammgary1
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Re: Financial DLC

Post by williammgary1 »

Funny story,

I forgot all about this thread.. Anyway every idea I proposed in this thread I would like to see.

Tender Offers (like seriously please) lmao
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