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Virtual worlds, real economics September 11, 2007

Posted by jeremyliew in economics, gaming, mmorpg, virtual worlds.

A couple of weeks ago I wrote about how virtual worlds can generate very real emotions. Alex Tabarrok’s blog Marginal Revolution, notes a post from EVE’s (the space based MMORPG) economist that shows that virtual worlds can also generate real economic phenomena. In particular:

EVE consists of more than 5000 solar systems in 64 regions. The solar systems are connected in a complex web allowing for goods to be moved from one end in the Universe to another. Pilots have to be careful because in low sec and zero-zero security zones there is always the danger of being attacked by gangs of pirates looking for easy prey….

EVE is so large it is difficult for anyone to grasp what is going on in all the regions at any given time. Yet the markets seem to be very efficient at distributing information resulting in symmetric prices throughout Empire space (and even further). This is clearly visible in figure 11 which shows the price for zydrine [one of the more valuable minerals that is used for manufacturing in game] in three different Empire regions.


As one of the comments notes:

The main way to analyze a video game economy is in terms of the one truly scarce resource: player time and effort. In Eve, in order for a player to perform arbitrage, he has to physically move the good from one place to another – thus players will only do so if the profits are worth the time spent moving the goods around. Zydrine is a relatively dense good, in terms of value per volume; a small ship can haul thousands of units of zydrine, so a 200 isk/unit price difference between regions can be exploited for millions of isk in one trip. Another mineral, Tritanium, is only worth on the order of 3-4 isk per unit; its price can be a lot more volatile, especially in uncivilized regions where a large cargo ship can be attacked and destroyed.

Does anyone know of other studies done on the virtual economies in other MMOGs, casual online worlds, or social networks with virtual goods?


1. Daniel Markham - September 11, 2007

Along the lines of valuation on online experience, here’s a recent MSM article: http://www.msnbc.msn.com/id/20642550/

If I understand the theory correctly, it seems that folks in each community need the social networking to enable the necessary arbitrage. In other words, the social interaction gives you the necessary information to make the trades. (Much like what happens at Country Clubs) This is probably happening on IRC, in-game chat, etc.

2. nickperrett - September 12, 2007

In addition to Nick Yee, there’s a couple of interesting places to look:

1. Castranova has various studies on Everquest

2. Sony’s Station Exchange has a white paper

3. Indiana Uni researches virtual worlds

4. James Hursthouse is putting together the IDGA persitent world white paper which might have some data

5. Terranova has links to studies here and there

6. Metaverse Roadmap

3. cavalierrusticano - September 12, 2007

Well, real people participate in the virtual world? I’d be surprised if they behave differently. Isn’t paper money kinda ‘virtual’ to some degree? But, very cool observation in deed. I am sure real money(like convertible to gold) can be made in these ‘virtual’ worlds simply because real people reside there.

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