So your "fun economics" apparently ignores depreciation? If I buy a high-end PC for a gaming rig now, I don't get to magically trade it in in a few years for the current high-end PC. You will never find any merchant that buys things for the same price as they sell them (which is implied by "losing 80% of your trade value").
This is quite bad example. It would probably hold true, if in D&D, 3rd level militia would have +1 swords in year 1111, +2 swords in year 1113, +5 swords in year 1115, +11 swords in year 1117, +25 swords in year 1119... This is why you cannot sell your old PC for a reasonable price.
Another point - I can understand that you might be picky and you will pay only 20% of value for that sword +2 which was 'used'. I'm not that picky - I will buy it instead for 30%. Not possible? What about trading sword+2 for axe+2 ? You mean I have to give you 5-7 swords+2 to get one axe? Because axes are a lot more useful and in demand? Then what about exchanging two axes+2 for one sword+2.... Oh... also not possible.
Magic item economy in D&D is broken fluff wise. It is very arbitrary set of rules created to make game very balanced and to make gathering of 'crap' gear not worth the time. It is probably most board-gamish aspect of D&D for me - I have already adapted to game-oriented way of handling combat and powers, but I still cannot fully accept economy rules as presented. At the same time, there is no easy way to modify them without toppling game balance.
Now, let's look what will happen if we change the rules to be more 'simulationist' (list of completely arbitrary decisions on my part, I'm aware that most of those steps are not RAW and not RAI).
- Let's leave the magic item prices as they are - I have to start with something
- Item prices at high levels are completely abstract and ridiculous. There is NO way that 25lvl player characters are running around with items which are worth more money than few kingdoms together. Still, I want to stay with the prices - so let's forget that it is about the money. It is about amount of magic residuum which is required to create magic item. Unit of residuum is called gp and it happens by accident to be worth one gold piece.
- Above point means that gold pieces/coins are actually backed by residuum (same way as paper money notes used to be backed by gold in real world). Creator of the coin promises that he will give you so and so many units of residuum in exchange for your gold coins if you choose so. Obviously, it is not supposed to happen too often, or he could not mint too much money
- What with astral diamonds? Why they are worth the same amount of money? Easiest solution would be to say that they are 'condensed' residuum (exactly 10000 units of it), probably with a simple ritual to convert it between dust and diamond forms. Clean, simple, makes more costly magic items residuum easier to measure.
- It is bit cheesy to always find hook-guisarme-with-small-bulb in magic treasure just because one of the players have chosen it. It is very easy to solve without breaking the game - small ritual which will allow to exchange the enchantments between same class of items. This way, you can keep your grandfather's hook-guisarme-with-small-bulb and just replace the enchantments on it, by 'draining' magic from found item. Old enchantment will disappear (thus creating a nice residuum/money sink). This doesn't work so great for magic armors, because of fluff (they are made of different materials depending on enchantement). Fortunately, there are a lot less armor types, so it is less suspicious when you find matching type in treasure.
- Barter trade. Can I exchange sword +2 for axe +2? What about sword+2 for chainmail +2? I would say yes, skill test/challenge permitting. If you go to magic 'shop', you should be probably charged a bit - sometimes between 20-50% of item worth should be in line, depending on negotiation success and worthiness of items (should uncommon weapons be worth more or less for shopkeepers? on one side, with common ones it is easier to find buyer, on the other hand, every magic shop in the capital city will have them, so you won't be an exclusive provider...).
- Selling items to shopkeepers/brokers. Shopkeeper has to invest his money, hoping for another adventurer to come by. On the other hand, he has kind of insurance - in worth case he can disenchant item and get pure magic currency out of it. So, shopkeepers should pay somewhere below 100% and above disenchant percentage.
- Disenchant. It is perfectly 'acceptable' that disenchant process gets only small amount of residuum out of the items. On the other hand, idea is to not too much penalize parties spending 10 levels in dungeon, without access to magic shops. 20-40% is probably reasonable amount. I would probably make it 20% guaranteed and for anything more, you need a proper laboratory and some skill checks/challenges. This could mean professional disenchanters in big cities, offering their services, giving you 30-35% of residuum, keeping around 5% for themselves (weaker disenchanter, lower margin he can expect).
- Combining two points above, given the fact that good shopkeeper will probably have a discount with one of good disenchanters, shops should probably buy magic items from you for 40-50% of their worth. Upper limit of it meets lower limit of barter trade. Smaller the city, less money you will get.
- In RAW, to get item one plus better than yours, you had to cash in 25-35 items of yours (because of 20% sell, 5x price of better plus and 110-140% price in shop). In my version, assuming 50% average worth for sell (mix of barter and sell for money), you will need 10-12 items. I don't think it is a game breaking - this means that if entire party will cash in their +2 weapon and armor, they can buy one weapon +3 for one guy. Thanks to 5x curve for pluses, letovers from levels long ago are not going to change party wealth in any noticeable way, as far as better magic items are concerned.
- You need to disenchant 2.5-5 items to create another one of the same level. If you just want to exchange the enchantement, cost is 2 items (you put shank +great and legacy +bad and get out legacy +great). Looks ok.
- Wealth versus power. This is the problem only in heroic tier. At this level, by playing economy game, you can probably get one extra plus on your equipment. I think it is ok - if somebody really invests a lot of effort into that, +1 to attack/damage or AC is in acceptable range. Above that, you CANNOT play economy, because economy is not working in this range of money. Still, if you rob a treasury of big kingdom and steal all residuum there, you can probably overequip yourself considerably. At the same time, you will probably become most wanted man in quite big area - after all, with such robbery, you can collapse entire monetary economy of given country. I expect that bounty hunters send after the party should match the level of the treasure, not the party (so if 5th level party robs 20th lvl treasure ,which allows them to get +4 weapons, they will have to test it against 20lvl bounty hunters...). They could as well just go and kill 20th level dragon - they would get same treasure, but without angering a king or two. So, only thing which is changing here, is that with enough effort, you can get a treasure before killing the monster... (in RAW, 20th level dragon would still have 5th level treasure if killed by 5th level party - be we are way outside RAW here already)
- Still, economy minigame can be terribly boring for the player not involved. It is not meant to be actually played, changes are there to make it looking possible.
- Magic walmart. There is no way of avoiding it. If there is a demand, there will be a supply. Only question is how rare it is. More rare, worse the prices for the players.
- Residuum sources. Where does it come from originally? Is it still possible to find raw sources of it, or they were long time ago bound in various forms of magic? If raw sources exists, there will be ultimate strategic points and wars will be fought mostly for them. Letting players inside such 'mine' is not wise idea, so probably they should not be in easily reachable places. Another possibility is that they are not mine-style sites, but for example some kind of living creatures (dragon hearts/whatever). If there are not raw sources, every disenchant operation is actually killing a bit of magic in the world. For the time of campaign, we can assume rate of discovery of magical items in the world offsetting disenchant process, but in long term, residuum is going to become scarce compared to other currencies (so unit of residuum will become worth more horses/pigs/castles/etc then now).
This was a flow of thought, not structured - I just wanted to write down some of the ideas about economy in D&D I had so far. I might think about something more organized later.
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