MMO-ECON :: Economics, Statistics, and Rationality of MMOs

Income and Expenditure

Tuesday, July 8th, 2008

Like any real-life economy, one can track the flow of wealth throughout the in-game economy. However, the way that wealth flows is remarkably different than in real-life economies. Unlike the largely circular flow of goods, services, and payments characteristic of real-life economies, in-game exchange more often takes on a linear flow.

To get a grasp on this type of linear economic activity, let’s chart out the two endpoints: system input and system exit.

System Input

• Gathering Professions – Players scour the landscape for mineral nodes, valuable herbs and other such items. These are the primary resources used by other players for crafting new items. (more…)

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What questions might MMO-ECON pursue?

Wednesday, May 21st, 2008

In my first post , I listed a few general topics that MMO-ECON will address, but these were rather broad. In this post, I want to outline some of the questions that I plan to address. This post will be somewhat of a living document, updating whenever a new topic comes up that I might want to pursue later. More important, posting comments on this article will prove to be very helpful to me as I brainstorm the ideas I want to commit full posts to later. So, please post your ideas for future topics!

Determine the exchange rate between in-game currency and real life currency. There are direct conversions of real to virtual money through gold selling websites. The exchange rate might fluctuate based on in-game and real life factors such as changing income levels of characters (for instance, when a patch makes earning gold more easy), changing work conditions of gold-farmers (such as recent crack-downs on internet cafes and gold farming enterprises in China), as well as population changes from growing or shrinking player bases. Additionally, I want to complete cross-section and time-series analyses of currency trends across different servers and even across different MMOs.

Analyze Organizational structures. Guilds are the corporations of MMOs, organizing the economic behavior of tens and hundreds of players. Roboticus’ guild (pictured above), for example, currently has 215 characters. What makes guilds work? How are decisions made? Who sets the mission and strategic plans?

Estimate the GDP of different games economies. Previous analyses have looked at the size of game economies by deducing the currency exchange rate of real life (RL) currency to virtual currency, and then extrapolating that value to the total quantity of gold within a given virtual markets. There are additional paths I would like to pursue, such as determining the value one puts on their time spent in the game (by regressing income levels with time played to determine marginal costs of playing). An estimate of the time-value of gameplay might help to assign values to object achieved in the game, based on how much time it takes to acquire the item.

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What is MMO-ECON?

Tuesday, May 13th, 2008

MMO-ECON is the geek study of economics, statistics, and rationality found in massively multiplayer online (MMO) games. MMO-ECON will address some of the traditional questions asked by economists on macro and microeconomics, consumer rationality, and decision making by looking at player behavior within virtual gaming worlds.

MMOs create persistent realities in which gamers operate following economic rules and incentives similar to those we find in real life (IRL). Unlike real life, however, every aspect of the virtual world is controlled by a game designer or designers, and therefore can be changed at will. This combination of real players with real motives operating in a virtual and malleable world offers a remarkably useful environment to test some of the traditional questions that economists ask.

The possibility of using a virtual world as an economic petri-dish assumes a basic level of congruence between online and offline rationality. This topic will be foundational to MMO-ECON. But, given even a marginal level of similarity (and I suspect it is more than marginal), we can move on to broader questions and analyses.

MMO-ECON will present two tracts. The first will be a series of blog entries presented here that will report on the day to day issues of testing economic theories within MMOs. Additionally, the blog will write about general issues within MMO economies with an eye to making them more understandable to a complete outsider. Whenever something interesting is found within this first tract, it will be added to the second tract of static articles. Hopefully, these articles will present a coherent and structured take on MMO economics.

In short, MMO-ECON will focus on:

• Economics of MMOs
• Rationality and decision making of gamers
• Statistics and econometrics within MMOs
• Data collection and analysis
• Deeper questions of “value” within games, and what it is that motivates people to behave in certain ways within virtual worlds

One additional quirk of MMO-ECON is the dual audience for which it writes. On the one hand, there are gaming enthusiasts who may not be familiar with economic jargon, and on the other, traditional economists might not even know the meaning of the word newbie. Thus, throughout MMO-ECON, I will use jargon from both sides, but always include a hover-over definition of any questionable term (denoted by italics and dark red text).

Being the first post, this will be somewhat of a living document as I change it to reflect the current purpose of MMO-ECON. Please feel free to add your comments and thoughts as I work to define this site.

Tags: Introduction
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