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Victoria 3 - Dev Diary #9 - National Markets

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Hello again! Today we will dig into Victoria 3’s National Market system. Markets are what drives the game’s dynamic economy by determining a rational price based on supply and demand for all trade goods in every state throughout the world. Expanding your national market to encompass more territory means more raw resources for your furnaces and more customers for your manufacturing industries. As your industrial base grows, so does your demand for infrastructure to bring goods to market.

The French market is swimming in cheap Luxury Furniture, Porcelain, Fruit, and Meat. Luxury Clothes and Wine are well-balanced. But as far as luxuries go, Sugar in particular has a sizable deficit and securing a reliable source of that would likely result in improved supply of domestic distilled Liquor as well.
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By default every country is in control of its own market which is typically (but not always) centered on their capital state. Every state connected to this market capital - overland or by sea through ports - is also part of the market. These states all have a variable degree of Market Access representing how well-connected they are to every other state in the market. Market Access is based on Infrastructure, which we will talk more about in next week’s development diary!

All local consumption and production in states contribute to the market’s Buy Orders and Sell Orders. Think of these as orders on a commodity market: higher consumption of Grain will cause traders to submit more Grain Buy Orders while higher production of Silk will result in more Sell Orders for Silk.

Furniture is a popular commodity with the growing urban lower middle-class, and it’s not likely its price in the French Market will drop anytime soon. Assuming the appropriate raw materials remain in good supply, upsizing this market’s Furniture industry is a safe bet.
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As we discussed in the Goods development diary, all goods have a base price. This is the price it would fetch given ideal market conditions: all demand is fulfilled perfectly with available supply, with zero goods produced in excess of demand. If buildings produce more than is being demanded each unit produced will be sold at a depressed price. This benefits consumers at the detriment of producers. Conversely, if demand is higher than supply, the economy of buildings producing those goods will be booming while Pops and buildings that rely on that goods to continue operating will be overpaying.

When determining prices for goods across a market’s many states we start by determining a market price. This is based on the balance between a market’s Buy and Sell Orders, with the base price as a baseline. The more Buy Orders than Sell Orders the higher the price will be and vice versa. Buy and Sell Orders submitted to the market are scaled by the amount of Market Access the state has. This means a state with underdeveloped infrastructure will trade less with the market and rely more on locally available goods.

States with full Market Access will use the market price for all its goods. Otherwise only part of the market price can be used, with the remainder of the local price made up by the local consumption and production of the goods. All actual transactions are done in local prices, with market prices acting to moderate local imbalances proportional to Market Access.

Glass is overproduced in Orsha. Coupled with a suffering Market Access in Orsha this means the Glassworks there can’t sell at the somewhat high market norm for their goods. This works out fine for local Pops and Urban Centers who consume it as they get to pay less than market price. But continuing to expand the Glassworks in Orsha will only lead to worsening Market Access for all local industries, and won’t lead to a better price of Glass anywhere else since fewer and fewer of Orsha’s Glass Sell Order ends up reaching the market. We can see this development on the market price chart: the market price used to be high due to low supply, we started expanding the Glassworks in Orsha which lowered the market price, until the point Orsha’s expanding industry became a bottleneck and prices started to rise again. The last few expansions have done nothing to lower the market price even as the local price has been steadily dropping.
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If an oversupply becomes large enough, the selling price will be so low producers will be unable to keep wages and thereby production volume up unless they’re receiving government subsidies. But oversupply is not remotely as bad as when goods are grossly undersupplied, which causes a shortage. Goods being in shortage leads to terrible effects for those in your market who rely on it; for example, drastically decreased production efficiency of buildings that rely on it as an input. Shortages demand immediate action, whether that be fast-tracking expanding your own domestic production, importing it from other markets, or expanding your market to include prominent producers of the goods.

Lacking access to a sufficient quantity of Dyes, this poor Textile Mill can only manufacture 42 units of Clothes this week instead of 126, which is entirely insufficient to make ends meet. Unless something changes, its wages will be cut to compensate and eventually Cash Reserves will run dry, rendering the building inoperable as its workers abandon it.
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If importing Dyes, growing them on Plantations, or manufacturing them in high-tech Chemical Plants to fix the shortage is not an option, returning the Textile Mills to pre-industrial, low-yield handicraft will remove the need for Dyes and restore the Textile Mills to marginal profitability.
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Astute observers familiar with previous Victorias will note there are no goods stockpiles involved in this system. In the predecessor game a single unit of a goods would be produced, sold, traded, perhaps refined, stored, and ultimately consumed, with global price development determined by how many units are inserted into or removed from the world’s total supply. In Victoria 3, a single unit of goods is produced and immediately sold at a price determined by how many consumers are willing to buy it at the moment of production. When this happens prices shift right away along with actual supply and demand, and trade between markets is modelled using Buy and Sell Orders. This more open economic model is both more responsive to sudden economic shifts and less prone to mysterious systemic failures where all the world’s cement might end up locked inside a warehouse in Missouri. Any stockpiling in the system is represented as cash (for example through a building’s Cash Reserves or a country’s Treasury) or as Pop Wealth, which forms the basis for Standard of Living and determines their level of consumption.

As the econ nerds (you know who you are) will by now have intuited, this lack of goods stockpiling in turn implies that in Victoria 3 we have moved away from the fixed global money supply introduced in Victoria 2. The main reason for this is simply due to how many limitations such a system places on what we can do with the economy in the game. With Victoria 2’s extremely restrictive and technically challenging closed market and world market buying order, it simply wouldn’t have been possible to do things such as Goods Substitution, Trade Routes, dynamic National Markets, transportation costs for Goods and so on in the ways we have, either due to incompatibilities in the design, or simply because it couldn’t possibly be made performant. We believe that the complexity, responsive simulation, and interesting gameplay added by this approach more than make up for what we lose.

Finally, a small teaser of something we will be talking more about once we get around to presenting the diplomatic gameplay. As you may have gleaned from the top screenshot, it is possible for several countries to participate in a single market. Sometimes this is the result of a Customs Union Pact led by the more powerful nation but more often it’s because of a subject relationship with a puppet or semi-independent colonies. In certain cases countries can even own a small plot of land inside someone else’s market, such as a Treaty Port. The route to expanding your country’s economic power is not only through increasing domestic production and consumption, but also through diplomatic and/or military means.

The Zollverein, or German Customs Union, is a broad unified market of German states controlled by Prussia. Without such a union many smaller German countries would find their economies too inefficient and trade opportunities severely hampered by geography and lack of access to naval trade.
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That’s the fundamentals of Victoria 3’s pricing and domestic-trade system! As mentioned, next week we’ll take a look at an aspect of the game that’s closely related to markets and pricing: Infrastructure.
 
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This comment is reserved by the Community Team for gathering Dev Responses in, for ease of reading.

Ninking said:
Looks awesome! But that the UK is in the French market (as seen in the first screenshot), that can't be the start-date situation, right?
Britain has a little island in the "Indian Ocean Territory" region, which belongs to the French Market. So they actually contribute 0.1% of GDP to the French Market at game start :D

LucasG21 said:
An interesting development of the old Spheres of Influence on an economic model. But I still have a few questions.

  1. Will there be any way to model purely diplomatic informal control of another country?
  2. Will we be able to kick countries out of our national market?
  3. Can nations with puppets join another country's market, and if so, will the puppets automatically join the new market as well?
1. We'll get into more details on various forms of diplomatic control over other countries in a later DD, it is correct that shared markets only cover about half of what the Spheres of Influence entailed.
2. Generally speaking, if another country is in your market it is because you have invited them or hold some sway over them. In this case you can just kick them out or release them. However, in case a country actually holds a small parcel of land in your market (for example a Treaty Port) it's not that easy, and you would have to bully them into giving that territory up or take it back by force.
3. Yes, puppets join any Customs Unions their overlord accepts an invitation to.

MrMineHeads said:
@lachek How did you come up with the base prices? Is there ever a situation where they can change?

A related question would be if we have a privately owned factory that is selling a good in a market, how do we determine profitability? So if the good was selling for 50 pounds, and wages and materials cost 40 to produce, is that satisfactory? I don't know if I am describing my question correctly, I hope you understand.
Base price setting is more art than science, but generally speaking Luxuries have a higher base price than Staples, manufactured goods cost more than resource goods, and high-tech goods cost more than low-tech goods.

If a building sells goods for 50 pounds and pays 40 for material and wages, the shareholders of that building are able to make 10 pounds in dividends - all money earned and spent is divvied up between Pops, Buildings, and Treasury in accordance with conditions like wage rate, laws, and so on. One thing we've struggled with, but found what we think is a very good solution for, is how to signal to the player whether a particular building is "good" or not given that everything benefits someone. The solution we've settled on is to determine a Productivity factor for each building which is equal to the amount of money each employee generates per year on average (not including wages, dividends, etc), and then compare that Productivity factor to other buildings worldwide both of the same type and across all types to translate it into a "health" factor. As a result you can see at a glance that one building generates £1.9 pounds per employee while another generates £7.1, and that the first might be good for its type (perhaps a Subsistence Farm) while the latter could be better for its type (perhaps it's a Steel Mill that's falling behind tech-wise compared to other Steel Mills worldwide).

Ratgar said:
Does this mean that only goods which the player initiates trading for can be bought by pops in a market? In real life, a very small country will still have access to all the same goods as any other, but if that is the system, wont you have one state minors having drastically reduced access to different goods, because they only produce a few domestically and you are artificially limited in how much trading you can do?
Pops could theoretically attempt to buy goods that is not produced or traded to a market - otherwise there would be no "demand" for that goods - but in practice Pops will substitute most of their demand for unavailable goods for locally available ones that can be used to fulfill the same need.

cb30001 said:
Will it be possible to remove yourselve from a market like for example india removing itself from britain and becoming its own market?
It depends on why you're in the market to begin with. If you're in a Customs Union you agreed to of your own volition, you can simply leave it. If you're in a market controlled by your overlord, you will need to gain independence or change status to a subject that's permitted economic autonomy to gain control of your own market.

Mr. Wiggles said:
Interesting, but...no import/export?
For sure there is, but alas, that's another dev diary :)

MinhowMinhow said:
Will be possible to stockpile military goods? Would be annoying to lose a war because of market mechanics.
Welcome to Victoria <3

Having everything - war most definitely included - being inextricably tied to market mechanics is a major design pillar for us. No, you cannot stockpile military goods - which means you better hope you have a good gold reserve and either a solid domestic arms industry or reliable trading partners to ensure you don't experience overpricing or a shortage of the military goods you need to run your army at peak efficiency right as you're marching on the enemy capital.

Agamidae said:
I may be dumb, but I don't understand from this picture why the price is lower than the base price.
Is there a tooltip when hovering over 26.8%?

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I assume that the price is reduced by the ratio of production/consumption. So without the market, it would be reduced down to 30%? (Or maybe 60% if it's not 1 to 1)
But we only apply 26.8% of that reduction?
I don't see this explained in the screenshot (unless it's hiding in some tooltip).

Similarly, how do you know that the mill should produce 126 units of cloths? Does it say so in the tooltip? Or in another part of the window?
Maybe it would be better to write it out as 42/126? Same goes for the amount of dyes needed.

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Click to expand...

73.1% of the price in Orsha comes from the market price of £45.7 (higher than base price)
26.8% of the price comes from local production and consumption, which is £23.9 (this value is missing from the tooltip as it's never actually important to the player). If the Market Access had been 0% and Orsha was completely isolated, this would be the actual price.

45.7 * 0.731 + 23.9 * 0.268 = £39.8, slightly less than base pricing.

That the Textile Mill would produce 126 units of clothes if it did not experience a shortage is noted in the tooltip, yes.

Regarding currencies and money supply:

Like in previous Victorias, the pound symbol is not to be taken as an assertion that all trade happen in British Pounds, but as a universal money symbol. I'd love to make a game with multiple currencies and a currency market but oh my god the implications

The "money supply" works on much the same principle: the pound is any arbitrary unit of value, not a literal bank note. When the money is stored in your treasury, it's a "gold reserve". When you're running a deficit, it's the "debt principal". When a Pop has some money left over, it's converted into Wealth (savings, investments, etc.) When a Pop lacks money, their Wealth is drained. The money supply, or value store as it were, is the sum total of Treasuries, building Cash Reserves, and Pop Wealth, if you want to think of it that way.

inter681 said:
Is it the state's own infrastructure level or some weighted average of the respective nation's infrastructure across all her states that influences the state's access to its national market? Because it would be weird if say New York can enjoy great access to the USA market by simply building up on the coast while the majority of Great Plains are just undeveloped wildness, bypassing the transcontinental railway and the alike which are essential for the east coast to have access to the riches over Appalachian Mountains.
Next week! But as a spoiler, no it's not a national average, and rails are a must for NYC to get access to large quantities of resources from the Great Plains.

MohawkWolfo98 said:
I’m abit confused re the UI of the price of goods. As far as I can understand it, silver coins signifies the price of that good is more expensive than goods with bronze coins, yet Meats is cheaper than furniture? Am I missing something?
The coin stacks represent how relatively cheap or expensive goods are. Big stack of gold, high demand / low supply. Small stack of copper, low demand / high supply.

Benjamintf1 said:
I assume there is *some* kind of stockpile right? Like, if you declare war, your armies don't instantly go from 100% effectiveness to 0% if your supply of arms was created by the enemy in the war but rather drop based on some rate right?(In the same way, I'd assume pops don't literally starve to death overnight?) (In this case not managed by the player, and very limited, but existing? perhaps modified by tech?)
There's some inertia in the system, yes. For Pops, the inertia is their Wealth, which represents their savings. For shortages, including shortages in the military, there's a duration of time during which the penalties pile up. Some military goods are also needed to sustain your armies and navies even in peacetime.

Victor Cortez said:
Could you give us an example of a country which trading city is not the capital city?
The USA, where the capital is Washington DC but the market capital is New York.

Froonk said:
@lachek

Could you confirm whether the goods shortages will actually prevent training of units or building of factories or will it only increase the cost to do so as a function of demand versus supply?
If demand merely exceeds supply, but not by so much a shortage is indicated, the price will increase until it's prohibitively expensive. But goods shortages, which kick in when demand outstrips supply by a good margin, will drastically slow down the efficiency of all buildings - military, industry, construction, etc. This affects all functions of buildings: goods production, construction speed, military effectiveness.

Limbojack said:
I really hope you'll reconsider this decision, even if it would require a lot of extra work. Being unable to stockpile military goods in anticipation of war certainly takes away from the "realism", especially in MP.
Well, nothing is impossible. But military stockpiles would insert a bit of inertia into the military system, which means that the economic aspect of warfare become relatively less important. Since your gold reserve already effectively acts as a stockpile, having military equipment stockpiles would mean two buffers would have to be depleted before the country runs into any kind of trouble. So from a design perspective it doesn't make a whole lot of sense given how the rest of the economic and military systems work. Hopefully the reasons will become clearer as we continue releasing more information!

MylesSCP said:
This sounds like it means when supply and demand of a good are in equilibrium the price will drift towards the base price. I hope this isn't the case and that prices will not change when in equilibrium. If they did then it seems like equilibrium would never truly occur outside the base price since once it had the price would start shifting causing further shifts in supply and demand.
Given a certain amount of production, consumption, market access, etc etc a particular price will be computed, which does not change while conditions remain the same. Prices don't "drift", they are computed to an ideal value. This behavior is crucial to achieve the level of connection between cause and effect we were aiming for. There are plenty of other aspects that drift in response to prices, but prices themselves do not.

Arizal said:
Reading this, I have a fear : that markets might be too rigid. Why isn't it possible for a country to be splitted between many markets?
Also, @lachek already answered on the design of "no stockpile", but to some degree this isn't that realistic. Warehouses exist and logistic as well. What happens if your arms producing region is invaded for a month? Do your army collapses because you have no supply whatsoever?
In earlier versions of the internal build we actually had countries split into multiple markets, trying out a variety of design solutions for this, but none of them resulted in satisfying gameplay as keeping track of all your markets and managing goods flow between them felt more like a chore than anything else and made it very difficult to understand the overall economic situation in your country. Moving to a single national market basically just made for a better game as it allows the player to focus their efforts and have a far better understanding of the consequences of the actions they're taking in that market. That said, we haven't completely ruled out having special cases like separate colonial markets if we can get that working in a way that doesn't create the problems I mentioned above.

Pro said:
Is it correct to interpret this as saying that it's possible to buy more of a good than what is being produced, just at a higher price?
Yes, to a point. It's important to understand that this is intertwined with the decision to not model goods stockpiling - if more goods are bought than sold (at a comparatively high price) on week 42, some of those goods changing hands might have been produced on week 41, or 27, or 6. In the real world, farms only have a few harvests per year and rely on granaries to ration the excess, doling their supply out over time in order to maximize their profits. The same also goes for other industries to different extents, depending on factors like shelf life, quality, technological obsolescence, etcetera. In Victoria 3, this stockpiling behavior is abstracted such that for as long as demand and supply remain balanced within some kind of reason, we assume that goods are available but expensive (until they're not - see shortages), and that all goods produced sell for a price (albeit perhaps a low price) even if there's not an end consumer that particular week. The end result is arguably more realistic, since goods actually being completely unavailable to buy at any price is - and was - a rare and very disruptive thing.

mikhail321 said:
Did you consider introducing a similar modifier for excessive supply, to avoid buildings consistently overproducing?
There's really no need for it, since overproducing buildings will be operating on such low margins they can't afford to pay their workers, who as a result will seek better employment elsewhere which decreases production naturally.

mursolini said:
So, just to clarify, V2 model, in which it was only possible to buy goods that were actually produced, and unsold goods were just thrown out for no money, is gone? Pretty much, everyone's need is always supplied, unless demand/supply ratio passes a treshold, and then, there is a shortage hit?

So, potentially, it is possible to just operate world economy at pre-shortage deficit level indefinitely?

Can't world, in particular in multiplayer, be locked into endless subsidy war?
Yes and no.

Yes: the V2 model of an omnipresent national supermarket that everyone shops at is gone.

No: everyone's needs are not always perfectly supplied, since their ability to pay for their needs is dependent on their purchasing power. All purchasing economic agents do have stockpiles in the form of cash reserves or Wealth, and depleting those will result in adverse effects on actual people.

For example, if the price of Grain is very high, this will adversely affect the workers and owners of Food Industries and those Pops who survive on baking their own bread in the short term, while the owners of Farms will enrich themselves. In the longer term, if Food Industries can't pay high enough wages to retain their employees, both output of Groceries and demand for Grain will decrease. Eventually this will balance out the Food Industries but at the expense of Farm revenues and the Wealth of Pops who rely on Groceries.

No: you cannot operate the world economy at pre-shortage deficit level indefinitely as this will deplete Pop Wealth which will reduce demand and devastate the profitability of buildings. And when this happens in a single country, the people will eventually rise up and/or emigrate.

Yes: you can try to fix underproduction issues with subsidies, but this means paying tax revenue to keep production up. This cannot possibly be sustained long-term in anything but specific segments of an economy, typically strategic ones that other industries rely on.

mikhail321 said:
That’d be true if base price is close to equilibrium price, but it can’t be so for all markets and all technology levels. If the base price is enough to keep pre-Bessemer steel mill barely profitable, it should generate huge margin for an EAF mill, so EAF will be able to cope with constantly insufficient demand and low prices and still pay decent wages. Or am I understanding the system wrong?
No, you got it right! And yes, pre-Bessemer Steel Mills are barely profitable (prime candidate for subsidizing if you want to be an early Steel-producing power) while late-game Steel Mills can be very profitable indeed. However, those late-game Steel Mills also require expensive input goods as well as more qualified and higher paid employees, and by that point any decent economy would have seen average wages inflate quite a bit compared to 1836. Since buildings compete with each other for workers what is considered a "decent wage" changes over time, and the high potential productivity of late-game Steel Mills can only be realized with access to cheap advanced input goods.

mursolini said:
To clarify: situation where "machine tools"(tm) good produced at let's say 10 units, demand is 20 (assuming it is below shortage treshold), the world can operate as if 20 units are actually produced, for as long as buyers can afford high price?I'm especially interested in the case of state, since state can have a very deep pockets. But, are 10 or 20 units actually available, and if 20, whom pockets the difference, for those 10 units that were not produced, but we're bought from somewhere?

In V2, there was a curious dynamic, where you had to create machine tools factories, or your chance of rapid industrialization was zero. Market simply would have supply to actually build those factories.

In V3, that wouldn't be the issue. As long as I'm willing to she'll out extra cash, I can industrialize Russia in 1936, and for a few years the world will just create machine tools out of thin air, for me, right?

Then, question, where will that money go? Or does not closed system also means that money can be payed out into thin air for goods provided from it?
Click to expand...
If you have zero access to Tools, the shortage mechanic will ensure you cannot industrialize.

If you have some access to Tools but your demand for it is somewhat higher than that, you will be paying a lot more to industrialize than your more capable competitors. The premium you're paying for Tools will go to your Tool-producing industries and the Pops who own them. If your Tool supply come from imports, it means greater profits for Tool-producers in the exporting countries.

Druplesnubb said:
I'm afraid I don't quite understand why such things couldn't be modeled in the old system. Could you give some examples?
One fundamental example is that when supply is insufficient, you have to distribute it between prospective purchasers by some rational mechanism. So when you have a Steel Mill and 100 Pops who all want to buy Coal, who gets to purchase what fraction of the available supply?

Option 1: Determine some priority sequence, e.g. buildings always buy first, then Pops buy in order of descending Wealth. This means the Steel Mills might buy up all available Coal, leaving Pops with excess money but no heating. Pops start dying, and the player has to decide to wait until the price of Coal increases due to low supply such that their Steel Mills have failed so Pops get access to the supply, or close/destroy their Steel Mills temporarily until they can secure their Coal supply. Or, if Pops buy first, the Steel Mills get no Coal and close down, thereby causing Pops to lose their jobs so they can't afford to buy Coal, leading to a cycle of different agents in the system failing and/or downward spirals. Furthermore, with sequential purchasing that depends on the outcome of the previous purchase, we cannot multithread the logic. Hard priority buy sequences like this feel artificial and cause frustrations where players ideally want to control the distribution top-down with sliders, which of course is both fiddly and nonsensical from an immersion perspective.

Option 2: Have an overall "trade manager" split supply proportionally between purchasers based on desired purchasing amount. This is the rational decision since it can both be multithreaded and doesn't lead to systemic cyclical breakdowns. However, when combined with a Goods Substitution feature, such a trade manager would have to balance two parameters (availability and price) across a number of different permutations to make a single rational purchase decision that maximizes the yield for potentially tens of thousands of agents. There may be some cool math that can be applied here but none that we can instrumentalize such that it can reliably execute several times per second.

This is already a computationally difficult problem. Now insert local price conditions based on Infrastructure and Market Access. How much of the market's allotment of Coal compared to Oil should a Farmer in Michigan get to buy when Michigan only has 75% Market Access but Coal is produced locally?

With an open economy where stockpiles are abstracted into the price conditions, we can have all purchases resolve on their own thread and tally up into a total combined price. If the price is too high for some of those purchasers to sustain it in the long run, their own economic conditions will deteriorate and demand will decrease. This means we can approach an equilibrium over time by each economic agent doing their thing, rather than trying to compute an optimal distribution between all agents given a multitude of variables that all influence each other.
 
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Very excited for this new feature and how trading will be handled in this new opus !
 
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I've noticed that the UK was part of the French market, does this mean that France is the Suzerain of the UK or is it possible that two major countries create a common market?
Would be cool the create the EEC 100 years early
 
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It looks as if the south of the Kingdom of Hanover is in the prussian market is this intentional or is it a graphical error?
 
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An interesting development of the old Spheres of Influence on an economic model. But I still have a few questions.

  1. Will there be any way to model purely diplomatic informal control of another country?
  2. Will we be able to kick countries out of our national market?
  3. Can nations with puppets join another country's market, and if so, will the puppets automatically join the new market as well?
Additional Questions:
  1. Can OPMs set up their own market, or are they required to be a part of their state's market? (Added Aug. 5 at 17:18)
 
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Can we, as the leader of any given market, expel any country we don't like? And maybe giving them a Trade CB?
 
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What did you replace VIC 2 money supply with, though? Will the new system possibly make manipulating the market and thus creating money out of nowhere possible?
 
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Looks awesome! But that the UK is in the French market (as seen in the first screenshot), that can't be the start-date situation, right?
Britain has a little island in the "Indian Ocean Territory" region, which belongs to the French Market. So they actually contribute 0.1% of GDP to the French Market at game start :D
 
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It looks really neat! I'm curious what the three other flags in the French Market are, as I can reconigze France, Sardinia-Piedmont, and the UK.
 
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Britain has a little island in the "Indian Ocean Territory" region, which belongs to the French Market. So they actually contribute 0.1% of GDP to the French Market at game start :D
Is this an oddity that only exists at the game start, or can you have individual states join other nation’s markers as a general game mechanic.
 
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@lachek How did you come up with the base prices? Is there ever a situation where they can change?

A related question would be if we have a privately owned factory that is selling a good in a market, how do we determine profitability? So if the good was selling for 50 pounds, and wages and materials cost 40 to produce, is that satisfactory? I don't know if I am describing my question correctly, I hope you understand.
 
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