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Offline Freahk

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Company takeover discussion
« on: June 06, 2021, 08:47:28 PM »
I couldn't find the old thread about company mergers/takeovers, so I started a new one.

On BB, we have seen an issue with the takeoveer system: It can be abused to generate free money at the moment.

The most obvious issue is the free starting money on newly founded companies, which allows companies to get the starting capital again and again.
This will be fixed in the long-term, but there might be a short-term solution to this.

Further, calculation of takeovers seems to be quite broken at the moment.

Have a look at the following example:
Company A is a newly founded company. 250000 starting capital.
Company B is by 86000 in the reds. Assets are exactly 0.
- The takeover cost displayed was 172000
- After the takeover, company B had an acount balance of 336000

We briefly discussed this on Discord and so far concluded the following:
In the above example
- a takeover cost of 86000 should be displayed.
- Company As account balance should be 164000 after the takeover.
That means, the displayed and actually booked cost of a takeover should be assets+liabilities, which is the same as (pseudo code)
Code: [Select]
A.account_balance + B.account_balance - B.assets , given a negative account balance.

How to handle takeovers when the company being taken over has a positive account balance?
Quote
It could be that you'll have to pay off the magnitude of the balance, independent if it is credit or debt

Of course if it is offered you could also say that the money on the balance is gifted to the new owner...
These are the options I can think of
In my opinion, that money should be transfered to the new company.
From the code, I guess this is the intended behavior, except in case of companies in liquidation.
It doesn't work that way however, due to wrong calculations in the takeover cost calculation.

I am wondering why the exception of not booking account balance of companies in liquidation exists.


One issue still remains: Can we prevent players from exploiting the free starting capital in the short-term?

I'd argue we might, interpret the free starting capital as a non-interest-bearing, which each company can claim only exactly once.
That means, on takeover a company will have to refund that bearing, otherwise the same company would have claimed it twice.
I am aware that this doesn't take into account the growth of starting capital depending on the timeline.
« Last Edit: June 06, 2021, 10:21:18 PM by Freahk »

Offline jamespetts

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Re: Company takeover discussion
« Reply #1 on: June 08, 2021, 10:36:41 PM »
There are three issues here: (1) possible errors in computation; (2) possible short-term modifications; and (3) treatment of companies on liquidation.

As to (1), I note that you have submitted a pull request. Can you summarise its intended behaviour and how that differs to the present?

As to (2), I am somewhat reluctant to implement a feature that is intended to be removed at some point in the future, not least because there is a big risk of not remembering to remove it, but also because of the problem of wasted effort which could better be spent towards the long-term fix and user confusion of features that appear and disappear quickly.

As to (3), the difference in the case of liquidation is intended: the idea is that, if a company is in administration, one is buying the whole thing as a going concern, taking on both assets and liabilities. In liquidation, however, its individual assets are being sold off to meet the demands of its creditors, and the purchasers of those assets do not take on liability for debt. We currently do not have a system for separating out the assets, so we cannot directly simulate individual assets being bought and sold, but this will be added with respect to the purchase of individual vehicles from a company in liquidation once second hand sales of vehicles are implemented. It is important, however, to simulate not being liable for a company's debts when buying the assets of a liquidated company, or else the assets may end up going for scrap rather than being re-used because nobody wants to take on the associated debt, which is both unrealistic and uneconomic.

Offline Freahk

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Re: Company takeover discussion
« Reply #2 on: June 08, 2021, 11:09:50 PM »
(1) The intended behavior is the following:
Whenever a company is offered for takeover, the displayed and actually booked costs will be "assets - account_balance".
This means the new company has to buy the assets and pay off the loans.
In case of a positive bank account balance, there are no loans in the current system and that amount will be booked to the new company.

Whenever a company is in liquidation, the displayed and actual cost will "assets"

With the additions from (2), the current stating money will be added to the takeover costs to simulate that the starting capital is available to each company only exactly once.
With the clarifaction from (3), I guess this cost should not apply to companies in liquidation. I'll prepare a third commit, which doesn't add this cost to companies in liquidation, but be warned this will re-enable the takeover exploit on companies in liquidation.
 
(2)
It's one line of code, already included in the second commit of the PRed branch.
The cost calculation code has to be altered whenever the long-time loans are implemented anyways, so it's rather unlikely to forget it.
I might add a comment clearly pointing out the intention of that line.

About (3)
Thanks for the clarification.
That means no matter how exactly the loan system is implemented, it's always possible to buy assets on loan, run the company into bankruptcy and sell the assets. The new loan system won't fix this.

Offline wlindley

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Re: Company takeover discussion
« Reply #3 on: June 08, 2021, 11:19:10 PM »
The whole issue of negative balances needs further thought.  No actual company operates with a negative bank balance, that would never be allowed. Loans, bonds, or stocks need some kind of representation.  As is, all the effort into costs, revenues, profits, and game balancing are pointless with negative cash balances. Real companies begin with near-zero assets but with cash from loans or the sale of stocks, bonds, or other securities. Or are we not actually trying to simulate proper economics?

Offline Freahk

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Re: Company takeover discussion
« Reply #4 on: June 08, 2021, 11:27:53 PM »
We try to simulate this, the current implementation is just a quite simple one and that's the reason why a more sophiscated system is planned in the long-term.
However, even in the current system, there is a credit limit, a solvency limit and an interest being paid on negative account balance, so you can think of negative account balance as a loan.

Offline wlindley

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Re: Company takeover discussion
« Reply #5 on: June 09, 2021, 11:59:09 AM »
Very good and no worries. On topic, whatever is done here now should merely have a bit of thought and some hooks built in for whatever comes later.

Offline jamespetts

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Re: Company takeover discussion
« Reply #6 on: June 09, 2021, 08:51:36 PM »
The current system of a negative bank balance is intended to represent an overdraft. It is planned to implement some form of long-term credit in the future, and abolish (or, at least, greatly reduce) the free starting money when that happens so that companies will have to borrow to invest, and there will be an interesting relationship between what a player can achieve by borrowing any given amount of money in any given time and the greater risk that paying interest to service a higher level of borrowing entails.

Offline prissi

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Re: Company takeover discussion
« Reply #7 on: June 10, 2021, 07:43:10 AM »
I think the problem is that in Simutrans the revenue scales with the network size. Thus a twice as big loans can potentially generate 4x the revenue. This only saturates when there is the entire map coveraged.

Thus even an initial loan needs to be somewhat limited. (Also my bank denied me loaning 32 billions for covering Angola with high speed trains ... )

Offline Freahk

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Re: Company takeover discussion
« Reply #8 on: June 10, 2021, 10:33:47 AM »
I have now pushed a change that, as requested, does not charge the initial capital of the current date whenever taking over a company that is in bankruptcy, effectively re-enabling the exploit in case of bankruptcy.


Furthermore, I have noticed that assets does only include vehicles no further non-financial assets like the land value of owned properties or ways.
That might be a topic on its own.
« Last Edit: June 10, 2021, 06:00:39 PM by Freahk »

Offline jamespetts

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Re: Company takeover discussion
« Reply #9 on: June 12, 2021, 10:43:21 AM »
I think the problem is that in Simutrans the revenue scales with the network size. Thus a twice as big loans can potentially generate 4x the revenue. This only saturates when there is the entire map coveraged.

Thus even an initial loan needs to be somewhat limited. (Also my bank denied me loaning 32 billions for covering Angola with high speed trains ... )

In reality, the amount of capital that transport (or, indeed, any) companies can raise is limited by economic mechanisms that we need to simulate to be able to simulate the realistic economic constraints, working with which is more or less the whole game mechanic, affecting commercial transport networks. In simple terms, this requires a credit limit function (as indeed we already have with the overdraft system); before implementing a more sophisticated financing system, we need to work out what the real world constraints on finance really are.

I have now pushed a change that, as requested, does not charge the initial capital of the current date whenever taking over a company that is in bankruptcy, effectively re-enabling the exploit in case of bankruptcy.

Perhaps I have missed something - may I ask why it is a good idea to re-enable an exploit?

Quote
Furthermore, I have noticed that assets does only include vehicles no further non-financial assets like the land value of owned properties or ways.
That might be a topic on its own.

It is indeed a topic on its own - the "assets" graph should indeed represent these things. Land value owned would require its own independent land ownership abstraction (discussed in another topic); as for ways, this is complex, as depreciation would have to be computed for each segment of way, as ways wear out. The forge cost never has to be repaid, but, beyond that, ways are a wasting asset.

Indeed, when the vehicle maintenance mechanics are implemented, vehicles will also be a wasting asset and depreciation will need to be computed for these, too.

Offline Freahk

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Re: Company takeover discussion
« Reply #10 on: June 12, 2021, 08:07:31 PM »
Perhaps I have missed something - may I ask why it is a good idea to re-enable an exploit?
As you have noted above:
In liquidation, however, its individual assets are being sold off to meet the demands of its creditors, and the purchasers of those assets do not take on liability for debt.

As purchasers of companies in liquidation do not take on liability, they won't pay the initial capital in addition.
Thus, new companies can still be founded just to spend money on things which don't add up on assets, then run into bankruptcy to be taken over for free.
« Last Edit: June 12, 2021, 08:54:35 PM by Freahk »

Offline jamespetts

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Re: Company takeover discussion
« Reply #11 on: June 12, 2021, 08:47:55 PM »
Thank you for the clarification - that is helpful. Now incorporated.