Changes in Economic Conditions in Online Games

I confess I’m not as hip as my on-line persona might lead you to believe. So I probably am not fully appreciate the following message sent to me by Walker White which I edited very slightly:

The game Eve Online has a major virtual economy, and many of the players form corporations to handle space exploration, mining, and manufacturing. So, in August, they hired a economics professor to be their “Alan Greenspan”. He measures CPI and markets in the game, so that the game designers can institute virtual monetary policy. The PDF above is the latest quarterly report where he tries to address the debate about whether or not inflation exists in Eve Online.

How do you handle monetary policy in a game? In Eve, there is no loan system (though they are thinking about inserting one), so monetary policy consists of making minerals scare or more plentiful, or changing the powers of in-game objects, thus changing how players value them. For example, this PDF has a graph showing how changing the range of cruise missiles in the game affected their prices.

(Note from cactus… I believe this is the graph to which he alludes.)

Dr. Gumundsson gave an interesting talk at GDC last week, where he outlined some of the differences between virtual world goods and regular goods (e.g. homogeneous quality, lack of depreciation from use) and how this affected his design of the GUP (gross user product). I hope that he will eventually post these slides online.

I’ve heard about various economic issues associated with some of the on-line games. I wonder how useful they’ll turn out to be as sources of economic experiments.

Updates…

1. BTW, the pictures in the linked PDF file are gorgeous.
2. Walker adds in comments:

I have heard from sources in the industry that their is evidence of money laundering through World of Warcraft. Use real world assests to by in-game assets, exchange assets using the in-game economy, and then cash out.

Clearly the world is getting more complicated.