Virtual Economies in MMORPGs

The world of electronic games has come a long way since the days of Pong and Pac Man, farther, in fact, than was once thought possible. Nowadays, thanks to the internet, gamers can log onto vast, interactive worlds and play alongside others using assumed identities or “avatars.” These games, commonly referred to as Massively Multiplayer Online Roleplaying Games (or by the cumbersome acronym MMORPGs), feature many aspects of real life that make their otherwise fantastical elements more believeable, and therefore more enjoyable, to the players.

Because of their intentional similarities to the real world, however, many people have noted the appearance of certain characteristics in MMORPGs that the designers never intended. In a way, these virtual worlds have expanded as a result of their human players, taking on unforseen properties and uses. Among these, perhaps the most widespread and fascinating is the advent of virtual economies.

The virtual economy of any MMORPG seems to spring up from certain characteristics already built in to the game. For example, many MMORPGs have a common currency of some kind, as well as personal property in the form of items and equipment that have intrinsic game value. More recent games have begun to feature complex commerce mediations, including trading systems, auction houses, and even player-run shops. Virtual items and currency change hands regularly in any active MMORPG, leading to entire virtual economies.

As one might expect, such economies are generally bereft with the same problems of the normal economy. Certain game events might cause temporary slumps or recessions, while others might create prosperity or high market demand for certain items. Any regular player can readily tell you what’s valuable at market and what isn’t, as well as the fact that time and effort are usually required to make a profit even in virtual space. Of course, most MMORPG economies suffer from terrible inflation as a result of cheating. “Duping,” a popular term used in many MMORPGs, refers to the process of hacking the game in order to illegitimately copy currency or items. Because of this inevitability, a few players can easily destabilize the workings of an entire MMORPG economy in a matter of weeks.

More curiosly still is a more recent breakthrough in MMORPG economics. In the past few years, larger MMORPGs have burst the constraints of purely virtual commerce by having players auction items, avatars, and even entire accounts on internet sites such as EBay. Quite naturally, exchanges of this sort occur using real-world currency, leading many people to wonder whether these economic systems can really be regarded as separate or virtual. Some newer MMORPGs (see Sources below for one example) already have real-world currency systems integrated into the game.

One study of the MMORPG Everquest calculated that the platinum piece, the prevailing unit of virtual currency in Everquest, had an exchange rate of approximately one U.S. penny, making it a “stronger” form of currency than the Japanese yen or the Italian lira. Furthermore, the study calculated that, by this exchange rate, the average Everquest avatar earned $3.42 per hour, making the game’s per capita Gross National Product higher than India’s or China’s. Given this information, it is difficult to say conclusively whether the Everquest economy can be considered virtual or not.

One final item of note is that, while these economies have a tendency toward instability because of the possibility for player abuse, no government exists within these games to enforce regulations for business or trade. All players start the game essentially equal, and so some economists speculate that financial equality can mitigate or eliminate the need for economic intervention.

Obviously, the reality of MMORPG economies is a fascinating microcosm in which to study theories about real-world economies. However, with the profound effects they can offline, can they really be thought of as “virtual” in any sense?

Sources

“Fantasy Economics,” by Robert Shapiro

Project Entropia

“Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier,” by Edward Castronova

The paragraph about the value of the Everquest Platinum piece being equal to one US cent has an incorect conclusion. The problem is that you are equating all in-game money to the small percentage of it that is Ebayed. Realize that the supply of the game currency that is for sale is a miniscule percentage of all the currency in the game, which enables the sellers to sell it for a premium. If all of the game currency was for sale at the same time, the price of it would be almost nothing, and it wouldn’t actually be worth the effort to sell it. The idea that the average palyer makes $3.42 per hour is only true if you stipulate that the percentage of game currency that is for sale outside the game remains the same.

Also realize that the price charged is directly realted to the monthly game fee. If people were paying $100 per month to play, they would be willing to pay more for the game currency on Ebay, and if they were selling it they would expect to make more on it. Entropia Universe is no different. Although you can pay the game for free, the things you can do there are extremely limited and slow to progress if you opt not to pay into the game. I’m not saying you can’t play for free and make some money if you really work at it, but it is very difficult to do so. The people successfully doing this are few and far between. The majority of the players pay into the game because it’s too hard to get anywhere otherwise.

Thank you for your comments, John. To be honest, I fully expect many of my ascertions in this post to be incorrect by now. I wrote it back in college several years ago for a media studies class. I’m certain that a lot of things have changed since then, not the least of which being the ascendancy of World of Warcraft and the appearance of specialty trading sites like IGE.

I do, however, agree with you that few if any players actually profit from the game. Most actually pay to play and never see a dime from the sale of online currency or items, myself included. And it makes perfect sense that, if everyone tried to make a real-world profit, the overwhelming supply would render virtual resources almost worthless.

I still stand by my ascertion, however, that there is plenty of overlap between virtual and real-world economies to warrant consideration. Especially when it comes to games like Second Life, which are built to accommodate such exchanges, it’s worth questioning whether the currency can actually be considered virtual. After all, when we can tack a real-world value on something, can we really call it play money?