Exp9.12 Financing (Credit Limit)

[AvG]

James,
I think that investment-possibility with external money, so in Simutrans the Credit Limit, is rather low.
I consulted my son, in real life a bankmanager, about this matter. It turned out that in the real world it is acceptable to finance with external money to 75% (in normal average situations)
I think that could be altered in Exp.
Your opinion?
AvG

[jamespetts]

AvG,

I am considering more generally the issue of financing at present. Currently, one starts the game with a very large amount of free money. One can then sit back and earn interest on that money at a generous rate (half the debit interest rate, which is 10% per annum, making for a 5% per annum credit interest rate). The current credit limit system is more by way of overdraft than a long-term loan, so the limit is small.

What I think would work a lot better (and improve gameplay, too) is if players started with no money of their own, and had to borrow money in order to get going at all. I would suggest that players be able to take out bonds (a system that seems to work well in the Railroad Tycoon series) or something similar, allowing them a greater credit limit, and which would be repayable over the course of a number of years.

This would have the effect that players would have to make sure that they borrowed no more than they could invest profitably in transport in the requisite time, and ensure that the rate of return from the investment is greater than the cost of borrowing.

I should very much appreciate any input on this topic generally, including whether repayments should be regular or as a lump sum at the end of the term, how the interest rate should be set, and how a player's credit limit for long-term capital should be calculated, as well as the consequences for a player of failing to repay the amount (if a repayment would take a player over its overdraft limit).

[Carl]

What I think would work a lot better (and improve gameplay, too) is if players started with no money of their own, and had to borrow money in order to get going at all. I would suggest that players be able to take out bonds (a system that seems to work well in the Railroad Tycoon series) or something similar, allowing them a greater credit limit, and which would be repayable over the course of a number of years.

I agree: this works well in Railroad Tycoon and it would be a good additional gameplay option for Experimental.

I also think it would be good to retain the "starting with free money" behaviour as an option, because otherwise sand-box style maps will be much more difficult to get off the ground. Allowing both as options leaves open lots of different styles of gameplay and lots of different uses to which Experimental can be put.  

[ӔO]

I think you should start off with some money, because you may have had a previous business that netted you some wealth or maybe it could have been inherited. I also like the idea of selling off your stocks so that you can get money to spend and later on you can buy them back if another player hasn't bought them up already.

As far as I can tell, when financial matters are brought down to their simplest form, there are only stocks and bonds.


For stocks, there should be a risk rating of the stocks. If you buy up stocks of another player, but they bankrupt and default, then their stocks become worthless. That should prevent players from buying up stocks unnecessarily.

For bonds, I think they should be paid back monthly, because it's easier to see what you will owe at the end of the month, rather than some large number at the end of the year with no way to pay it.

[jamespetts]

Carl's suggestion of having the free money optional is sensible: these issues can then be decided at pakset level. I am strongly minded to stay away from stocks, as simulating an entire stock market can get enormously complicated (and be a simulation in its own right), and is rather beyond the scope of what I have the time to do within reason; many players also consider that an entire stock market simulation would be a distraction from the core transport simulation of Simutrans. Bonds, however, are much simpler and can be a sensible way to progress.

As to bonds, I don't think that actual bonds do use monthly repayments, do they? Bank loans use monthly repayments, whereas bonds are a lump sum repayment at the end of the period. The lump sum method is used in Railroad Tycoon. The economic advantage of the lump sum method is that players have the use of the whole of the capital for longer, so can build their network to profit before having to make a big repayment.

Careful consideration does need to be given to insolvency, however. For the single player game, simply having a credit limit sufficed: it was enough that, if players ran out of money, they couldn't buy any more. In a multi-player game, this is not sufficient, as it gives rise to the possibility of the map being cluttered by insolvent zombie companies, unable to buy anything new, but still creaking on with outdated and inadequate infrastructure, clogging up the map for other, solvent players.

In Standard, bankruptcy is measured by whether the company's net wealth is positive or negative, and the consequence of bankruptcy is a complete liquidation of all company assets. This has the advantage that zombie companies are eliminated quickly. However, the mechanism in Standard can be somewhat harsh: a player can leave a perfectly good company running one day, and come back the next and find everything gone because a vehicle has got stuck somewhere, clogging the whole (small) network. Also, a complete liquidation can be wasteful: perfectly good network, some of which may be shared with other players, may go to waste.

I should be interested in people's views on how to get a more sophisticated approach to insolvency without giving rise to excessive complexity. The two issues that need to be considered are:  (1) when is a company deemed to be insolvent; and (2) what are the consequences of insolvency?

Some thoughts that I have had in relation to question no. 2 is to have the public service player able to select a number of different options from a management menu only available to the public service player: liquidation, mothballing, nationalisation of infrastructure or bailout.

Liquidation would be the same as Standard for infrastructure. Vehicles might be handled differently, as I plan to set up a system to enable vehicles to be bought and sold secondhand; if and when that is implemented, vehicles of an insolvent company would be offered for sale secondhand for a fixed period of time (perhaps one year), and, if unsold after that time, would be scrapped.

Mothballing would require the new mothballing feature that I plan to implement: it would replace all of the infrastructure with the mothballed type, which cannot be used, but which can be restored to working infrastructure more cheaply than building afresh, and which reserves the land for future. One issue that needs to be considered is whether this mothballed infrastructure is set to being owned by no player (so that the first player to build over it is able to use it), or whether it is set to be owned by the public service player (which would mean that it could not easily pass back into private hands, but its use could be more regulated). Vehicles would be handled in the same way as with liquidation.

Nationalisation would entail all of the infrastructure, aside from depots, which would be removed, passing into the hands of the public player, which would then be responsible for the maintenance cost. Vehicles would be handled in the same way as with liquidation.

Bailout would entail the insolvent company receiving a lump-sum payment from the public service player enough to keep it from insolvency for a short while: the company would then remain a going concern.

I also wonder whether a further option should be considered: the ability for another player to take over a failing company. I plan in any event at some point to implement a feature allowing voluntary mergers: that is, where transport company A and transport company B merge by mutual consent (and both the password for company A and the password for company B would then work for the new, merged company, allowing multiple players to continue to co-operate: how to handle this in the UI (if one of the players, for example, then changes the password) will need careful consideration). In the case of insolvency, this might be extended such as to allow one company to take over a failing company, assuming all of its liabilities and assets. In this case, the whole of the failing company would be transferred as a going concern to the company taking it over, and the original player of the failing company would not have password access to the company taking it over. The failing company would be kept going despite its insolvency for a period to enable it to be taken over: an announcement would be posted in the messages tab so that players know that it is available. The first company to elect to take it over would do so, and it would not then be able to be taken over by anyone else.

The takeover option would have to be ancillary to the other possibilities, as one of the other things would have to happen in the event that nobody wants to take over the company.

Thoughts on these or any other ideas would be most welcome (and volunteers to program them more welcome still).

[ӔO]

1: For insolvency handling, I can think of a couple.
a) If the company was in the red for a certain amount of years. I think about 2 to 5yrs, because the game can take a while to progress that far.
b) When the account balance becomes less than the assets and after 1yr.

2: If companies become insolvent, then how about putting them into a limbo state?

The game would boot the player when their company becomes insolvent and put an AI in charge of the company. The AI would do nothing except run the lines as it was.

While in the limbo state, the company can be bought out by another player for the total value of the company's assets or after a certain amount of time, can be liquidated or nationalized. A message would be sent out to all players to notify them of the purchasing option.

When buying out another company, the purchasing player should get an option to buy everything as is, just the infrastructure or in a mothball state.

I think a bailout should only be possible if the company has been in existence for at least a few of decades.

[elthore]

Seems you got a lot of this already thought out James and it sounds good to me, but I'm no expert on these matters.  From the perspective of a player, more ways for the companies as well as public to interact in a mp game is definitely a good idea. Only if it can be done realistically of course. 

Btw. 'crazy ways' was Almost a successful company but I destroyed an expensive bridge at the wrong time without the funds to replace it.......fail. Lol