Splinterlands Economics: Asymmetric Information

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Hello everyone! We are back again today with another edition of Splinterland Economics - a series in which we introduce a basic economic concept and then apply it to Splinterlands. If this is your first time reading, just to tell you a little bit about myself: my day job is in an unrelated area but I consider myself a little bit of economics nerd - I read a little (or maybe way, way) more news than I should, double majored in econ, and am obsessed with optimization. I love the way Splinterlands is equal parts card game and resource allocation game. My goal with these articles is to share a little bit of what I know with you all.

Our subject today is something you may run into while playing you Splinterlands ranked battles, buying a car, or making an investment in stocks or crypto. In the real world it can make a crucial difference in warfare, finance, or international relations. Today, we'll be talking about asymmetric information!


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What is Asymmetric Information?

Asymmetric information describes a situation in which one person has more information about something than another person. For anyone who remembers the subprime mortgage crisis and Great Recession of 2009, asymmetric information played a role there too - financial firms began selling mortgage packages and derivatives that were manipulated to appear safer than they actually were, taking advantage of asymmetric information to sell loans at higher prices than they would have if everyone had perfect information, because the sellers knew more about the product they were selling than the institutions and individuals who were the buyers.

Another example that may be more common in your everyday life is that if someone is selling a home or a used car, then there is asymmetric information, because the seller has owned whatever is being sold and has much more knowledge about its condition and true value than the buyer would. In another case, if someone is purchasing health insurance, then there is asymmetric information in the opposite direction - the person purchasing insurance has better knowledge of their health and preexisting conditions than the company selling the insurance.


How do we apply it to Splinterlands?

There are several places in Splinterlands where there is asymmetric information. In ranked battles, you can see your opponent's match history, but don't have access to viewing their full card collection, at least without the use of third party tools. When it comes to deciding how to allocate assets within the Splinterlands ecosystem, some players may have access to more information about future plans the developers may have than others.

Related more to the backend of the Splinterlands game and markets, there is also the possibility of developers with more information than the average person using that information to make a profit. Recently I have seen a bit of talk about market bots using information gained from processing parts of the Hive blockchain in order to make purchases faster than what should normally be possible. While I am not a developer and do not have enough knowledge of the blockchain to comment on the feasibility of such activities, this potential situation would be a scenario where someone is taking advantage of asymmetric information in order to gain an advantage.

I would like to take a second here to point out something that the Splinterlands developers do (at least in my opinion) a great job of - sharing information in town halls. With several large players of the game also working for the company, it would be very easy for the team to remain silent about future directions that they may take the in-game economy in and to take advantage of insider knowledge to make enormous gains for themselves. Instead, they hold weekly town halls where developers share their progress and plans for the future. While it is impossible to provide perfect information to all of the outside players, these town halls do a great deal to minimize the impact of asymmetric information.


Why should we care?

Being aware of asymmetric information helps us in multiple ways. First, being aware of when there is asymmetric information alerts us to the possibility that there is greater risk in an action than you may first thing. And second, once we are aware of asymmetric information then we are able to look for possible ways to mitigate it.

Whenever you are about to participate in some sort of transaction - buying or selling anything - then take a second to think about what you are about to do. How well do you understand the goods or assets you are dealing with? And how much does the market or the person you are transacting with know? While many, many transactions occur where both parties end up better off than they were initially, if there is information asymmetry then there is also the possibility that someone is getting ripped off.

It is very easy to unintentionally place yourself at a disadvantage due to asymmetric information in Splinterlands - there are a variety of places where important bits of information may be lurking, from white papers, to posts on Hive, to comments about future plans in town halls. It is important to minimize the amount of things that you don't know - either by keeping an eye out yourself, or by following someone else who does.


Thank you so much for reading all the way to the end. Interested in seeing some more of my writing in the future? Be sure to give me a follow! In the meantime, if you'd like to see some of my recent posts:


Thinking about giving Splinterlands a try but haven't signed up yet? Feel free to use my referral link: https://splinterlands.com?ref=bteim, and be sure to reach out to me if you have any questions!

All images used in this article are open source and obtained from Pixabay or Unsplash. Thumbnails borrowed with permission from the Splinterlands team or made in Canva.



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4 comments
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Being aware of asymmetric information helps us in multiple ways.

That is totally true and I think that a lot can be gained in trying to figure out where this asymetric information can play for you. A lot of people don't take the time to understand the mechanics especially in Splinterlands and there is definitely a herd mentality. If aware of that, there are some nice deals to be made...


I have picked this post on behalf of the @OurPick project and it will be highlighted in the next post! Comment Footer.jpg

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Yep, taking the time to read everything and figure out how things work will definitely help you find some good deals!

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