Land Supply

Disclaimer: I'm a land dunce. By that, I mean that I've never owned any land, only have a basic understanding of tier, and do not know the history of the market.

In spite of the above, I still found this SL blog post a few days ago interesting. It looks like Linden Labs has an actual target for land prices, somewhere around L$6.3 / m, as noted in the article. The question that remains is if the market will believe that price. Any land owners here wanna help me out on this one?

The interesting aspect of this article is that in some ways, it resembles setting an target price by Linden Labs for its major commodity: land. Although Ginsu Linden warned of these economic comparisons, I still persist in my observation because of how First Life markets can react to price targets.

Think about it: when you hear a price target for a stock, car, or anything else, what comes to mind? I think the first question is whether or not the source you hear it from is credible. The bum on the corner rambling about how Google will hit $1,000 per share probably isn't your best source, but if Morningstar said the same thing, you'd pay more attention...or at least I would. In this case, I think we can classify Linden Labs as a reputable source on the matter.

However, the next item to consider is whether that price target will be accepted by the market. If the price is too far out of the current range, the market will simply ignore the target. In some of the comments on that Linden Labs blog article, it seemed as though some already have. If the market believes that price target, then it becomes a self-fulfilling prophesy, with sellers trying to sell above the price and buyers going below it, hopefully reaching equilibrium at or around the price target. However, if the market doesn't believe the price target, then they simply go on as is, and it is up to Linden Labs (who control land supply only - not demand) to attempt to get to their target.

So then, if we revisit this topic in say, two or three months, the land prices could serve as a proxy for the combined influence of two variables: how much the landowners in Second Life trust the words of Linden Labs, and how well Linden Labs controls land supply. Two variables are hard to decompose, but it still answers the general question, "can Linden Labs precisely control the land market?"

There are, of course, a myriad of other factors which could come into play in this market, and I am yet unexperienced in it. Comments are very welcome on this article, as I would love to learn about the land scene in SL.