Wednesday, July 9, 2008

The evil of virtual inflation

Online games are widely popular, especially MMORPGs (Massively multiplayer online role-playing games) like World of Warcraft, Everquest, Dungeons & Dragons, and Second Life. All of them simulate a virtual world with player interaction, as well as interactions with robots. In most such games, there are markets: players can buy objects, trade with each other, or participate in auctions.

One problem that can arise in such virtual environment is inflation: as players accumulate money, the amount of money in circulation may constantly increase, unless the "government" finds ways to reclaim some of that money. For example, some goods are required for continued play, and their price is preset and may fluctuate. Gaming companies hires economists to handle this (example) and prevent rampant inflation.

There are people studying the Economics withing these games (example). At Indiana University, there is even a research group dedicated to this. A new avenue for experimental economics?


T-Bone said...

Sure, why not study it? You might even get some useful insight for the real world. Some games really depend on the economy to make the game. It's very easy to get the formula wrong and have it ruin the gameplay.

Eve Online actually hired an economist.

He has a dev blog where he puts up graphs on all types of things, comments on what is going on in the game and what the trends are, and why they are, as well as predicting what will happen. Often, small game tweaks result in a significant change in people's behavior.

I've played a few games that have an in-game economy. It seems adjustments have always needed to be made as things eventually become "broken" from a lack of foresight. For example, items that everyone needs to use once or only while they are low level will be expensive at first, and then worthless later. Some games like Eve depend on the economy because the game revolves around a constant war of attrition and replenishment.

Vilfredo said...

I have heard of someone at the University of Iowa writing a dissertation on the Economics in on-line gaming. I was not able to trace this now, though.

Andrea T said...

I agree there are things economists should learn from virtual games, though I'm not sure they have yet. The WSJ discussed inflation in an Eve Online world, and I'm surprised they did not see the evidence from online experiments: fiscal (not monetary policy) controls inflation (see