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I'm working on a little steampunk setting, which incorporates a lot of the elements of Victorian England. One of the similarities is the economy, in that prices and wages in this world are fairly historically accurate. One difference however, is the presence of several nonexistent materials, including Aerium and Prothane. Both of these are necessary to operate airships, with the Aerium lifting it off the ground and the Prothane (which resembles jet fuel) propelling it forward. How much do I charge for these substances?

Edit: Aerium is mostly mined in Samarla, a large country to the south of the main setting Vardia. Vardia does have some Aerium mines, but not enough to prevent both Aerium Wars. The closest real world analogue in terms of politics and economy (I believe) would be oil. Prothane is much more common and can be found in any country, but is difficult and dangerous to mine. Airships are far too expensive for most people to buy, but if you're clever, you can get a loan and slowly pay yours off.

Note: This setting is designed after the Ketty Jay series. If you've read it, that would be helpful.


A table of prices to give some perspective:

  • Week's wage for an Unskilled Laborer: 3 shillings, 9 pence
  • Dinner consisting of bread, cheese and beer: 3 pence
  • Enough gin to get dead drunk on: 2 pence
  • A shave: 6 pence
  • A standard sword: 1 ducat, 3 shillings
  • A silver pocketwatch: 11.5 ducats
  • A horse: 25 ducats
  • Renting a house (per year): 22 ducats

( A ducat is equal to nine shillings, a shilling is equal to twelve pence)

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    $\begingroup$ How difficult are these materials to gather/produce/refine/etc. and bring to market? how in-demand are they in general? Tea via East India Co. or oil from Middle East or uranium or more like wool and cotton? How common are air ships? $\endgroup$ – CaM Feb 8 '17 at 17:23
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    $\begingroup$ Your renting of a house is more than 100% of an unskilled labourer's annual income - is this intentional? Trying to get an idea of who will be able to buy Aerium and Prothane and what to compare it to. $\endgroup$ – cyuut Feb 8 '17 at 17:23
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    $\begingroup$ What are your airships used for? Do unskilled laborers pilot them to do useful work, or are they the playthings of the royal elite? If they are used in common industry the price will be greatly different than if only he 5 richest kings in Europe are using them. $\endgroup$ – GrinningX Feb 8 '17 at 17:28
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    $\begingroup$ @cyuut, yes that would be about right. A whole family might live in one room in a shared house. We don't have the same level of visible poverty in the west any more. $\endgroup$ – Separatrix Feb 8 '17 at 17:47
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    $\begingroup$ @ggiaquin, most people had neither the use for a horse nor the ability to afford one. It's a luxury for the rich and a necessity for a hackney cab. Travel of more than a day's walk is not a thing until the railways unless you're driving animals to the London markets. What modern people would probably find most surprising is that people who all lived in a room together would still have a domestic servant. $\endgroup$ – Separatrix Feb 8 '17 at 18:11
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Sharkn8do's guide to pricing

So, this will sound a lot like an intro to econ course, and that's because it is. You have two deciding factors in pricing, what it costs to make this product, and what your buyers are willing to pay.

Cost to manufacture

There will be a couple basic things you need to figure out when determining costs, you mention this is based off the Ketty Jay series, so you might have to do some research, or you can come up with your own numbers.

Harvesting

So the first cost breakdown to consider is how much it costs to harvest the raw materials you need to make the good.

Labor

You give a weeks wage, so I would look at productivity for week, as opposed to an hour, which is how we do it now. This will be one of the easier cost breakdowns. You will have to figure out how many people are working in a week, how much they make, and how much of the raw good is harvested.
for example: 10 workers a week at 45 pence a worker harvests 450 gallons of airate (something I made up to make aerium) then you're looking at a labor cost of 1 pence a gallon. These are numbers I made up, no clue if they are what you want.

Tools

This includes all machinery, any tools, and and other transportation or whatever that is used on site. You need tools I assume, so you need to take into account tool degradation or depreciation. How you will do this will be as such.
I have 10 shovels, 10 pick axes, and 10 buckets, but also have a conveyor belt and a massive tank to store all of it until shipping.
The shovels, pick axes, and buckets cost 150 pence, and will last you 3 years, r 150 weeks, so it costs you a pence a week in degradation.
You will have to do this for each item in the harvesting process.

Administrative Costs/Overhead

As much as we hate to admit it, this is something you will have to take into account. Administrative costs will look like, managerial pay, secretary costs, accounting costs, or whatever it is you want to include.
Overhead will look like electricity, water, rent, gas, steam, and any other costs you have associated with the site required to harvest the raw materials.

Transportation

Getting the raw goods to where they are processed is something you have to have. Next you have costs to transportation, this is going to look fairly similar to harvesting, so we'll breeze through this.

Labor

Transporting uses labor, whether its a driver or a guy pushing a cart. Take that into account.

Materials

You have a horse, or a cart, or a motorcycle, whatever it is moving your goods, it will degrade. Use the basic outline for degradation again on this.

Overhead

Feed, gas, whatever it is, you have it as a cost, take that into account.

Processing

You have your goods where you want them, YAY! Now you have to take into account how much it will cost to turn your raw materials into the finished product, this is going to look exactly like the last 2 steps.

Labor

You get it.

Tools

We get it.

Overhead/Administrative Costs

Everyone gets it.

Add-ins

Plot twist! You may outsource the harvesting of your good to some other company, so say you need airate AND magnesium to produce your good, but don't want to go through the headache and danger of magnesium harvesting, you might have to buy the magnesium from someone else, you have to figure out how much that will cost.


What you can charge

So, you should have a decent idea of what it costs you to make your product by now, so you have to take into consideration what the buyer of your good is willing to pay, i recommend an up charge of no less than 15%, but if your buyer has room for more cream, go with that. Example, it costs you 10 pence per liter of aerium, but you know your buyer can pay 20, meet halfway, that way you both feel like you got a good deal. But, if it costs you 10, and your buyer is willing to pay 13, go to 12, get that %15. The reason for this is because when your buyer is going through hard times, if you keep it at their max, they'll want to drop it, meaning you either lose their volume of orders, or lose money on each order, or you can give them wiggle room, to let them spend less, and avoid needing help in the future. What you need to figure out is a lot more than "now, I make $400 a week, and a plane ticket is 300 so if a person makes 3 shillings and 9 pence, then an air ship ticket is 34 pence" What drives costs, especially in something like air travel, is the cost to manufacture, operate, and maintain functions. I understand this is going to get a little advanced, but it'll be the same basic principles.

Their labor

An air transportation system has a lot of moving parts, pilot, maintenance, clerks, luggage handlers, flight attendants, you have to figure their costs per flight (labor for domestic flights on a weekly basis will be fairly similar.)

Their overhead

They have a lot of overhead, you are a part of that, being their ongoing cost of fuel. Figure out everything other than you. Electricity, rent, administrative costs, etc.

Their equipment

Luggage belts, cars, everything they own excluding the actual airships and all their moving parts. These are all infrastructure of theirs that degrade, figure that out.

Their maintenance

I am putting this in it's own category, because engine parts wear out. You will have to determine whether you want the airships to cost more and have a longer lifespan, or cost less, but be rotating more often. After this, you have to see how much it costs them per airship on a cost/lifespan ratio like we did for buckets in harvesting.

Their revenue.

This is when you have to figure out how much they charge per ticket, depending on factors like time of day, departure demand and arrival demand, and distance; how often people travel, the occupancy of each airship. Then you take how much revenue they make a flight, cut off %10 (what they will want for savings and stuff), divide that by how much they have in expenses per flight (take the fixed costs of the week, and divide it by how many flights are in a week). Then, you should have a price that is at least 15 more than what your fuel costs, and that's when you determine what you can charge.


Summary

This was a lot of information, i'm sorry, but here is the tl;dr version.
You have costs: labor, equipment, overhead, transportation, processing. Determine that, add 15%, never charge less than that.
They have costs: labor, equipment, maintenance, overhead, etc. They have revenue: tickets and whatever other streams of revenue you determine they have ( giftshops, skymall, food, etc.) Look at it like an equation. Revenue - 10% = expenses + x. Leave 'x' as a variable, so you can figure out what their max price they can pay for your good. Then come to some number between those two numbers that both of you would feel comfortable paying.

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  • $\begingroup$ Could you clarify who 'you', 'we' and 'they' are? $\endgroup$ – Megalonychidae Feb 8 '17 at 21:25
  • $\begingroup$ I assume that @Sharkn8do is using discussion-style prose. In this case then: you - either the out-of-universe writer (@Megalonychidae) or the in-universe hypothetical maker, we - the post writer (@Sharkn8do) and the post reader (@Megalonychidae), they - the in-universe buyer. $\endgroup$ – cyuut Feb 9 '17 at 8:49
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    $\begingroup$ @Megalonychidae when I said you get it, we get it, everyone gets it, it was more to illustrate that it was the same strategy as every other step. You is you, you have a lot of decisions to make. They is either the employees in that sector of your company in instances like "You will have to figure out how many people are working in a week, how much they make, and how much of the raw good is harvested. " or the airship company you are selling to like in "Their maintenance" $\endgroup$ – Sharkn8do Feb 9 '17 at 17:16
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Setting prices for fictional items in a fictional setting basically has to follow one of three paths.

1. hand-wave Pick a price you like and roll forward from there. Easiest, but least accurate if you're trying to make it feel realistic.

2. Economics of supply and demand Try to work out how expensive it is to make (resource costs for time, people, risk of injury or loss, refining/manufacturing/gathering/mining etc.). Then decide how much there is to sell (quantities, many suppliers competing vs. monopoly). Then decide what your demand is relative to that supply. As supply goes up, price goes down. All else being equal, as price goes down, demand goes up. The actual price will hit some equilibrium point above the cost to bring to market where demand and supply meet.

3. Find real-world item and adapt it This is probably the best path as far as getting a realistic price. Find an item from Victorian England that is roughly as difficult/easy to bring to market and roughly as important to the market, and use that as your price point. Coal or tea or some high quality alcohol might be good stand-in products to get your pricing for.

Remember too that prices aren't universal for most things. If it's expensive here it might be cheaper or even more expensive there, especially if it is more difficult to find. For example it might be fairly cheap to get import goods at a port city. But even finding those goods in a landlocked village might be hard. Or you might have to special-order them -- and pay a premium to get them shipped.

Do you want your characters to spend time and energy worried about getting these goods? Or is this just a background function of life? In most settings, paying the rent and affording food are things characters rarely focus much attention on. But if they suddenly have needs for a rare gem found only in the Amazon jungles, it becomes a quest. So is buying your materials a function of survival, that most characters can safely ignore? Or is this something they need to pay close attention to, budget for, and therefore must pay attention to how they use up their resources?

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    $\begingroup$ Adapting a real-world item seems the best way to go. If in this world airships have been around for a while, you could assume that an industry in airships and air transport has been established. In this case, there would be competition between airship builders, suppliers of fuel, manufacturers of parts, etc. I think it's safe to say that prices would be affordable for most, in which case imagine the price of a modern airline or cruise ship. Expensive, but if you save up you can do it. $\endgroup$ – Aric Feb 8 '17 at 17:47
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    $\begingroup$ You might also look to naval ships of the era. Hm. Though they didn't require fuel, just provisions. Perhaps coal-era ships and then adjust for inflation? $\endgroup$ – CaM Feb 8 '17 at 17:49
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    $\begingroup$ @CM_Dayton: Coal-powered ships were common during most of the Victorian Era - 1837-1901. For prices, one might look at hydrogen/helium prices and diesel prices during the Zeppelin era (which was just a few years after Victoria) as rough economic equivalents. $\endgroup$ – jamesqf Feb 9 '17 at 0:43

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