The value of research

[Guest]

I was browsing through the forums and I came across a discussion between two parties (they know who they are) about one selling the other his gas research. Q19 gas research as it were. As you might expect they had some rather divergent opinions as to just how much that research is worth.

This was interesting to me, and I don't think it's been discussed yet so I wanted to come up with a mathematical basis for figuring out just what research is worth. Now obviously in any particular sale the value is whatever both sides agree on, regardless of whatever calculations show. If one side is more anxious then it may be wise to offer better terms just to make it happen. But this should provide a good guideline.

Assumptions:

• The cost of the RC building is not passed on to the buyer. This includes build cost, material cost, and build time. That's fairly straightforward, as the seller still has a perfectly good building left. If the building itself was being sold, then those things would get factored in.
• The cost of the research is passed on, and adjusted (upwards) based on how long ago that investment would have to have been made. More on that in a minute.
• The RC building is assumed to be 500 m2. In smaller buildings the price is higher due to long research times, while larger buidings are cheaper (though it is asymptotic). 500 is a middle number for calculating, and in this particular case also happened to be the real value, so I used it.
• The discount rate (aka interest rate for the non-finance inclined) is assumed to be 10%. In Kapilands a 10% rate on investment is good but achievable in several places, including the gas industry. So I chose to use it here.

Method:
I took the cost for each step in the process, and added on a discount rate (10% per day) for how far back the payment would have had to go. For example:

The last step in the research was moving from q18 to q19. That costs 342,950

[Guest]

as one of the mentioned guy about the research sale i would like to get involved..
before everything i would like to mention that the price i put on the research is very subjective.. i am not eager to sell it unless someone pays a good price to it.. thats why the price is around 17 million caps..

secondly, to knolls, i respect the way you calculate it. but what if you make the discount rate 15 or 20%?? the profit margin in gas business is much more than that so may be you should take a rate a bit higher than you did.

I respect your effort and your scientific approach to the issues. But i am really looking forward more irrational buyers than you:)

[Guest]

The discounted cost is a nice estimate of the research value. But the real value depends not on the historical cost but on the expected impact on future profits and this is estimation is more a art, not a mathematical excercise.

If it is a edge technology in a profitable business it should cost probably much more than its historical cost, even upgraded by the cost of capital. On the other hand market value of the research in a structurally unprofitable business (e.g. beverages) most probably should be under the cost.

[Guest]

[*]The discount rate (aka interest rate for the non-finance inclined) is assumed to be 10%. In Kapilands a 10% rate on investment is good but achievable in several places, including the gas industry. So I chose to use it here.[/list]

That

[Guest]

Thanks for the responses guys.

But the real value depends not on the historical cost but on the expected impact on future profits and this is estimation is more a art, not a mathematical excercise.

Well, yes and no. Yes absolutely, in that the value of a research is what you do with it, not where you got it from.

But no I don't think you can look to this for valuation, as an art or a science. It doesn't give a competitive answer for researching yourself vs purchasing. It's pretty much a given that the future value is higher than the purchase price, or you shouldn't be buying (or researching) at all.

What you can do is use that against the purchase price, to decide if and when it's worthwhile.

Let

[Guest]

Now obviously in any particular sale the value is whatever both sides agree on,

This is entirely true, and since everyone places different values on different industries, there is no certain way to calculate price.

Personally, I would pay ~double the research costs for a mid-level q (say q10-14). As the q increases, the time saved by buying research also increases, so I believe some adjustment should be made for that.

I also think in terms of continuing that research because that is my ultimate goal - ultra high quality. So if I am buying a q20 research I factor in how much I need to expand my RC to keep research times reasonable. Then I look at how long it would take me to research the same quality I am thinking of buying in that (imaginary) expanded RC. If the potential gain is not high enough, I would not buy it.

It is not very mathematical or scientific, that is just how I choose to do it. It is only my opinion though, and the great thing about a game like kapilands is there are so many strategies and different ways to play. If you are anxious to get hold of a certain research and quality people can and do offer much more.

As bilge has said in his post, research pricing is a very subjective thing. Especially if it is in your main industry, it has to be a price that makes it worthwhile to sell. If you are not in a hurry to sell, the price will not be as competitive as someone who has left the industry.

[Guest]

I think whoever did research and eventually sells it never had the initial thought of selling it in the first place, but if you, as a seller want to get rid of it you look for someone who purchases as high as possible, for the seller the research is only worth what the best buyer wants to give, just like knolls mentioned, research Q25 toys is less worth dan Q20 plastics.

Now from the buyer's point of view, it's a matter of maths. He is just gotta know how much additional quality he's generating for how much products per day. If he has factories, he could produce y plastic per day and he knows with the new quality the plastic will be worth z more.
He has an additional profit of z*y per day. If he wants to earn his investment back in x days he should be willing to pay x*z*y.
So these 3 terms are the only critical factors for willing to pay the price:

1) number of days he wants to wait before seeing his money back

2) the additional value per item (apples +0.25 vs. bikes +1000)

3) number of products he makes per day (big companies should be prepared to pay more since they earn the investment bakc faster)

hope this helps some players decide on their purchase

[Guest]

upon all these discussions i decided to raise my price to 30.000.000 caps:) LOL

[Guest]

Or If its a finished product or first product

Leather jackets is worth more then leather that it takes to make the jackets