On incremental capitalisation

In some 18xx games, the money (capital) available to companies is received as players purchase each share. I.e. when the players buy the shares, the money is placed in the company instead of being paid to the bank. This is called incremental capitalisation. Usually, companies may start operations with only a few shares sold, instead of the 60% required by 1825, 1830, et al.

This seems quite natural. It does reflect, to a certain extent, the way shares work in the real world. I’m happy to play these games. On the other hand, I do think this mechanism has some disadvantages.

Incremental capitalisation certainly encourages a player-as-entrepreneur flavour rather than a player-as-investor approach, because each player is strongly encouraged to invest in their own company in order to give it more capital and therefore improve the performance of their existing shares. (This is accentuated, of course, if they are not allowed to sell the president’s certificate).

In game terms, one disadvantage is that it establishes a direct feedback between how well a player is doing and how well his or her company is doing. With full capitalisation, the company starts with all its capital available and so how well the company performs is independent of any further investment. With either approach, if the company does poorly, the return to the player will be lower, but with incremental capitalisation the reverse is also true. This can leave players stuck in a losing position.

Another disadvantage is that if a company is popular, it will do better as a result of more of its shares being bought. This can introduce a “kingmaker” element to the game, where a player in last place can directly affect the performance of the leading players. It can even lead to collusion between players, e.g. if two players agree to buy each others’ shares in preference to those of other opponents.

In most of these games, when a company pays dividends, the company itself receives income from any unsold shares. This gives a stream of income to the company. Depending on the exact flow of the game, it can remove a key element of the full capitalisation approach, namely deciding when to withhold dividends. This element is one I want to preserve in my game, because it can significantly influence decisions of when to drop an investment in a given company.

So, other things being equal, I will prefer not to adopt incremental capitalisation for Britain Under Steam. Even if I do end up going with this approach, I would still avoid paying dividends to unsold shares.