When we were designing Path of Exile ( http://www.pathofexile.com ) we had an explicit design goal to create a complex barter economy. To that end we decided to remove gold (quite strange for an Online RPG).
We added what we call internally "currency items" which are homogeneous items that have an inherent use. For example, an item that rerolls the magic properties on another item. There are 22 of these types of items of increasing rarity.
Because they all have an inherent use, there is demand for almost all of them. Because there are so many, few people have a true understanding of what the current exchange rates are.
The rest of the items in the game are randomly generated, and are hard to pin down accurate prices on, especially with so many competing currencies. Experts can take advantage of the uninformed to trade up in value and frequently do.
You might ask why do we want to have an economy like that?
There is a large class of players for whom trading becomes a kind of end game. If your economy is complicated and interesting there is room for a huge range of skill levels, room for true expertise in the economy. The feeling of making a trade in which you gained advantage over another player is addictive and really fun.
Wait - so by creating the currency item as something that gets used, as opposed to stones of jordans, are you trying to do an end run around inflation?
Also - loved the beta weekend.
(niggle - mage power charges were hard to understand and a terrible ability to rush. Which I did. When it worked it was fun)
Edit: Will you now have treasure goblins? Also, how has your take on the RMAH changed now that its starting to open up and feel its way around?
My notes below (disclaimer- never took econ, took very few stats classes):
- Barter still exists even though players are more sophisticated. Author expected to find one item becoming defacto currency, but that does not happen.
- Because barter exists, you can express the price of items relative to other items in the game, ie 1 lazer gun = 2 hats. It is theoretically possible to start with 2 hats and end up with 6 through multiple trades of items.
- Author then extrapolates a model for an economy like TF2 that has 35k items and 600M relative prices.
- TF2 is not in equilibrium, meaning lots of opportunity for arbitrage. Arbitrage opportunities are greatest when new items and sales are introduced.
- Assuming this "dis-equilibrium", author adjusts the model by accounting for frequency of trades, ie 1 lazer gun = 2 hats but may only be traded a few times, but lets say a new item, earmuffs, are added to the game and conversion rate is 3 earmuffs = 2 hats. This might be traded many times by players due to its introduction and inherent value to them.
- You can graph the value of these items over time to see if they can be arbitraged.
- My knowledge of statistics is rather weak, but it looks like if you compute the error rate, ie square root of the differences between normal model and adjusted model, you can monitor with real time data when arbitrage opportunities arise.
Grand summary: Gaming companies produce a ton of real time transaction data, and with this data it is possible to monitor economy dynamics in new ways that economists have previously been unable to do. If players had access to this data they can arbitrage more effectively, but more importantly for game designers it might be worthwhile to be knowledgeable about these effects so they can keep players engaged in the long term.
It surprises me that more experiments run on game data don't seem to hit the mainstream. Perhaps I am looking in the wrong places, but I've seen only a few research reports based on ingame data and those are hard to scrounge up themselves.
Video games are one of the great crucibles where everyone is born equal by default - and yet we have massive variance in wealth distribution by the end of it. You always have a select few who end up with enough power and own all the wealth.
I think it would be even more interesting to examine trade strategies in a game like Eve online. There's a giant simplification that occurs in games like World of Warcraft and now Team Fortress 2, where the only cost of arbitrage is the cost of finding out where opportunities exist. There are still interesting things to examine in games where transactions are instantaneous and safe, like how much risk people are willing to float by holding stock in intermediate goods, but the really interesting thing to me is examining communities where moving items around has real costs associated.
I would expect that the TF2 economy tends towards an equilibrium that is as simple as Yanis describes. This is probably not true in a game such as Eve. If one item is cheap to produce in on sector of space, and expensive in another, the equilibrium will reflect this fact: "arbitrage" opportunities will exist, and be stable, and be known by another name, "trade routes". There are real costs in transporting goods in Eve, for example the time cost of having a human pilot navigate a freighter, and the risk of being attacked by pirates.
In Eve you can have perfect information on the price and volume of transactions that occur, the movement of goods, the sovereignty of territory in which there are markets, the corporate affiliations of the people who operate firms and trade routes, and the wars and conflicts that arise between individuals and sovereign states. That sounds like an amazing playground for someone who is interested in liberal international relations, free trade and pacification, and any number of things that go beyond pure economics.
The EVE economy is much more complex than the TF2 and WoW economies, of course, but I think the simpler cases are especially instructive precisely because they don't possess many complicating elements that would make economic analysis difficult. Here all Yanis V. has to look at is the relative trade data of a mere 4 commodities; he probably wouldn't be able to go into so much depth if he were analysing EVE, simply because of the many additional confounding factors.
A simple economy can be more easily used to put predictions of basic economic theory to the test, as opposed to a complex one. So while I'd agree EVE offers even more interesting scenarios (and I say this as a big admirer of EVE), I'd say this analysis of a simpler model may be more instructive and clean-cut for economists.
EVE Online actually has a very well-working economy. Regardless of whether such an approach would work be optimal in real life, it very closely resembles what a free-market economy is supposed to look like.
The news item you linked to isn't a problem of someone misunderstanding economic principles, but of a simple mistake and the resulting bug - there shouldn't have been an additional reward for surviving cargo.
Yeah, no argument there, the EVE economy feels a lot more solid than other videogame economies.
But I don't think the surviving cargo thing was a required factor for the LP loop, it only sped up their initial gains. When they figured out how to manipulate the game's idea of prices upward, they basically were able to exploit infinite arbitrage that resulted from the bits of hardwired game logic that made up part of the market without being subject to/responding to market forces.
At this stage of the economist and gaming intersection, economists are still generally being pulled from the outside of the gaming industry. Finding exploits is not something that they've really had to think about in the way a gamer has.
I wouldn't blame him for it. Besides, all systems can (and will) be bent, broken, or subverted. Perfect identification of bugs is pretty much impossible. You can get a lot of obvious ones, and assume that the rest are above the ability/will threshold of the playerbase.
These posts are fascinating. In college I minor'd in econ, and I always had this feeling that economics grossly simplifies things, so it's fascinating seeing how economic principles play out in a world where there is such control over all the factors.
I really wish Blizzard offered up the same sort of analysis of WoW and eventually Diablo. WoW must be a treasure trove of data for an economist and Blizzard has had to work very hard to control things like inflation.
Well seeing as the data can be mined straight through their APIs, (most of the data), its not really that hard to at least get started.
IIRC there was a website, the _____ goblin or so, which monitored every commodity on the auction house of each shard/battlegroup.
Heck, the Poster above saying that the wow economy is simpler than EVE may not be accounting for things like cross server arbitrage, which bring the complexity levels a bit higher.
That there is a this kind of economy in TF2 is amazing to me. TF2 is the last great game I've ever played, but it's old in terms of video game lifespan and I feel that it's kind of a niche among shooters; you always hear of people playing Call of Duty/Halo...I can't think of a single friend or acquaintance who has ever mentioned TF2 in passing.
It's such a great, nuanced game that I thought it would attract the kind of players who would frown upon ingame purchases...and the fact that it's free also made me assume that most players would be the non-paying type. Glad to see that Valve's dedication to the game has some payoff to them.
Saying TF2 is old in terms of lifespan is a joke, particularly when comparing it another well-known Valve title, Counter-Strike, which has been continuously played and updated since about 1999-2000. It doesn't matter how old it is, it's still attracting players and making money for Valve. And it's still fun to play.
If anything, TF2 is more fun to play NOW then it was back when it was first released. New weapons are very balanced and new maps are well-designed. Even the cosmetic items (which don't add value to the game) are beautiful.
Don't know if you're agreeing with me or misreading me. TF2 is five years old. There have been (at least) 2 full games in between Halo 3 and 4 in the same time span and probably five in the Call of Duty series. So TF2 is exceptionally long in the tooth for a money-making shooter. Which is great.
Counterstrike is also another anomaly...but is it a game that Valve is putting in real resources to update? Maybe I should've said, TF2 is a relatively old for a first-person shooter that is still being actively supported.
Hell, they're letting their in-house economist study it. That's pretty good support in itself.
But the TF2 of 2012 is nowhere near the game that TF2 2006 was. Valve has poured a ton of time and money into continual development of the game and content.
We added what we call internally "currency items" which are homogeneous items that have an inherent use. For example, an item that rerolls the magic properties on another item. There are 22 of these types of items of increasing rarity.
Because they all have an inherent use, there is demand for almost all of them. Because there are so many, few people have a true understanding of what the current exchange rates are.
The rest of the items in the game are randomly generated, and are hard to pin down accurate prices on, especially with so many competing currencies. Experts can take advantage of the uninformed to trade up in value and frequently do.
You might ask why do we want to have an economy like that?
There is a large class of players for whom trading becomes a kind of end game. If your economy is complicated and interesting there is room for a huge range of skill levels, room for true expertise in the economy. The feeling of making a trade in which you gained advantage over another player is addictive and really fun.