A primer on Estate monopoly

[bbasgen]

Having not found much discussion of this in the forum since the Emperor release, I thought it would be helpful to do some quick research and start a discussion on the role of monopolies. The short answer is that they generally appear to be something to avoid. Here is a simple summary of what I found:

1. Granting a monopoly gives you 80% (+/- 1%) of what you would have earned over 10 years.
2. This means that monopoly is effectively a ~ 2.62% interest loan

At first blush, this sounds pretty reasonable: a slightly higher interest rate than a loan, but with some estate benefit. Let's take a practical example:

1. You grant a monopoly on wine to the Clergy as France. That gives you 142.6 gold. Without the monopoly, you would have earned 180 gold in 10 years.
2. This means the loan amount is 142.6 gold, and the cost of the loan over 10 years is 37.4 gold. The formula is: (142.6 * 0.026)*10 = 37.4
3. With that loan from the monopoly you build a church (well, with admin 4 that is) in Paris which earns you a whopping 0.26/month.
4. In 10 years when the monopoly expires, you have earned 31.2 from that church.
5. Of course, we can see you've lost 6.2 gold in the deal, even with your lovely gothic Parisian church!
6. Using a monopoly loan to build in provinces with less income generation, of course, has an even less appealing outcome.

EU4 is not so simple, of course. There are caveats we must address:

• By the time you reach admin 4 as France (~ 7 years), you can accumulated a decent amount of gold to buy a church for your devout Parisans without the need for a loan.
• Since a monopoly provides a lower interest rate on a loan, it is a better option than the standard loan when a player needs money in a tough situation.
• Granting monopolies as a pre-emptive measure is generally a bad idea due to the pay off issues: loan gold should be re-invested immediately.
• Note, of course, that when it comes to buildings, you can't build them in a place with a monopoly, thus sapping long-term earning potential for high value provinces.
• It should be noted that regardless of income source, our Parisian church pays for itself very quickly: ~32 years is the break even, which means ~344 years of profit that will increase for various reasons.

Finally, we have to talk about mercantilism, the real gem of monopolies:

1. Using 100 dip on raising mercantilism is now a non-starter. It would be better spent on province development rather than mercantilism.
2. Granting monopolies on the *least* profitable lands seems like a reasonable trade-off. You get a small loss of income in exchange for 2% more trade power and estate loyalty.
3. Doing a strategy of high mercantilism makes trade ideas very important to take advantage of all that trade power.

In summary, monopoly's are generally best when they are limited and small. When generating money, they are a certain short term loss (e.g. for the term), and the breakeven likely takes several decades. The time value of money in EU4 is measured in decades if not centuries. Thus, I think one issue to consider with monopolies is the 10 year term limit, which seems too short. If that period were extended, the economics could look a little better. The ideal, I think, would be that monopolies functioned in a way that the player could turn a profit when used with careful discretion. An anachronistic possibility, which has been discussed a bit over the years, is to make mercantilism (and now monopolies, which is a nice association for the game) to have more pros/cons with respect to free trade. That makes more sense for Vicky of course, but we currently have the issue of mercantilism being a sure fire good thing, when it would probably be better if there were more trade offs.

Oh, and definitely don't do what I did on my current Ironman experimenting with monopolies: using the money to build a bigger army, getting into a lot of wars, and then taking out a bunch of loans. That was economic mismanagement so bad that I had to reduce the maintenance on my armies for the first time .... since probably EU3!