PLEX Has Zero Elasticity- The Runaway Horse
One of the greatest strengths to Eve Online (that may not be frequently apparent to new players) is that you can pay for your subscription with in game currency. For average players who may be school aged or can’t afford ‘another subscription’ this is perfect. The unfortunate realization with this fact is that the in game currency used to pay for account subscriptions (coequally known as PLEX) has nearly zero price elasticity of demand. As the price of PLEX increases or decreases the demand for it is hardly affected. As a result, the prices of PLEX have been consistently rising (year after year).
PLEX Is an Extremely Liquid Market.
It has been estimated that the average volume of PLEX traded on the market is close to three trillion isk per day. It has been some time since CCP has released official figures on the amount of PLEX usage. In December of 2010 CCP reported that nearly 100,000 subscriptions a month were being paid with PLEX (this would equate to over 60 trillion isk in today’s market. At the time, PLEX was equated to account
for roughly one fourth of all consumer purchases for the month (note that this takes into account players that do not use PLEX to fund accounts as well).
In our current situation in eve, this places the figures for PLEX in the tens of trillions of isk per month (even disregarding the likelihood of inflation and the growth of PLEX usage over the last two years).
Recall that a significant amount of the purchasing power made by the average player goes into subscribing for their account.
Supply and Demand
The most basic tenants of Supply and Demand are that as the price of a product increase, the demand will decrease proportionately. There are a few situations in which this may not be the case such as when substitutions are involved. When corn prices across the globe start to climb consumers may switch to a substitute product (such as wheat). This is generally true in practical applications of any economic product. When a substitute exists, consumers will switch to the alternative product.
Consumer Budget Constraints
Many of you are probably wondering, “What does the average consumer do when prices rise, but there is no ‘alternative product?” The consumers generally will be forced to adhere to their budget constraint. In other words, for the Eve online player that cannot afford to pay real life money for their single (or in some cases- multiple) accounts, they will still purchase PLEX. The effect of budget constraints will generally force some players to either:
a.) Cut into their profitability on isk making accounts
b.) Spend less money on ships and fittings
c.) Sell off non profitable or ‘unused accounts’ (This has negative effects on ‘demand’)
Traditionally PLEX prices have risen when capsuleers are faced with a large raise in purchasing power. These rises in PLEX prices have traditionally coincided with significant changes to the game (Respawning Anomalies, Incursions, Faction Warfare, Mining Changes). Who can know what the magical PLEX equilibrium price may be. This winter, we may just find out (again).
< /b>CCP Screenshot of the Jita Market on PLEX Prices. Showing a 1 Year Average, Retrieved on 10/10/12