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Implementing a stock exchange as opposed to a stock market

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rayzg
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Joined: 08/14/2008

Caveat: I don’t know anything about how the stock market works except from what I’ve learned through Wikipedia and other online sources.

Scroll down to the text in bold to skip the background information.

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Simplistically put, a stock exchange like NYSE and Nasdaq enables investors who wish to purchase a specified number of shares at a particular price find others willing to sell the same. The value of a stock depends on the buyers and sellers themselves; for instance, if there are more buyers than sellers, then the buyers will be more willing to specify a higher price (or bid). So the stock value a stock exchange posts reflects the price at which a particular stock most recently traded.

Compare this with your typical stock market game. Stocks are purchased from and sold to the bank, not between other shareholders. Share values fluctuate not necessarily by supply-and-demand but by other external factors such as special cards that enable a player to raise or lower a stock value by a specified amount. These games sometimes feature a separate area or board that indicates a non-negotiable price at which a stock may be purchased or sold.

Many consider the 18xx stock market system one of the most realistic. However, stocks are exchanged through the bank, not with other shareholders. Shares do fluctuate from supply-and-demand, but they also fluctuate by decisions made by a corporation’s president. 18xx games feature a share value board that indicates the price at which a share may be purchased or sold and controls how much a share rises or falls when a particular event occurs.

Nonetheless, these three features -- exchanging of stocks only through the bank, fluctuating share values not due to supply-and-demand, and specific prices at which a stock may be exchanged -- elegantly abstracts the chaos and volatility created when thousands of investors are exchanging stocks. It’s probably why so many stock market games, from Stock Ticker to the 18xx series, have these characteristics.

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I’d like to develop a stock market system with the following characteristics:
* Only the players themselves determine the value of a stock.
* Stocks (for the most part) are purchased and sold only between players (not the bank).

The difficulty in creating such a system is ensuring a market exists for low valued stocks. In a “traditional” stock market game, the bank is always willing to purchase your low valued stocks. However, in this system, there might be situations in which it is impossible to sell them.

Can you think of other games that have implemented this kind of stock market system, or suggest other ways to implement it?

I’ve thought of two ideas:

1. Players have one of the following choices:

[a] Purchase a stock from the bank at a price determined by the founder of the corporation (similar to 18xx games).

[b] Sell one or more stocks by auction. A group of stocks may contain stocks from different corporations. Other players may bid with money or other stocks. The auctioneer chooses which offer to take. That auctioneer may also decline all offers.

[c] Forced purchase (similar to the trading mechanism in Kuhhandel/You’re Bluffing!) A player chooses another player’s stock to purchase. The purchaser places a secret amount of money in front of the seller. The seller may accept the money and surrender the stock, or he may offer a counter-offer to the purchaser. If the purchaser’s offer is larger, then he receives the stock from the seller, and the seller receives his counter-offer back. If the seller’s offer is larger, the seller keeps his stock and the purchaser’s offer, while the purchaser keeps the seller’s counter-offer.

[d] Forced sale, which would be similar to the forced purchase.

2. Allow the players to play a third role (the first two are investor and corporation president) as market makers or specialists. Investors sell and purchase stocks through these people, who in turn profit from the spread between a stock’s purchase price and its selling price. The mechanism could be similar to Eric Solomon’s Middleman.

bluesea
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Joined: 07/28/2008
rayzg wrote:...or suggest

rayzg wrote:
...or suggest other ways to implement it?

The simplest stock market, ignoring all chaotic and macro-economic effects, is as you say a matter of supply and demand. So I'm thinking either a game of set collection or individualized player victory conditions, or both.

Collecting sets or meeting some secret game goal of amassing certain cards or creating a diversified portfolio (could be based on a Careers-like self imposed game goal) would then force competition for the finite cards, cubes, chits, what have you. Players would need to trade their way to victory...simultaneously even...

"The game has no turns, no turns at all. A game with no turns."
"But you have to have turns. It's a board game. You need turns."
"No turns, Jerry! No turns!!"

So when the victory condition has been met, a player calls out and wins the game. This could be a very simple game at it's core (a good thing), but cutthroat as hell to play. Let the players themselves BE the complexity. Also, this player interaction gets rid of the bank completely as player only interact with each other. Maybe some chaos is added in the form of event cards that force players to modify their original victory condition, an force even more trade.

geremy
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Joined: 10/31/2008
What an interesting way of

What an interesting way of putting things, this might work but it also create certain chaos, because if this market will have lower prices then it's likely that external players would be interested in getting a share and this case the other stock markets will suffer the consequences. I just hope I am not wrong assuming this, I am still a beginner in this field as am currently learning some vital skills from an online stock market trading broker.

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Edit: Removed suspicious link. Message left for thread coherence reasons. User was warned via PM -seo

bluesea
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Joined: 07/28/2008
geremy wrote:What an

geremy wrote:
What an interesting way of putting things, this might work but it also create certain chaos, because if this market will have lower prices then it's likely that external players would be interested in getting a share and this case the other stock markets will suffer the consequences. I just hope I am not wrong assuming this, I am still a beginner in this field as am currently learning some vital skills from an online stock market trading broker.

Forgive me if I'm wrong about this, but is this spam? If so, this is some pretty slick spam. This is first time I've seen the use of product placement in a forum post. Heck this is a good business right there: Instead of bombarding a site with certain-to-be-deleted-spam, spend the day on several public forums crafting lasting quasi-realistic sounding posts with an innocuous link that do not get deleted. (NB: This post made it through most of the day at least!)

The better business would be for frequent forum goers to have a tool that they could post product placements for products that might be on subject: books, tools, crafts, etc. And then get a commission on the sale. I'm sure it exists already.

apeloverage
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Joined: 08/01/2008
it was indeed slick.

I bet the guy doesn't need Viagra, even from Canadian pharmacies. :)

larienna
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Joined: 07/28/2008
I never thought it was spam.

I never thought it was spam.

apeloverage
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Joined: 08/01/2008
why not just

let players trade stocks for money or other stocks during their turn, without any other rules about it (as in Settlers of Catan eg)?

Darkehorse
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Joined: 07/21/2008
Spam

Larienna,

The original post is not spam, but the reply from member Geremy definitely is.

-Darke

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