3D Internet - Economics

Economics

Many MMORPGs feature living economies. Virtual items and currency have to be gained through play and have definite value for players. Such a virtual economy can be analyzed (using data logged by the game) and has value in economic research; more significantly, these "virtual" economies can have an impact on the economies of the real world.

One of the early researchers of MMORPGs was Edward Castronova, who demonstrated that a supply-and-demand market exists for virtual items and that it crosses over with the real world. This crossover has some requirements of the game:

• The ability for players to sell an item to each other for in-game (virtual) currency.
• Bartering for items between players for items of similar value.
• The purchase of in-game items for real-world currency.
• Exchanges of real-world currencies for virtual currencies.
• The invention of user-created meta-currencies such as Dragon kill points to distribute in-game rewards.

The idea of attaching real-world value to "virtual" items has had a profound effect on players and the game industry, and even the courts. The Virtual currency selling pioneer IGE received a lawsuit from a World of Warcraft player for interfering in the economics and intended use of the game by selling wow gold. Castronova's first study in 2002 found that a highly liquid (if illegal) currency market existed, with the value of Everquest's in-game currency exceeding that of the Japanese yen. Some people even make a living by working these virtual economies; these people are often referred to as gold farmers, and may be employed in game sweatshops.

Game publishers usually prohibit the exchange of real-world money for virtual goods, but others actively promote the idea of linking (and directly profiting from) an exchange. In Second Life and Entropia Universe, the virtual economy and the real-world economy are directly linked. This means that real money can be deposited for game money and vice versa. Real-world items have also been sold for game money in Entropia, and some players of Second Life have generated revenues in excess of $100,000.

Some of the issues confronting online economies include:

• The use of "bots" or automated programs, that assist some players in accumulating in-game wealth to the disadvantage of other players.
• The use of unsanctioned auction sites, which has led publishers to seek legal remedies to prevent their use based on intellectual-property claims.
• The emergence of virtual crime, which can take the form of both fraud against the player or publisher of an online game, and even real-life acts of violence stemming from in-game transactions.

Linking real-world and virtual economies is rare in MMORPGs, as it is generally believed to be detrimental to gameplay. If real-world wealth can be used to obtain greater, more immediate rewards than skillful gameplay, the incentive for strategic roleplay and real game involvement is diminished. It could also easily lead to a skewed hierarchy where richer players gain better items, allowing them to take on stronger opponents and level up more quickly than less wealthy but more committed players.