| Location on World map | ||||
| Wilderness | ||||
| ↑ | ||||
| Edgeville | ← | Grand Exchange | → | Varrock Palace |
| ↓ | ||||
| Varrock | ||||
The Grand Exchange (also referred to as the GE) is a trading system for players to buy and sell almost every tradeable item (currently 6,032 items) with any other player from any world. Traders don't need to meet up with each other, and they don't need to wait at the Grand Exchange for their trade to complete. All coins and items from partially and fully completed trades are collectible at any bank (but not at bank chests or deposit boxes). This trading system is similar to modern real-life stock exchanges.
The Grand Exchange also refers to the location of this trading system: a large official market area north-west of Varrock city.
It was released on 26 November 2007 and has since completely replaced the older marketing areas trademark of Varrock and Falador.
Contents |
The Grand Exchange is located north-west of Varrock city. Players can get to the Grand Exchange in four different ways:
Any players without Agility level 21 can walk past the guards south of the shortcut and walk East to G.E.
In the Grand Exchange, there are merchants (Identified on the map by what they give information on). They will give prices of what they are identified. They are not exactly correct, but in the range.
The dwarf cannon and most armours can be assembled and traded as a set, rather than having to trade them individually. This has the advantage of requiring only one trading slot and banking slot. To assemble and disassemble any set for free, talk to a GE clerk. Right-clicking a set and clicking destroy will not convert it back into its parts.
Prices are partly governed by the Law of Supply and Demand:
Using the law of supply and demand, prices are automatically updated depending on their recent trading volume and prices. For items with low volume, such as party hats, their prices may only be updated every few days or even once a week. Prices are also partly governed by trade restrictions (see section "Trade Restrictions" below).
If the buyer's bidding price is higher than the seller's asking price, then the GE instantly completes the transaction at the price of the earlier offer. For competing offers, the Grand Exchange prioritises earlier offers over later offers (other things being equal).
Jagex has not published the Grand Exchange's exact pricing algorithms.
Before the Grand Exchange, players used to buy the stuff that they need from the General Store. Also, before the Grand Exchange, you could sell items for very low prices, such as the Dark cavalier for 50gp. You can now sell them for 51,000gp.
Every trade restriction is intended to reduce price manipulation, real world trading, and/or unfair interaction between low level and high level players.
On the issue of price manipulation, Jagex said, "We are keen to keep a player-driven economy, so the prices are worked out using the supply and demand rules above. We will only intervene as a last resort, and only if we think price manipulation is going on, although the system has lots of safeguards to prevent that."[1]
Some items cannot be traded above or below certain prices. The maximum price allowed is called a "ceiling," and the minimum price allowed is called a "floor." Spirit shards have a fixed price, which means they have an identical ceiling and floor.
This trade restriction is intended to reduce price manipulation. Some examples:
Unfortunately, ceiling and floor create some overvalued items (also called "junk" items), and some undervalued items which have to be traded for junk items. Jagex has a sticky thread on its forum for players to provide feedbacks about specific items' ceilings and floors. [1]
Jagex has not published a list of items displaying each item's ceiling and floor.
It is compulsory to buy and sell all items within ±5% of its current market price, unless there is a ceiling or floor, in which case the ceiling or floor takes priority. Any offer outside of this ±5% range is inactive. This restriction is entirely intended to fight price manipulation and real world trading.
The following trade restrictions are entirely intended to fight price manipulation.
| Item | Max quantity per 4 hours | Item | Max quantity per 4 hours | Item | Max quantity per 4 hours |
|---|---|---|---|---|---|
| Woodcutting | Fishing & Cooking | Fletching | |||
| Log | 25,000 | Raw fish | 20,000 | Arrow | 10,000 |
| Ashes | 10,000 | Food | 10,000 | Arrowtip | 10,000 |
| Mining & Smithing | Herblore | Bow | 5,000 | ||
| Ore | 25,000 | Herb | 10,000 | Bow string | 10,000 |
| Bar | 10,000 | Potion | 10,000 | Unstrung bow | 10,000 |
| Crafting | Vial | 10,000 | Feather | 10,000 | |
| Soft clay | 10,000 | Runecrafting | Flax | 25,000 | |
| Hides | 10,000 | Rune | 25,000 | Armour & Weapon | |
| Gem | 5,000 | Talisman | 5,000 | Armour | 100 |
| Jewellery | 5,000 | Summoning |
Barrows & Dragon Armour / Weapons |
10 | |
| Battlestaff | 100 | Spirit shard | 10,000 | God Wars equipment | 10 |
| Prayer | Proboscis | 100 | Treasure Trail armour | 2 | |
| Bone | 10,000 | Discontinued item | 2 | ||
| Construction | Farming | ||||
| Flatpack | 100 | Seeds | 1000 | ||
Some items are tradeable using the traditional player-to-player trade, but are not tradeable using the Grand Exchange. The list includes:
The Grand Exchange has made genuine merchants almost obsolete. The list below outlines the only legitimate role of every genuine merchant, and then shows that the Grand Exchange has fulfilled this role almost perfectly—far better than every human merchant.
Every price manipulation uses deception and/or coercion, which is why it is wrong to intentionally manipulate prices. Price manipulation is generally considered to have two main types and several subtypes; they are categorized differently because they work somewhat differently. (The fact that they work somewhat differently is why more than one solution is needed.) The two main types are disclosure-based manipulation and trade-based manipulation.
"This occurs where a person [discloses] false or misleading information which has the effect of misleading other participants about the value or trading volume of a security."[2] (Every tradeable item in runescape is a security.) Disclosure-based manipulation is fraud.
How some merchant clan leaders are using a pyramid scam on people, in five steps:
"This is the buying or selling of a security by a person [or group] which misleads or deceives other participants about the value or trading volume of that security.”[3] It has many subtypes, but only two significantly damage the runescape economy: matched orders and corners.
These are almost identical and will be treated identically. Someone places an order to buy, and matches it with an order to sell: the buyer and seller are the same person. This transaction is fake because nothing is really being transferred. Matched orders manipulate prices by faking a supply and demand. A group can do this too.
Matched orders also mislead other people into overestimating the trading activities of the security that’s being manipulated, and thus—for slightly technical reasons—mislead them into underestimating the transaction cost of that security.
Matched orders and genuine orders are currently nearly impossible to differentiate on runescape. We can only imagine account#1 posting an order to buy a dragon pickaxe for an unusual price, and account#2 selling it for a similarly unusual price. Repeated enough times and the price isn’t so unusual anymore, and that’s when the manipulation succeeded. We can also only imagine 2 millions lobsters being bought and sold for the same price on the GE, and so the GE accounts for those numbers when it updates the price of lobsters, but the GE currently doesn’t know whether the buyers and sellers were the same person. We don’t either. Again, matched orders and genuine orders are currently nearly impossible to differentiate on runescape.
Someone buys something, raises its price, and then sells it to another person. In this transaction, a cornering merchant intends to raise price by merely monopolizing his or her competitors, whereas a genuine merchant intends to raise price by at least decreasing the overall transaction cost. (Transaction cost is the cost of conducting a trade: the time and effort of finding someone to trade with, bargaining and enforcing a trade agreement, and transferring the goods and/or services.) Corners manipulate prices by monopolizing a security in a way that increases overall transaction cost, and this additional transaction cost burdens other buyers but not the manipulator. Again, a group can do this too.
The New Zealand government defines corner this way: A corner is where “a person [or group] buys up a substantial volume of a security knowing that other market participants will be forced to buy from him at a higher price.”[4]. Other buyers are forced to buy from a cornering merchant because they are left with few alternatives—the manipulator had already monopolized his competitors. By contrast, other buyers are not forced to buy from a genuine merchant because of two reasons: first, a genuine merchant often has competitors or the threat of potential competitors; second and most importantly, a genuine merchant saves them some trouble of finding someone to trade with, bargaining and enforcing a trade agreement, and transferring the goods and/or services.
The GE was released on 26 November 2007. Before the GE, Jagex had several legal issues with "real-world trading organizations." These organizations use bots and/or sweatshop labor to harvest raw materials, and then either sell the raw materials to NPC shops or amass them in a "farm system." Their virtual wealth is then traded to players for real-world money. Some of these organizations were using real-world trading for money laundering or as a fund-raiser for some other criminal activities. These organizations operated on both free and member worlds, and Jagex claims that their member accounts were often using stolen credit cards. The payments from stolen credit cards sometimes had to be refunded, in which case Jagex lost money.
The GE was implemented alongside with a restriction on player-to-player trades: You cannot transfer more than a net wealth of 3,000 coins. This trade restriction was intended to weaken real-world traders and every type of price manipulation, but it also hurt genuine merchants and other honest players. Players' complaints caused Jagex to gradually relax the restriction its current level, which is 5,000 for zero quest points; 10,000 maximum for free players; and 60,000 maximum for members.
The GE was also implemented alongside with a staking limit, to stop real world trading via staking.
Genuine merchant activities were previously some of the most profitable methods of earning coins, but the GE has made genuine merchants almost obsolete. This means all items' transaction costs had greatly decreased, and in turn, most items' prices had decreased:
Rune equipments' prices dropped significantly after a few months. Items traded on both free and members worlds were averaged by the GE. For example, cooked lobsters were traded for 250 coins in free worlds but 200 coins in member worlds, and so the GE price was 220. Discontinued items, especially party hats and Christmas cracker, were primarily used in staking and so their prices dropped significantly after the removal of staking. A few items' prices, however, increased after the GE's release. For example, bones were previously not worth the effort to collect and trade, but then their prices quickly increased to about 100 coins.
On 10 December 2007, a series of updates eliminated macros, which were a major source of raw materials. As a result, prices for raw materials that were previously gathered by macros, such as yew logs and raw lobsters, increased to a higher level than their pre-GE level. Yew logs increased from about 350 coins during pre-GE days to about 450 coins after the update. Raw fishes are now generally worth more than cooked ones, except for manta rays and sea turtles (because of the potential value in cooking it yourself). The prices of raw and cooked fishes are now generally similar to their prices several years ago when macros were not a major problem.
Most players embraced the release of the GE because it greatly reduced their transaction costs (see above section "GE replacing genuine merchants"). Some players, however, criticized the trade restrictions, especially the ±5% trade restriction and the player-to-player trade restriction. Other players criticized Jagex's lack of transparency because Jagex has neither published the GE's pricing algorithms nor the price ceiling and floor of each item.
Some players view the GE as a form of totalitarianism, a political system in which a central authority controls the economy and culture. This claim is largely without fact however, as most of Jagex's actions mirror that of Keynesianism, in the use of government intervention to decrease inflation or recession. The economy is driven by players, but many times Jagex has intervened by raising the prices of items that were significantly below their high alchemy prices, and by correlating the prices of similar items despite the fact almost all players priced them differently. For example, empty jug and jug of water have identical prices, and full potions and partial potions have proportionate prices. Jagex's interventions have discouraged players from using high alchemy to effortlessly train magic, and since high alchemy was a major source of coins, the lack of coins from high alchemy contributed to a deflation called the 2008 Market Dip.
In August 2008, the prices of numerous expensive items—godswords, barrows armours, abyssal whip, and high-level treasure trails armours—began to decrease for various reasons. This led to a collective social problem. The players, as individuals, reacted rationally by selling those items to prevent further personal losses, which collectively caused those items' prices to drop further and thus worsening the deflation. By 4 September, prices reached a plateau for most items and even started to rise for some items. By 31 October the market dip was over, although some expensive items were still millions of coins below their prices in August.
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