the artillery paradox

[Spruce]

I've got a question on my mind.

here's the setting. Suppose you have a factory and you putting steel and explosives into them to get some artillery out of them.

If the steel and explosives are highly demanded goods, the production of artillery seems to be unprofitable (negative profit).

Now this situation is valid for other goods also,

Now suppose a second hypothesis. Either artillery is in high demand or not.

If artillery is in high demand, the price someone would like to pay would compensate by far the high prices of both steel and explosives.

If artillery is in low demand, the product may be sold on the market with a negative profit.

The paradox in my games is that even with a negative profit, the profit is remaining negative even in the longer run,

I would say that either the AI shuts down their factory because the good is in low demand (the pool on the world market is not empty, why bother to produce with a loss - it's better to buy your stock from the WM then to make it with a profit?) and balancing the negative profit in the longer run,

If the pool is empty and demand is low why does the AI keep on loosing money and doesn't rebalance over time?

Perhaps the pool might be empty and the demand be low - but the AI needs to have armies very quick. So he needs many artillery quick. This resulting in a high own production capacity with an empty world market pool with a high supply and a low demand. So price is low and the pool is still empty ???

I've' no objection to have a low price if the artillery stock is super high, but now there's something wrong imho, because the negative profit still remaisn with low stocks of artillery

others noticed this to?

 

[Soulitaire]

I found profits in certain products to become interesting only later in the game, when the infrastructure and/or the education bonus to the clerks start kicking in.

Machine Tools, Artillery, even low-price items create losses at first.

The amount of items on the world market doesn't seem to have an influence... but check the economy ledger and you'll see the demand number. that one seems to help (at least when I compare world demand (not stock!) with the profitability of the corresponding factory)

 

[Kriegsspieler]

This is just one of the several peculiarities of the WM, isn't it? There isn't much price elasticity built into the game. One other thing the game fails to do is to judge the price differential between a product that is available locally and one that has to be imported. If you have a regular clothing factory early in the game, for example, the demand for those goods externally is, well, fairly high, but the price you should have to pay for them internally ought to be below the WM price. The two prices (internal and external) would not be wholly unrelated, of course, since consuming something internally that the WM would pay good money for represents a real cost to your country's economy.
It makes me think that the gang at Paradox ought to pull out their basic economics textbooks again. There are games out there that do a better job of modeling a complex economy.

 

[unmerged(20768)]

There are games out there that do a better job of modeling a complex economy.

What games ? I am an economics student and therefore when I play Victoria (which I like to play) I have to overcome those nonsenses ...

 

[Kriegsspieler]

What games ? I am an economics student and therefore when I play Victoria (which I like to play) I have to overcome those nonsenses ...

Well, Patrician II does pretty well on the issue of price elasticity. It also uses certain raw materials as inputs for other manufactured items, so on that score it too has to respond to the "artillery paradox" first described in this thread by Spruce (although now I can't recall whether it deals with similar situations more satisfactorily). In any case, the prices for many of the goods in Patrician II seems to vary pretty widely, depending on the availability.

 

[unmerged(6909)]

"Profit" is a strange term in Victoria.
Usually the player is interested in the profit he's earning......that is taxes+tariffs-expenditures.
The factory-profit doesn't include these most important settings.

If you want to have more money (more 'profit'): never buy from the WM, because you`ll have to pay for that with your money while you`ll get only a fraction of what is shown in the factory-profit

 

[Spruce]

"Profit" is a strange term in Victoria.
Usually the player is interested in the profit he's earning......that is taxes+tariffs-expenditures.
The factory-profit doesn't include these most important settings.

If you want to have more money (more 'profit'): never buy from the WM, because you`ll have to pay for that with your money while you`ll get only a fraction of what is shown in the factory-profit

strange, IIRC the price on the world market is determined by supply and demand. You can't buy your goods at local market at a different price,

am i wrong?

 

[Kriegsspieler]

strange, IIRC the price on the world market is determined by supply and demand. You can't buy your goods at local market at a different price,

am i wrong?

Silly me. When I referred to buying stuff internally in my post above, I meant to refer to what would be avilable for your POPs to consume, not what you as the player would pay. Obviously if you are making regular clothes at a factory you won't be buying it.
Your original post shows that the AI isn't very responsive to price issues because -- and I think others have pointed this out in other threads -- prices don't actually fluctuate very much. There's a little file in the data folder, isn't there, that basically sets out what the relative prices for various goods will be. I don't have the game on this computer, so I can't check, but I remember seeing something like this.

 

[Darkrenown]

Planes and cars go from £500 to £0.50. Prices don't fluctuate very much indeed!

 

[berhaven]

I don't find strange at all that artillery factories (or small arma, or clipper convoys) can be unprofitable.

They often were so IRL.

No state ever built an artillery factory to make money, but to have strategic independence from imports critical to its possible war effort.

 

[Kriegsspieler]

Planes and cars go from £500 to £0.50. Prices don't fluctuate very much indeed!

That may well be the case, but there's something odd about those later techs. The earlier ones (steel, clothing, etc) don't show nearly as much fluctuation, at least in my experience. Makes me wonder if there's a bug somewhere.

 

[unmerged(11486)]

Steel is steel. It isn't high-tech, fancy, or anything like that, and everyone needs it. Therefore, the price will be likely to remain relatively stable.

Aeroplanes are the pinnacle of luxury, very few people ever need or want them, so their price can fluctuate rapidly.

Steele

 

[Kriegsspieler]

Steel is steel. It isn't high-tech, fancy, or anything like that, and everyone needs it. Therefore, the price will be likely to remain relatively stable.

Aeroplanes are the pinnacle of luxury, very few people ever need or want them, so their price can fluctuate rapidly.

Steele

Well, yes, I can agree that the price of steel or fabric would be comparatively inelastic with respect to demand. But that is so completely inelastic goes beyond sensible economic principles, I would think. By the same token, the prices of autos and airplanes fluctuate pretty crazily. It really isn't so hard to correct this. You just have to insert a coefficient for price elasticity into whatever equation governs the price movements in the game.

 

[Spruce]

I don't find strange at all that artillery factories (or small arma, or clipper convoys) can be unprofitable.

They often were so IRL.

No state ever built an artillery factory to make money, but to have strategic independence from imports critical to its possible war effort.

this is incorrect. The Belgian army relied heavy on foreign artillery. Artillery factories aren't social institutes.

The point of the thread is that the AI keeps on producing many artillery - high supply and low demand with an empty pool equalling a low price. So making artillery is unprofitable because the AI chooses to arm himself, yet a non great power can't buy the artillery because there never is any and if another nation wants to compensate the scarcity of artillery pieces it's unprofitable,

this is only an assumption and perhaps difficult to prove but supposes the AI chooses to build artillery and sell it to the world market - so having high supply. But some of them might buy batches of artillery pieces at some times. By doing this, the "world market pool" is very small but the price of the good is still too low because many AI's are making artillery,

so when many majors are following this approach - and that's logical to assume the supply to the WM is high, the pool is small and the price is low. With high steel and explosive prices, the good is unprofitable,

true or false,

 

[Dinsdale]

Spruce, there is mention that the AI is being changed to adapt to the market for 1.03.

As for real life profitability, yes and no. Companies such as Bofors have made money since the 30 years war, and there is no way that bell-makers would have abandoned their holy work to make cannon if it was not the path to profit

Britain's artillery was mostly a national industry since the 16th century, the Woolwich Arsenal eventually grew to 72,000 workers during WW1. Whether a nationalized industry was profitable though is difficult to discern.

However, most non-national artillery factories would also have produced other goods. Companies such as Krupps had a wide range of products, so it's difficult to determine whether artillery production was profitable of itself.

Regarding economies, I've done a bit of fiddling to make the basic and heavy industries, resources more prolific, and the finished goods more of a drain. That way, the building blocks of industry; iron, coal, steel, lumber etc, should be encouraged, while pop-satisfying goods make less money, or a loss but are needed to maintain a stable country. It sort of works, but only for a human player as the AI doesn't pick it's industries that well.

I hope 1.03 is even more moddable regarding the economy. We can avoid all the "sucks/rocks" posts about the next version if every part of the economy can be modded and customized to fit how we want to play.

 

[Kriegsspieler]

I hope 1.03 is even more moddable regarding the economy. We can avoid all the "sucks/rocks" posts about the next version if every part of the economy can be modded and customized to fit how we want to play.

Amen, brother! I would love to work on such a project. A well oiled & demand-responsive WM would be a joy to behold.

 

[unmerged(6909)]

strange, IIRC the price on the world market is determined by supply and demand. You can't buy your goods at local market at a different price,

am i wrong?

There was the mention of 'negative profit' in the beginning of this thread, but this 'negative profit' hardly means anything.
Let's say you want artillery for new divisions. You have the choice of buying or producing artillery.
No matter what the 'profit' in the factory screen shows: it's always more profitable to produce it then to buy it since 'profit' in game terms doesn't mean your profit.
Set Taxes+Tariffs to 0. Now you're not making any profit of anything since everything goes to your pops....but the 'profit' in the factory screen won't change.
'profit' in game terms is just a measurement for comparision between factories and won't tell you anything about your profit.

This I found very disturbing when using the term 'profit'

On your discussion:
There could be an explanation for the combination of a high price for steel while the price for artillery is low:
Steel is used as input for some other factories (steamer+small arms) and for building RR. So there could be a very high demand for steel while noone wants the special combination of steel + explosives = artillery.

 

[Fawr]

No matter what the 'profit' in the factory screen shows: it's always more profitable to produce it then to buy it since 'profit' in game terms doesn't mean your profit.

You buy materials at full cost, but when you sell them your people get the money and you get taxes/tarrifs from your people. So rather than selling explosives and steel and then buying artilery it is much better to make it (unless you are just making it to sell, have a POP shortage, don't produce steel/explosives, ...). This causes all sorts of weird things to happen in the WM, and fixing it is the best way of making the WM better (Well adjusting prices don't mean much if you only get 40% of the sale price, but have to pay full price to buy).

 

[Spruce]

There was the mention of 'negative profit' in the beginning of this thread, but this 'negative profit' hardly means anything.
Let's say you want artillery for new divisions. You have the choice of buying or producing artillery.
No matter what the 'profit' in the factory screen shows: it's always more profitable to produce it then to buy it since 'profit' in game terms doesn't mean your profit.
Set Taxes+Tariffs to 0. Now you're not making any profit of anything since everything goes to your pops....but the 'profit' in the factory screen won't change.
'profit' in game terms is just a measurement for comparision between factories and won't tell you anything about your profit.

This I found very disturbing when using the term 'profit'

On your discussion:
There could be an explanation for the combination of a high price for steel while the price for artillery is low:
Steel is used as input for some other factories (steamer+small arms) and for building RR. So there could be a very high demand for steel while noone wants the special combination of steel + explosives = artillery.

in earlier threads i saw that only the sold goods on WM earn money, so a negative profit means your people are failing to give it added value,

they make money from selling money but the nation is loosing money because you'd better sold that steel and explosives on the world market instead of that artillery and the added value created is too small giving all boundary conditions,

so I can't agree with your statements. I do agree that sell the artillery on the world market isn't unprofitable as such, but you are loosing money by making it,

 

[berhaven]

this is incorrect. The Belgian army relied heavy on foreign artillery. Artillery factories aren't social institutes.

The point of the thread is that the AI keeps on producing many artillery - high supply and low demand with an empty pool equalling a low price. So making artillery is unprofitable because the AI chooses to arm himself, yet a non great power can't buy the artillery because there never is any and if another nation wants to compensate the scarcity of artillery pieces it's unprofitable,

this is only an assumption and perhaps difficult to prove but supposes the AI chooses to build artillery and sell it to the world market - so having high supply. But some of them might buy batches of artillery pieces at some times. By doing this, the "world market pool" is very small but the price of the good is still too low because many AI's are making artillery,

so when many majors are following this approach - and that's logical to assume the supply to the WM is high, the pool is small and the price is low. With high steel and explosive prices, the good is unprofitable,

true or false,

The problem with factory building decisions by AI it's just that it doesn't consider raw material availability. That's way you find always a large number of useless factories.