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Setting Trade Prices: The Cost of Trading

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1 Setting Trade Prices: The Cost of Trading on Wed Dec 17, 2014 2:41 am

NOTE: The first post is a detailed explanation of how to find a breakeven price for any product. The second post includes a list of breakeven prices which if you sell below that price you are guaranteed to be losing money in that trade. So if you're not interested in the calculation, just jump to the second post on this thread. If you find this to be useful and would like to see more breakeven prices then please just let me know.

I decided to make this post to get a better idea of how people are pricing their goods and help people decide whether or not something like a second pier for selling goods is worth it. Been crunching some numbers to figure out a good sales price. So here's what I found and I hope it will benefit people.

So in order to set a good price for a product, ideally you'd want to at least break even, meaning you'd sell it for the same amount it cost to produce, it at the very least. Let's take hemp for example.

A Hemp plantation costs -14gold to maintain. From what I understand that means it is 14g every 30 seconds (is this correct??). Although a single shipment from Northburgh takes an hour, shipments between players take only about 43 minutes for a standard ship, so let’s use gold per 43minutes (i.e. gold per batch) as our working unit. So a hemp plantation costs per batch:

14g / 30s * 60s / min * 43min =  1204g/hr.

So a hemp plantation costs 1204 gold per batch to maintain while it is operation. If it is idle it costs half this amount. Also, it takes 10 minutes and 30 seconds for a plantation to produce a single hemp. So how many hemp per batch can a plantation produce?

1hemp / 10.5min * 43min = 4.1/batch

A single hemp plantation running at 100% efficiency will produce 4.1 hemp per batch.

But to sell the hemp requires that you also have pier, a trade storehouse, and a transport ship to transport it from your hemp island to newport. These are the costs of selling. I suppose if you had a pier and trade storehouse on the same island then you can ignore transportation costs but let's include it for this example.

So the costs of these extra items are:
pier:  -8g / 30s * 2580s/batch= -688g/batch

tradehouse: -14g / 30s * 2580s/batch= -1204g/batch

small transport ship: -5g / 30s * 2580s/batch= -430g/batch

The subtotal of these costs is -2322g/batch

So finally we want to know the total cost of producing the hemp AND selling it. This will depend on the size of the batch. The costs of maintenance should be divided by the number of hemps sold per batch and the size of the batch depends on the size of the trade ship and whether or not it is upgraded with increased cargo. The smallest ship with no upgrades can carry 40 hemp in a single batch so let’s use that size.

If a batch is 40 hemp per 43 minutes then to produce 40 hemp requires a certain number of plantations operating:

40hemp/batch / 4.1hemp/plantation*hr = 9.75 plantations. Since you can’t have a fraction of a plantation we need to round up always and so we need 10 plantations to produce 40 hemp per batch. Then the cost of 10 plantations is (using cost per hour of a single plantation calculated above):

10plantations * 1204g/batch = -12040g/batch

We add this cost to the subtotal we calculated above to get the total cost of producing and selling a batch of 40 hemp is -14362 gold per batch.

So this means that if we want to break even (meaning recover the costs without making a profit) then we need to charge:

14362g/batch /40hemp/batch = 359g/hemp

359 gold per hemp is the breakeven price for a batch of 40hemp. Then to make a profit, we should sell at a somewhat higher price, and if we sell at a lower price then we will be losing money. What this also means is that it is advantageous to know the buyer/seller and what size ship the buyer will be using. If the buyer uses a larger ship then the batches become larger and you will make more money per batch (or a better alternative is you will give them a lower price and develop a good trading relationship!) For example, if the same calculation is repeated for a batch of 60 hemp, then the break even price is 340 gold per hemp!!  Now it is easy to realize the importance of larger ships especially for trading Very Happy

The cost of producing and selling a product decreases when the buyer uses a larger sized ship (in general but not necessarily always)! In other words, you make more profit because you sell more in the same amount of time.

Is it worth selling a product even if it is at a loss? (i.e. below the breakeven price)
If you already have a pier and trade storehouse; and have a surplus (say full storage) of hemp that's just sitting around then you're still paying half the cost of the plantation simply to keep it and the full cost of maintaining the pier, trade storehouse and transportation ship. In this case it still costs pretty much the same amount but the plantation costs half of what it did before since you have full storage and it is paused. But you are also not selling so there is an added opportunity cost, to put it in technical terms (the cost of not selling something you could be). So yes, if your trade storehouse is not busy and you have a surplus of hemp lying around then it is definitely worth selling even at a lowered price; losing on maintenance and gaining in some sales is better than not gaining at all even if you don't break even. In other words, losing a lot of money is worse than losing less money. But obviously, ideally you want to profit so only do this if you are desperate for quick cash. Someone is bound to pounce on an underpriced product.

I hope you will benefit from this post and get an idea of how to choose your selling price. With this information you can plan a good trading business much better. If you have any comments, thoughts or insight please do share. I made an excel spreadsheet that automatically calculates breakeven prices for various shipment (batch) sizes and plan to do something similar for products other than hemp. I think I’ll list some of that information as I create it to help people out and as a good reference. Finally, please, please, if you see an error or oversight in my calculation then please let me know so we can have a more accurate analysis. Thank you for reading!


Final note: If you want to make this calculation for a product that is not at the beginning of a production chain (linen for example), then total cost of production will be the sum of the cost of production for that product alone and each step of the chain before. So the production cost of linen will be the cost incurred from the Weaver's hut plus the production cost of hemp. Then you add to that the cost of selling (maintenance of pier, trade storehouse, and transportation ship)

********REASONS FOR EDITING:*******************
1) When I first wrote this post I had used gold per hemp as the working unit. This is incorrect because we never carry out trades of a single item, rather batches of items. So when calculating the maintenance costs this makes a big difference since the cost of selling accumulated by the pier, trade storehouse, and transport ship should be divided by the number of items being traded. While the cost of production, that of the plantations, will depend on the amount sold each batch as well and so is not constant.

2) Added the "Is it worth selling a product even if it is at a loss?" section.

3) Edited the final note section. I had incorrectly thought that the production chain diagrams show you how much of each lower tier resource goes into making a higher tier one. For example, the diagram for linen shows 3 hemps for 1 linen, and I thought that meant 3 hemp are used to make linen when in fact that's not correct. It only says 3 because it takes 3 times as long to produce a single hemp as it does to produce linen, so you'd need 3 hemp plantations per weaver's hut for them to keep the weaver constantly supplied. Higher tier products seem to always use only 1 of each of the required lower tier products, but the diagrams show how many you'd need to keep up with their consumption.

4) Found out that trading with other players in fact takes only about 43 minutes per batch rather than an hour.



Last edited by Tea on Tue Dec 30, 2014 12:01 am; edited 16 times in total (Reason for editing : See end of post.)

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2 Breakeven Prices List on Wed Dec 17, 2014 3:34 am

I will compile a list of breakeven prices for various products in this post as a reference. The listed prices are the break even price assuming the buyer uses a Small Transport Ship (40 capacity) and that chains requiring another island are built entirely on the other island. Although a breakeven price means that if you sell above the price (even by 1g) you should make a profit, these listed prices DO NOT guarantee a profit if you sell 1g above them. This is because of other factors and further complications in the trade process like:

  1. The fact that you will not immediately sell once you put the your goods up for sale and therefore continue to pay maintenance costs without selling. While these prices assume you are continuously selling without pause.
  2. It assumes all shipments in the trade carry 40 items (or more) when that may not be the case. For example if someone purchases 100 hemp using a small trade ship, the first two shipments will carry 40 items but the final shipment will only carry 20 items. The breakeven price of the final shipment of only 20 hemp will be 498g and therefore for the entire transaction it will be 400g


What this means is you need to give yourself a bit of a buffer and make your prices somewhat higher than the listed prices to guarantee a net profit. On the other hand, if someone is purchasing using larger ships then the breakeven price will actually be lower than that listed here. This reiterates the importance and advantage of a negotiated and agreed upon trade over a random trade being sold in the market.

So what these listed prices do guarantee is that for selling to a buyer using a small trade ship with only 40 capacity, then selling BELOW these prices GUARANTEES A LOSS.

So here's the list:


  • Beer: 967g
  • Hemp:  349g  (different from example above because when adding precision it turns out 7 plantations are required, not eight)
  • Herbs: 586g
  • Linen: 475g
  • Wheat: 113g
  • Wool: 71g





More to come Wink



Last edited by Tea on Thu Jan 08, 2015 10:12 am; edited 16 times in total (Reason for editing : To improve the post. Updated prices using more accurate shipment times)

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3 Re: Setting Trade Prices: The Cost of Trading on Wed Dec 17, 2014 4:57 am

I have updated this post and I think this analysis and calculation is now correct. Have a read to know how to set trade prices without making a loss! Also let me know if you find this useful so I will be motivated to add to the list Wink

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4 Re: Setting Trade Prices: The Cost of Trading on Wed Dec 17, 2014 6:00 pm

Great job done Tea ))) so I was right saying that settling 3 piers and simuntaniosly buying beer for 900 is cheaper then producing )))

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5 Re: Setting Trade Prices: The Cost of Trading on Wed Dec 17, 2014 6:44 pm

Thanks Winger. Nope not cheaper, see post below

PLEASE NOTE I have updated the price of Beer and Linen, they are lower than previously. Products not at the beginning of a chain are a bit more complicated to calculate and I need to be careful not to double count pier, transportation, and trade house maintenance cost; which I had done the first time. Now it is corrected.



Last edited by Tea on Wed Dec 17, 2014 6:47 pm; edited 1 time in total (Reason for editing : Removed a previously incorrect answer to make sure people don't get misinformed)

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6 Re: Setting Trade Prices: The Cost of Trading on Wed Dec 17, 2014 6:46 pm

Wait, no Winger it's not cheaper :p Sorry, it can be confusing.  This break even price is for Producing AND selling. The cost of producing alone including shipment to Newport is only 875g per hour per beer for shipments of 40 beer. Please be careful not to mix up these breakeven prices with the production costs alone.



Last edited by Tea on Thu Jan 08, 2015 10:13 am; edited 1 time in total (Reason for editing : corrected beer production cost)

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7 Re: Setting Trade Prices: The Cost of Trading on Fri Dec 19, 2014 11:37 am

Hahahah g is for gold, I was first reading it as for grams so I was wondering what the hell is about and for how much should I sell 375"grams" of hemp ^^
Thanks I was wandering how the sell should be considered!

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8 Re: Setting Trade Prices: The Cost of Trading on Sat Dec 20, 2014 4:11 am

Lol Jun Yi, yea I'm also used to seeing g for grams. I'm glad you found it useful!

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9 Re: Setting Trade Prices: The Cost of Trading on Sat Dec 20, 2014 7:02 pm

New prices update! Higher tier products breakeven prices have been lowered again due to an error in their calculation. Sorry!

I had incorrectly thought that the production chain diagrams show you how much of each lower tier resource goes into making a higher tier one. For example, the diagram for linen shows 3 hemps for 1 linen, and I thought that meant 3 hemp are used to make 1 linen when in fact that's not correct. It only says 3 because it takes 3 times as long to produce a single hemp as it does to produce linen, so you'd need 3 hemp plantations per weaver's hut for them to keep the weaver constantly supplied. Higher tier products seem to always use only 1 of each of the required lower tier products, but the diagrams show how many you'd need to keep up with their consumption.

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10 Re: Setting Trade Prices: The Cost of Trading on Tue Dec 30, 2014 12:02 am

Updated prices. It turns out that although trading with Northburgh takes an hour for a single shipment, trading with other players actually only takes about 43 minutes. This lowers the breakeven prices than previously calculated.

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11 Re: Setting Trade Prices: The Cost of Trading on Thu Jan 08, 2015 9:53 am

I think you are making it more complicated as it is... or less, depends on what factors you want to use...
my point is:
-if you sell goods, you don't have to care about the shipping price as you don't need any ship to sell a good
-If you do really want to include the shipping price, you miss the fact that several players can buy your goods at the same time

you should not include the shipping price but the trade storehouse income in it, and as I said its impossible as you can't figure how long it will take to sell your good...

in the end you should only count the price of each good to see if you are making profits or not and consider the other expenses as "normal expenses"

I'm making an excel paper listing all the prices of the goods based only on the producting of the good, not including any shipment...

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12 Re: Setting Trade Prices: The Cost of Trading on Thu Jan 08, 2015 10:33 am

Well what I'm doing here is simply including more of the details of the costs in my analysis. Why is this important? Well take a look at the following results. These are my breakeven price calculations for various ship sizes as buyers.


As you can see the breakeven price reduces significantly for larger ships. This means that if I were to sell to someone with a larger ship I can offer them a significantly lower price while still making a profit. In later parts of the game when selling higher tier commodities where players are likely to have larger ships then i can drop my price with a safe bet that I'll still be making a profit. You can't get this type of analysis without considering batch sizes and shipment costs.

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13 Re: Setting Trade Prices: The Cost of Trading on Thu Jan 08, 2015 10:54 am

Updating breakeven prices again using more accurate shipment sizes after the helpful shipping information from Myainsel and TheDamien here: http://annoios.forumotion.com/t40-ship-upgrades-which-to-choose

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