Choose an item from the Steam marketplace.
1. Use the latest hourly Median Sales Price and Buy and Sell Orders (Cumulative) to approximate Supply and Demand data. Plot your data points on a diagram with price on the vertical axis and quantity on the horizontal axis. (Your 'Supply' and 'Demand' plots should meet, or nearly meet, at the median sale price and quantity of sales.)
2. Fit a trendline to your supply and demand series. Ideally, your r^2 should be 0.75 or higher. Linear or quadratic fits will probably work, but you are free to use other functional forms. You are allowed to prune obvious outliers. Plot these trendlines. (2 marks)
3. Use the trendline equations to calculate the equilibrium price for this market. (Due to the shortcuts we're taking, this will not necessarily match the median sales price.) Please note that the equation obtained from selecting 'display equation on chart' in Excel is not precise enough for this calculation. You will need to extract the coefficients using INTERCEPT() and similar commands. A useful guide to these commands can be found at https://spreadsheetpage.com/index.php/tip/chart_trendline_formulas
A few tips:
0. It may be helpful to choose an item that has been on the market for at least four months and has at least 100 copies available for sale and hourly sales of 10 units or more. This will avoid small sample problems that may lead to nonsensical results. Two useful sites to help you choose your item are the Steam Marketplace front page, which lists the most popular sellers prominently, and an independent site that provides information on Steam trading cards.
Steam Marketplace Front Page: https://steamcommunity.com/market/
How to use it: Scroll down to 'Market Activity' and look at the 'Popular Items' tab. Click on an item in the list to be taken directly to its information page.
STC Set Prices Page: https://steam.tools/cards/
How to use it: Click on 'Added' to sort the list by the date that these Steam market items first went on sale. Scroll until you find items that are at least four months old. Once you've found such an entry, click on the [B] in the 'Links' column. This will take you to a page listing all the trading cards available for the game corresponding to that entry. Scroll down until you see a 'Search the Market' link on the right. Click any such link to be taken to the card's information page.
1. On the information page, you will find a line graph labeled 'Median Sales Prices'. If you hover over the line with your mouse, you can obtain detailed hourly price and sale information. Hover your mouse over the far right entry and make a note of it in your spreadsheet. This will be of the form 'Sept 10 11 AM, CDN $3.61, 707 Sold'. Just below that graph is one plotting Buy and Sell orders. Hovering your mouse over the plots will give you more detailed data. Transfer all of this data to a spreadsheet. You should have three columns: One for price, one for Buy Orders at [Price] or Higher, and one for Sell Orders at [Price] or Lower.
Together, this data gives you an approximation to a trunctated supply and demand diagram. Rather than the full X, we only see the right half: <. We don't see the 'Buy' bids above the median sales price, because those buyers bought the item at the sale price. We don't see the 'Sell' bids below the median sales price, because those sellers sold their items at the sales price.
The median sales data will give you the middle of the X, and the Buy and Sell orders will let you reconstruct the <.
2. Because we only see hourly median price and sales data, it is almost certain that there will be outliers near the market-clearing price for your data. There may also be outliers at very high or very low prices.
3. For this exercise, you do not need to worry about prices having to be in whole cents. An equilibrium price such as '32.56 cents' is fine.
Using your trendline equations and the information above, calculate the equilibrium price we would see if there were no transaction fees (or equivalently, if the fee were 0%).
Using data and equations from the previous two questions, calculate the percentage of the transaction fee burden that falls upon buyers of your chosen item at equilibrium. Show your work.
Briefly explain, using a Supply and Demand framework, why the median sales price (and quantity sold at that price) changed the way it did. Attach a screenshot of the relevant graph or a plot of the relevant data to illustrate your explanation.