Johnsbook11

Economic Ideas: Scarcity, Popularity, Liquidity, and Volatility

Johnsbook11The ROBLOX economy is in constant motion, and many entrepreneurial-minded users have found methods to leverage it in order to turn significant profits. ROBLOX Creative Director John Shedletsky keeps a close eye on the economy, so we thought we’d tap him to see if he had any helpful advice he could share with those of you looking to dive into the market.

There is no guaranteed path to profit

There is no guaranteed way to profit from limited items on ROBLOX, so keep that in mind. If there were a 100% foolproof way to make ROBUX out of nothing, you can bet that a lot of fools would be doing it right now. The purpose of this article is to provide food for thought–it is not a get-rich-quick guide.

What makes items valuable

There are two main factors that drive the value of limited items:

  1. Scarcity
  2. Popularity

Scarcity is how many copies exist. It stands to reason that if an item is very rare, it will have more value than an item of which thousands of copies exist. For almost all items, you can tell how many copies exist by looking at the “sold” counter on the item page. The only time this count isn’t accurate is for items that were never sold, such as contest prizes (Subzero Ski Specs, for example, shows zero sold but there are actually thousands in existence). These items are slightly more risky to deal in unless you have a pretty good idea of the scarcity (which you can sometimes infer based on the number of private sellers that exist for the item).

LegitHatGraphPopularity also has a huge effect on the value of items. Limited items are by definition in limited supply. So if demand for an item is high, the price will be too. A great example of this principle: among Builders Club members (users who can trade and sell), there are a roughly equal number of Perfectly Legitimate Business Hats and Starry Eggs in circulation. The Legit Business hat typically sells for 2,000-3,000 ROBUX. The Starry Egg? 66 ROBUX. The difference is due almost entirely to popularity.

Liquidity vs. volatility

Knowing the value of an item is helpful, but there is more to this story. It’s possible to also talk about how an item sells, and we’ll use terms from the world of finance to do this.

The “liquidity” of an item is a measure of how many copies of the item sell or trade each day. A very liquid item might trade hundreds of times a day. An illiquid item might trade only a couple times per month. Basically, if an item is liquid, you can easily sell it for the going price in a matter of minutes. Liquid items are as good as cash (which is another factor that makes the Legit Business hat valuable).

The “volatility” of an item is a measure of the price variance. A highly volatile item might sell for X one day and 2X the next. A low-volatility item, in contrast, has a stable price that does not vary much over time. To buy/sell/trade at a profit, one needs the price of the item to move. So while volatile items are riskier to buy, they also offer more near-term reward and profit potential to their owners. It is basically impossible to profit on low-volatility items in the short term due to transaction costs.

This probably sounds very theoretical, but let’s look at how we might use these ideas in practice.

The Riptide Sword

RiptideGraph

Don’t pay attention to the amount that it’s worth; pay attention to how often it switches hands (the volume chart). About 80 of these swords are sold every single day, which makes them a very liquid asset. This provides you with a sense of security when you’re choosing the items to accept from trades–you know that if you accept a highly liquid item, you’ll be able to turn around and sell it at the drop of a hat. What’s more, you can confidently ball-park how much money you’ll receive for the item (because volatility is low). This is the safe way to trade, but also the least lucrative in terms of big earning. Still, if you deal in enough liquid items and have a lot of patience, you can generate some real currency.

Now let’s look at a different type of item.

Deluxe Roman Helmet

DeluxeRomanHelmet

This is a volatile item. Take a look at the graph in the picture above. The price fluctuates wildly over the course of a month. Sometimes it sells for 800. Sometimes it goes for 2,000. Pretty crazy. Would you buy this item at 1,400? Risky.

The liquidity of this item is low. You can actually count the number of times it’s been sold on one hand (typically expensive items are less liquid). Now take a look at the graph, and compare it to the Riptide Sword. Totally opposite, right?

So, if you receive a volatile item in your trade inbox, what does that mean? The security of selling the item is pretty much gone, though the potential earnings if you find the right buyer could be substantial. Accepting volatile items is a sharp trade-off that could result in big bucks, or an expensive item for which you can’t find a buyer. But there’s always the chance that the helmet you took in that was worth 800 ROBUX could be sold to another buyer for 2,000 ROBUX later on down the line. It’s a big risk with a potentially worthy pay off.

Season Steven

BatShadesSometimes popularity can be predictable.

Be constantly aware of the date, and think ahead. Lots of users made a ton of profits this year by buying last year’s Halloween items around August and September. Buy holiday gear months before the actual holiday, and you might be surprised by how many people will want it when the actual holiday arrives. Seasons are a big deal for users on ROBLOX, and getting seasonal gear helps them feel in the spirit.

More ideas for people who like math

We’ve talked about some simple financial concepts and how they apply to the ROBLOX virtual economy. Students of economics know that these conceptual frameworks can become arbitrarily complicated. The main reason is that economics is about competition and a slight edge can be very valuable. If you are mathematically minded, you might enjoy thinking about how some of these ideas might be applied to your ROBLOX transaction strategy:

  • CAGR (as it applies to individual items as investments)
  • Volatility arbitrage (taking advantage of predictable increase in per-item volatility over time)
  • Alpha (measuring the quality of your investment prowess)
About John Shedletsky

ROBLOX Creative Director @Shedletsky on Twitter

100 thoughts on “Economic Ideas: Scarcity, Popularity, Liquidity, and Volatility

  1. PrincessStormy On Roblox

    Who are John Doe and Jane Doe? Whenever i’m on ROBLOX’s profile, instead of 1, I put 2 or 3 up in the tab bar. 2 is John Doe and 3 is Jane Doe, and when I search them in people, they’re not there.

  2. derp

    Trading is hard, but very simple, you just need to get used to it start of with the cheapest item you can find, sell for a decent price over the price you bought, it may takes weeks, or months but once someone buys it move on to another.

      1. Nullmario

        If Roblox did that the items RAP would keep raising and never lower, then all items would soon be too expensive for new players

  3. Gunganz

    It’s actually pretty simple once you get the hang of it. I wish I was still TBC so I could still trade.

  4. unknown

    So those who do not purchase builders club has no right to compete in the roblox system of economics?

  5. Anonmsyus (or however you spell it :P)

    If there were a 100% foolproof way to make ROBUX out of nothing, you can bet that a lot of fools would be doing it right now. Best Quote EVER!

  6. 9Millionaire

    they forgot to mention that during halloween/christmas/other holidays with sales that people sell limiteds very low so they can get the presents thats why cf went down to like 10k from 20-22k

  7. Maxomega

    Not sure this Season Steven thing works. I’ve not been able to sell my pumpkin necklace at all.

  8. insanero

    halloween hats are going to be in high demand for a while
    but once december comes its going to be christmas hats
    THATS JUST AN IDEA

    1. epicmaster2004

      Actually it isn’t. It is popular because it is cheapy and grubby people who think they are rich but are poor can get their hands on it and show it off to noobs who think it is worth alot.

  9. GingerBiscuit99, Owner of Kingfisher Forces

    Very Good Shedletsky, But you forgot 1 factor and that is luck. I Bought the Bat o’ Lantern Hoping that it would sell for 5,000R$ as thats the first of its kind. It Then went on to sell or 1,000R$.

    Without Luck i wouldn’t have 2,419R$ from Buying and Selling.

    1. ChumCreature

      No! They’d have to lower the price of BC, TBC, and OBC for that! Because they’ve been drastically making updates giving NBC nearly as much freedom as BC. Except for places, groups, and the R$ allowance.

  10. goluigi10

    This is a valid concept for hats, but they’re ignoring the elephant in the room. You all know what it is, and how they could feasibly fix it.
    In the meantime, I suggest buying plain clothes, and slapping T-Shirts on the front.

  11. Kaiser Hayat

    This is a great idea but the prices are moving about TOO much, you need to go to let’s say: 1600R$ – 1500 R$ then wait 30 days, then change to 1450R$ – 1500R$
    then after 90 days you can change it higher to 1800R$ – 2000R$, that way it won’t become irrelevant.

  12. nukeysaurusrex

    Try playing the Stock Market Tycoon. It’s a great way to put this into practice without spending real ROBUX.

  13. Yolo

    If there were a 100% foolproof way to make ROBUX out of nothing, you can bet that a lot of fools would be doing it right now. Best Quote

  14. EragonSky (Eragon70789)

    Interesting explanation about prices, but to those who did not quite get it or want a shorter version of it here it is.

    The larger the stock of an item = the price lowers and vise versa. However, the higher demand of one item = price rises even if it comes in large stock (take Arctic Commando for example) this also works vise versa (take hooded spacelord for example).

    1. Scooby8snacks

      I had it for years. I finally parted with it. Then I got a BloxCon hat. Best $31 dollars spent on a robloxian XD

  15. slowrichpro66

    Nice ROBLOX you know I’ve been studying about economics lately but like it said if an Item is liquid it’s sure worth a buyer but if an item is volatile it’s worth profit if you have enough money or willing to trade.

  16. AkyraTheWolf

    Here is some tips to make money.
    Try selling a low value one for another projected low value one. Trade it for something wroth the price yours is selling for, but don’t let it lower before that. Also if a hat sells for 5k and the next price is, say, 500k you might want to buy it, as since you bought, the AP might also go up.

  17. DrVolco

    Heh this just slaps LMad’ers in the face along with other value traders.

    +1337 respect shedletsky

  18. AwkwardBlockHead

    Halloween is extremely profitable in terms of demand. As a clothing maker, I’ve made nearly 30k TIX and 5000 R$ this month off of clothing sales from Halloween costumes.

    1. ChumCreature

      Yah, In real life the amount spent is only second to that of Christmas. O_O Candy, Costumes etc.

    1. MysteryMilo

      I believe you mean “Cool guide. Interesting, John.”

      Unless of course you’re saying that this is an interesting John compared to other Johns..?

  19. Fastrix

    most seasons/holiday items don’t raise too much during its season/holiday time, due to gifts released and special items released then, which make people want R$ as quick as possible before the item they want is unavailable…

    just a thought/fact :P

  20. jtrespeces

    Thats how I pretty muchly profit, but I simple it into, buy a new limited, sell for a higher price, but you can listen to this, or my simple plan

  21. 1billybob1

    Nice! This will teach lots of people on what this means- and how to settle the economy better!

Comments are closed.