Mercatorio is heavily focused on market traded products, and offers sophisticated market mechanics as the backbone of the production and logistics in the game. As of right now there have been trades occurring on 5375 markets, each representing the price of a specific product in a specific geographical location. This number goes up every day, as more advanced products are developed and traded, or less developed towns starts importing intermediate products.
Dynamic prices
Prices vary over time, responding to the local market situation. Even a mainstay resource like firewood will see variations in price and traded volume from one month to the next.
Price development of firewood in Düsselbach, with the last trade being made at 1.08 pence.
Prices will usually differ between towns, Düsselbach’s 1.08 pence begins to look cheap when compared to the price of firewood in Esfjord, where it just traded for 3.41 pence.
Esfjord is experiencing a much higher price of firewood than Düsselbach,
and as we can see there used to be an even larger price difference.
How prices are set
The prices in Mercatorio are the result of the aggregate supply and demand in each town. Each player is contributing to this with their own offers and requests, by issuing orders on a page that should look familiar to anyone who has traded stocks.
The trading page offers information about the market situations as well as the active building’s holdings of money and firewood. The market depth shows offers from other buildings and traders, while the player can issue a new order for a volume of goods at a certain price against these offers.
The order being issued will either execute directly against the offers already on the market, at the prices offered there, or become listed on the market itself. If a particularly aggressive buyer where to offer 2.00 pence for 60 firewood at this moment, that buyer would get 40 at 1.09 pence, 17 at 1.10 pence and 3 at 1.11 pence.
However, given the game’s one-hour turns, most players will probably want to automate the trading, and this may offer more beneficial prices too due to a particular aspect of the market function, the starts-of-turn auction.
Auction you say?
While the market mostly operates in an immediate trading mode, where orders execute immediately when prices overlap, this is not the case for a brief period at the start of each turn. The market will pause and allow for all automated orders to be entered, both local ones and those from trade routes to the town. Once all the orders are in, they will all execute simultaneously at the price that allows the maximum volume traded. Despite the auction only taking a few seconds out of the 1 hour turn, this is where the largest volume of trading takes place in Mercatorio.
Setting up automated trading for firewood. We’re setting the max price high to avoid being outbid,
while the price we end up paying each turn will be decided in that turn’s auction.
The max price setting for automated trades is the maximum price the player is willing to pay, and unrelated to the resulting price. If the resulting price ends at 1.09 pence, two players participating in the same auction with max prices of 1.10 and 2.40 will both get to pay the same price of 1.09.
The setting becomes relevant if the price goes over the max price (or under the min price when selling), in which case the order will not execute. These remaining orders will be the market depth we see on the market once regular operation returns. In many situations lack of order execution may be a worse outcome for a player than overpaying slightly for a product, so it may be worth being generous when setting these price caps.
Resulting holdings one turn later, after purchasing 10 units manually and 15 units with automated buying.
We can see the resulting price in the start-of-turn auction was 1.04 pence per unit,
well within our 2.40 pence price cap.
Benefits of auctions
Opening and closing auctions are common for marketplaces like stock exchanges these days, and the benefits sought are the same as those you will experience when playing Mercatorio. By pausing the market action and letting all interested parties enter their orders in a calm (and private) fashion, then matching them all at once, large bulk trades can be executed more efficiently, with less tendency to drive the price up or down.
Letting large buy and sell orders execute against a thin market in short succession would cause artificial oscillations of prices and worse prices paid for those entering the orders. By removing those artificial oscillations, the price action is driven by actual supply and demand, or speculation of how this will change in the future, which are the core elements of market trading we want to experience in Mercatorio.
