What does "flip" mean?

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Draegnarrr wrote:

Because its gouging regular players so they can't run their builds, many items that get flipped aren't really that valuable so its just an arbitrary way to profit from some people just trying to play the game.

I wouldn't call it evil but its certainly shady I think many are under the impression they are playing an ARPG not an economic simulator but it perfectly mirrors life and in any situation where one is permissible a parasite will turn up looking to profit at the expense of others ^^

There is a big difference between flipping an occasional item and just buying every version of a unique and setting your own price though, I think you've crossed over the line when its more like currency speculation than just making a bit of profit while working on your build.

That's not how free markets work, though... the only way everything you said could possibly be true is if a flipper is really, really bad at making profits.

In a free market, you only ever make a transaction if it will benefit you in some way. A sword is more useful to you than 1 Chaos Orb, for example. But your marginal utility (how much you gain from the transaction) has variable magnitude. Maybe the sword is more useful to you than 2c. or 3c. or 5c. All the way up to 10c, for example. At 11c, you'd rather have the orbs than the sword. Economics here calls 10c your Willingness to Pay, or WTP.

If flippers price 11c+, they won't ever sell the item to you, and if you're a representative part of the population, then that means the flipper won't really profit. So he has to price it 10c or below. Anything 9c or below, you are still gaining pure benefit.

OK, now imagine the flipper doesn't exist. There's someone else out there whose WTP for the Sword is 5c - and he already has the sword. He'd rather have 6+c. But, and this is the crucial part, he also enjoys playing the game and slaying monsters, not playing the market. And he can't play 24/7, he has a limited number of hours in the day. So what does he do? He prices it at 6c, because you can't be online 24/7 either, and watching markets all day, so it's highly unlikely you and he will ever interface.

In comes the flipper. He buys for 6c, and since all he does is trade all day (if he is a profitable flipper), he prices it at 9c and patiently waits for you to come online.

You buy the sword for 9c.

Every person in this scenario got an amount of benefit.

The seller got his 1c of marginal utility, or 6c revenue, immediately, which he could reinvest into items he actually wants for his build sooner. You got the sword, which is +1c more useful to you than a handful of orbs. The flipper made a profit of 3c from arbitrage.

The only scenario in which the flipper doesn't provide a service to you is if he is worse at selling items to you than the original owner of the sword (WTP 5c). Which means he gets no profits, which means he soon goes out of business.

Thus, the only scenario in which you lose here is if
a) information asymmetry. The WTP of you or the seller would change if they knew """"the real value.""""
b) The flipper is not profitable.
c) other scenario I may have missed? Any economics experts can step in here if I've missed something.

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adghar wrote:

I haven't really noticed any difference between PoE and the US as far as flipping goes.

Fair enough, local rules differ so it probably wasn't a good example, though there should be a fine line defined between predatory flipping and reselling service.

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adghar wrote:

I think the reason flipping is looked down upon in POE is information asymmetry, where usually the presumption is that the person selling at an extra-low price is just some poor clueless newbie who dropped a Shavronne's Wrappings and thought, "huh, this is kind of useless, I guess I'll sell it for 1 or 2 chaos orbs"

I don't really have a big issue with that, if you underpriced something it's your fault, though PoE has a big problem with false listing due to its shaky trading system. False listing is kinda tricky to pull off in RL.

I agree it's something you normally see as providing a service, if you want to sell a car and you're really desperate for cash you will probably contact a local dealer and accept the lower price. That's all well and good, he provides a service by buying off something that might not be that easy to pawn off at the moment but it will bring a profit once it sells and also takes care of logistics.

However, what we should have in mind is timeframe, selling a car can take weeks while you need money now and the whole thing is a nightmare to organize if you don't have a lot of free time. Selling an item in decent demand in PoE is pretty fast if you price it low, and flippers don't buy stuff that isn't in demand, there's no money to make there.

In the end, I assume most of the money flippers make is by fake listing, which not only isn't providing a service but is actually detrimental to the user experience. Mind you, I got nothing against currency buyers, selling currency can take a lot of time, especially if you want to trade less common currency types so that's legit service.

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Ludvator wrote:

Any sort of AH-like instant trading would make flipping the big thing though.

This is something I see a lot. I think it would be faster to complete a single transaction but also less profitable because you wouldn't be able to do fake listing anymore, so it would require more transactions for the same profit, it could very well end up being a less attractive prospect.

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adghar wrote:

That's not how free markets work, though... the only way everything you said could possibly be true is if a flipper is really, really bad at making profits.

Free markets have too much traffic/max volume to function like poe, for example if the game had millions of players it would get increasingly complicated to monopolize an item and set it at a price different to what its probable value is. This would produce a dynamic where item prices were solely dictated by their occurrence in the game vs the number of people who wanted to use them.

Non-flipped items already have this as their price, items that are no longer in demand are cheap, if they are rare but very few use them they tend to get for a reasonable amount but never something extreme.

Flippers artifically alter this by finding an item that has moderate to low supply and decent or increasing demand and fixing it so they can take more C for items than they are probably worth, due to dominance of trade scripts and bots its pretty unusual to find something substantially cheaper either and people who want said items are forced to either choose something different or shell out currency to a gouger.

So in your three way example 3 people have got what they wanted in a way however the buyer has gotten a substantially worse deal than a 2 way in order to support a middle-man whose only purpose is to take a cut. I don't view this as a benefit and neither do many other people, you view it as somebody whose contributed nothing (they aren't adding to the overall trade-pool of the game in terms of currency or items) taking a cut for no reason than because they can.

Basically they don't add value, they just take extra value from someone else.

In theory at least, the value add of arbitrage here is liquidity and market information. Otherwise, like I said, if flippers don't provide liquidity, they go out of business.

Honestly I don't interface with markets much, though, so I don't know how well PoE matches real life or theory. It looks like lots of people take issue with flippers due to information asymmetry in one form or another. For example, it didn't hit me that fake listing was as big of a deal as it was, that's definitely scummy and would probably be regulated in some way in real life.

As for the low supply and increasing demand, that just sounds like sellers being clueless. If the sellers knew that demand was rising, why would they sell it for any lower than they knew the future price would be? So the only reason flippers would be able to get something "on the cheap" would be to know something the sellers don't. Whether their profit is then justified, well, it depends. They presumably put in more effort than the sellers who do not have the information, so in that sense they have "earned" their profit, but if the original sellers at a low price would have sold just as swiftly as the flippers once they realized demand was rising, then there isn't much of a liquidity benefit, just something like "fast cash" for the seller at low price.

As for the 5c/10c/arbiter example, the main theoretical idea is that without the arbiter, the trade might not even happen because the buyer and seller might not ever be online at the same time. And in any case, one party will always be "taking extra value from someone else." If the buyer is super super patient, he'll eventually get his sword for 6c, "stealing" an extra 3c of value from the seller. If the seller is super patient, he could eventually sell the sword for 9c, "stealing" an extra 3c of value from the buyer.

If they didn't need to be patient, it's unlikely the flipper would have been able to step in, in the first place, so the flipper would go out of business.

It seems arbitrary to me that the provider of the item and the provider of the orbs should somehow be entitled to more profit than the provider of speed of transaction.

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adghar wrote:

It seems arbitrary to me that the provider of the item and the provider of the orbs should somehow be entitled to more profit than the provider of speed of transaction.

The main issue with that is they don't really provide anything, if you price something low and wait ten minutes I'm sure that one of those 50 whispers you got was a legit buyer, PoE population isn't low enough to have any need for that kind of an intermediary.

I say that currency exchange is a needed service because it's also a chore to sell a lot of currency. If you got 500 chaos to swap for fuses and post them low you'll likely have to do a lot of smaller transactions for 10-20 orbs but if a currency buyer calls in he doesn't buy as much as he needs, he'll buy all of it at once and has the funds to pay for it, so he provides convenience. Also, currency market is pretty stable last few leagues and few factors affect them so it's harder to tamper with.