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[GreatWyrmGold]

Planned. But with demand, too.

Just saying.

[Phlum]

Planned. But with demand, too.

Just saying.

But how to do it?

[dwarf_sadist]

Planned. But with demand, too.

Just saying.

But how to do it?

Easiest way I can see it being done is to do each segments supply and demand on it's own, then connect them in a chain.

(
woodcutter supply function  //Base cost of wood and production cost
|  //return supply function to demand function
woodcutter demand function  //Markup based on demand and availability
+  //woodcutter and hauler separate functions that do not feed to each other
hauler supply function  //based on infrastructure, distance, etc
|
hauler demand function  //markup to pay for infrastructure and create a surplus
)
|  //the carpenter must buy wood based on the demand of both woodcutters and haulers
(
carpenter supply function  //starting as the cost of both wdct & hl, then adding wages, etc
|
carpenter demand function  //markup and final price of good based on both supply and demand
);

[Trif]

I don't understand why everyone struggles so much with demand. You can't form a price without that.

Just take good old Maslow's hierarchy of needs. First and foremost, dwarfs need food and booze, so there's a constant demand for that. The price for food is formed by comparing the amount of plump helmets to the amount of hungry dwarfs.
If dwarfs are well-fed and drunk, they want a nice bed and several layers of solid rock over their head. Count the dwarfs sleeping in the mud, subtract the number of beds, there is your demand.

Moving on, there is the need for personal comfort and relationships. That's pretty non-material, so I'll combine it with the next step: self-esteem, achievement and respect. Satiated and cave-adapted dwarfs have a demand for fancy clothes, a barrel of sunshine, maybe a cabinet in their bedroom, admiring a nice door, or they want a pet. This will be a bit more fleshed out after the personality rewrite, but you can see the intentions. (Which reminds me, we'll probably need object deterioration before the economy rewrite. There won't be a lot of constant demand for bracelets if they never break.)

And finally, we have the need for self-actualization, which will only be fulfilled for a few individuals. Maybe a dwarf wants to become a musician, or tame a dragon, or be elected mayor, or engrave the king's bedroom, etc etc. Again, that's not very material, and the personality rewrite will introduce more of these personal goals.

So, yeah, personal needs create demand on the fortress level. The old economy of 40d was working like that, by the way. How does the global economy work then?

It's not much different, actually. The nations have rulers, who want to be happy like everyone else. They try to accomplish that by staying the ruler as long as they can. That works best if your nation's population is happy and protected. Therefore, the national economy is just as well influenced by demands of individuals.

An example: imagine a dragon attack on a human town. Most of the houses burn down, but most of the inhabitants survive, homeless and hungry. Since the town is destroyed, they move to different cities of the civilization. Instantly, there is a demand for housing and food, so to increase the supply of blocks, fish and crops, more citizens become masons or farmers.

Of course, the game can't track the thoughts and wishes of every individual and calculate prices based on that. But based on the overall wealth of a nation, the profession ratios, locations and availability of certain resources, mortality rate, political situation and the baron's love for ballista parts; we should be able to get some fairly accurate economic predictions.

And now you know that each time you read "She has admired a fine door lately", the price for doors just dropped a little.

[Reelya]

@Phlum: It sounds like an interesting "short cut" calculation but it would make a lot of errors of logic using the equation you outlined.

e.g. you have a base value for all helmets based on the total amount owned by the fortress. If there were 1000 steel helmets but only 1 bronze helmet, then the bronze helmet would be worth 1000 steel helmets by your system. Just because an inferior version is less common than the superior version wouldn't give it equal value to the entire stack of superior ones. Scarcity itself isn't value.

That's why you can't just us supply as the source of value, value is driven by demand.

e.g. imagine the price for a thing the fortress has exactly 0 of ... e.g. 0 iron helmets would then have to be given the value of X number of steel helmets. That's not a price. And you have to distinguish between things the fortress doesn't have, and those that it doesn't need. Your basic system would set a high price for things the fortress doesn't have, regardless of their need or use.

[GreatWyrmGold]

Really, the way supply and demand affect prices isn't the numbers, it's the proportion.

If you have 100 steel helmets, they'll be worth more if you need 500 and less if you need 25. Similarly, needing 100 helmets doesn't affect a supply of 500 helmets the way it does a supply of 25. The change to price should be proportional to demand. Presumably, this would be based on item types which can replace each other, with the exact type (cap v helm), material, and quality also affecting it. Obviously, a lot of high-quality or good-material X's would devalue the worth of such a material or quality, while sending the prices of lower-quality/worse-material goods through the basement.

The hardest parts will be figuring our how much a group needs, figuring out how the supply of given quantities affects price, and working out the numbers.

[thisisjimmy]

In reality, it's even more complicated than just the proportions.  You also have to take into account the elasticity of supply and demand (the supply and demand curves).  Nonetheless, a simplified model that only considers proportions may be fine for the game.

Take GreatWyrmGold's example.  Let's say there are only 25 military dwarves that could make use of steel helmets.  Also, let's assume that a steel helmet never needs to be replaced, the military isn't growing in the foreseeable future, and that the helmets can not be melted down or used for any other purpose.  In this example the demand for steel helmets is inelastic.  No matter how cheap the helmets are, and no matter how vast the supply is, you will never need more than 25 helmets.  It doesn't matter whether there's 100 steel helmets or a million; each helmet after the 25th one is essentially worthless.

Now, if we assume a highly competitive market, a large supply will lower the price of those first 25 helmets sold.  In a monopoly, it may not.

If demand for steel helmets is elastic, things play out differently.  Let's say steel helmets are the latest fashion craze and every dwarf wants them.  However, they aren't essential for the non-military dwarves and they will make do without them if they feel the price is too high.  If the price is very high, only the rich dwarves will buy them.  If the price is very low, every dwarf will buy them (and maybe even 2 or 3 encrusted with different patterns of bone).  Now the supply has a much greater effect on the price of steel helmets.  If you only have 100 steel helmets, you make the most money by charging however much the richest 100 dwarves are willing to pay.

You also have to account for elasticity of supply.  The blacksmithing industry probably wouldn't produce 500 steel helmets knowing they could only sell 25.  On the other hand, if steel helmets become the latest fashion craze, and demand (and therefore price) goes through the roof, the blacksmithing industry will expand and produce more steel helmets.

[Revanchist]

http://tvtropes.org/pmwiki/pmwiki.php/Main/PlanetOfHats

Spoiler (click to show/hide)

Sorry about the messy link.

This suggestion would likely also avert this very quickly. Except for booze makers.

[taptap]

This supply only proposal is grotesque, but I doubt anything involving demand will work either. How do you model demand in dwarf fortress? In game, the only continuously needed items (because they are consumed or wear significantly) are clothing, food, booze all of them are produced easily in almost unlimited amounts on a few tiles, all other items are effectively eternal (In my current fortress I noticed the first sign of wear on a floor hatch only after 20 years, but it is the only stone, metal item that shows wear at all.) - i.e. prices for all products with unlimited supply should be ridiculous low, prices for items with limited supply but no demand after initial equipping should be low too. (And world population in old worlds is stagnant for centuries!) So, in game needs can't be the base for an economy. If you model demand artificially you have tons of other problems - just one: how do you group different items together? Iron toys and bone toys are both toys, prices of them should be related to each other (you can substitute one for the other), but you can substitute iron toys for iron helms too, due to smelting and forging so prices of all iron products should be grouped together, and of course the prices of iron helms are related say bronze helms because both products are actually quite good substitutes for each other. So, in the end there is a relation between bone toys and bronze helms... economic modelling is always fun for a few items at a time with a lot of assumptions if you try it for the whole economy you are in big trouble. If you try it seriously, I doubt you can stop short of a model like that of Sraffa.

There is the major problem that labour in general and agriculture in particular is too productive in dwarf fortress for more realistic economy to work (especially at high skill levels, not to talk of the huge and for the player easily obtained effects of quality items.). As long as a dozen dwarves are able to support all the needs of your population there won't be a realistic economy where you face actual choices what to produce locally (you can basically do everything for which you have the resources, put half the population in the military and still have idlers now - without real optimizing just some half decent layout) regardless of the model. In my fortress the single biggest labour need is hauling of goblinite and worn clothing to the trash smasher to keep the universe going (fps), i.e. I spend more labour to destroy value than to produce value, because production is so very easy.

[GreatWyrmGold]

Wear for other items is planned. So is food production requiring effort. Anyways, even if you could make food by turning a crank (15 minutes of cranking to a meal, say), and that food was delicious, there would still be demand for food because not everyone could or would want the crank, and plenty of people would rather pay others something to turn the crank for 45 minutes per person in their family per day (3 hours for a family of four!) than do it themselves. Eventually, an equilibrium would be found where the consumers were willing to pay what the producers would be willing to be paid. Simple economics.

[taptap]

The demand wouldn't be affected, but the price would be (some people are too enamored w/ simplified understanding of supply/demand curves to understand this). The supply curve itself would look differently due to different production costs. As there are basically no production costs for products based on renewable resources in dwarf fortress realistic modelling would arrive at almost flat supply curves and due to this extremely low prices - which would in realistic modelling remove the incentive for trade in all those goods made from renewable resources.

[GreatWyrmGold]

Obviously the price would be lower, but the concept would work.
And "remove the incentive for trade in goods made from renweable resources?" Only if everyone could make all the goods they wanted. They can't, they don't have the time or skills, and if renewable==infinite. Neither of those is true. Trees are renewable, but not everyone can make a bed or wants to spend the time, and there won't be enough trees to fulfill an infinite desire for beds, crafts, potash, ash glaze, fuel, etc. The same is true for every other renewable resource.

[taptap]

"They don't have the time or skills" is ridiculous, how comes your fortress gets all the skills, all production and all that while having tons of idlers and high quality stuff after a few years but everyone else is seemingly unable to produce a single good quality roast or any excellent/masterwork item at all. What is wrong with them? There is no infinite desire for beds, crafts, fuel, metal items etc. with no wear + stagnant world population for centuries there would be exactly no demand and stockpiles of good quality items everywhere - the same as it happens in your fortress once you equipped your dwarves, and made all the furniture you need and stay at the population cap for a while. If you add a bit of wear demand will be still very limited (you wouldn't need a large forest to make a few new beds per year).

If there were a somewhat realistic economy goblins would stop raiding/sieges because they can't sustain the continuous losses. I.e. fantasy == no realistic economy.

[GreatWyrmGold]

"They don't have the time or skills" is ridiculous, how comes your fortress gets all the skills, all production and all that while having tons of idlers and high quality stuff after a few years but everyone else is seemingly unable to produce a single good quality roast or any excellent/masterwork item at all. What is wrong with them? There is no infinite desire for beds, crafts, fuel, metal items etc. with no wear + stagnant world population for centuries there would be exactly no demand and stockpiles of good quality items everywhere - the same as it happens in your fortress once you equipped your dwarves, and made all the furniture you need and stay at the population cap for a while. If you add a bit of wear demand will be still very limited (you wouldn't need a large forest to make a few new beds per year).

That's how it is now, not how it will always be.

If there were a somewhat realistic economy goblins would stop raiding/sieges because they can't sustain the continuous losses. I.e. fantasy == no realistic economy.

By that logic, no one would play the lottery. After all, there's only a low chance of getting ANYTHING, and only an absurdly low chance of getting a big prize. Yet we do. Once goblins actually raid settlements they destroy, it'll make sense,
Alternatively, dwarves and goblins hate each other. That's plenty of reason for war.

[Phlum]

i'm getting some hate vibes here. a lot of people seem to think that my "maths" will be the final word in the price of an item. lets use our brains here, it is impossible to solve price with one peice of math. this has been know ever since economics became important.

oh and yes, this is ment to be used on the current "free labor" state of dwarf fortress

again i will say, "I only made half of the maths!!"

so in my case

Spoiler (click to show/hide)

   -suppy is a peice of math, this is given by me.

   -demand is another peice of math, which the purpose of this thread was to discuss.

supply and demand together are needed to calculate ideal price,  i offer one half of the maths. i was hoping someone else was smart enough to provide the other half.
i did not clearly state my thesis, i'm sorry.