This is a detailed breakdown of how the trading system works in the game.

The entire economy works on supply and demand with this formula:

item value = 0.75 ^ (future supply - desired supply)

where future supply is current supply + 1 if you’re offering the item, or future supply - 1 if you’re asking for the item.

When evaluating a trade, a trader considers their total inventory gains and losses for the transaction, and then applies the formula one by one to each item. If you try to give a trader many copies of the same item, each one will be less valuable than the last. And if you try to buy many copies of the same item, each one will be more valuable than the last.

Each trader has different desired supplies. There are 6 finished goods and 6 raw materials. Each trader automatically produces 2 raw materials, and can convert two other raw materials into finished goods. Traders have a desired supply of 1 for the finished goods they can produce, and a desired supply of 1 for the materials needed for those finished goods. Any finished goods they can’t produce themselves have a desired supply of 3.

For example, Lizbeth can produce mangoes and thread, and she can convert metal into jewelry and chilies into spices. Her desired supplies are thus:

furniture: 3
clothing: 3
literature: 3
wine: 3
metal: 1
chilies: 1
jewelry: 1
spices: 1
mangoes: 0
thread: 0
lumber: 0
paper: 0

It would be a good idea to take her mangoes, which she doesn’t want very much, and bring them to Samara, who values them more highly. After waiting a day, Samara will have converted the mangoes into wine, and will likely have a high supply, which she’ll be offering for trade pretty cheaply. So you can take some of that wine and bring it back to Lizbeth for a profit.

Traders naturally consume the finished goods you trade them over time, so that their demand stays high.

This chart shows the production capabilities of each island:

For example, from the chart you can see that Timber Town produces lumber, which you should take to Presston to be manufactured into furniture.

A trader’s desired supply of sex is based on your relationship with them. For every 2 successful transactions, the desired supply for sex increases by 1. Sex “inventory” resets to zero every day.