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Dealing with in-game inflation May 7, 2008

Posted by jeremyliew in business models, economics, game design, game mechanics, games, games 2.0, gaming, mmorpg, virtual goods.

Siqi Chen, CEO of Serious Business (publisher of the Friends for Sale game), pointed me to an excellent white paper on the money supply impacts on an online economy recently.

It notes that in most games, players control the rate at which new cash is introduced into the economy. To avoid hyper-inflation, it recommends four steps:

Consumables are important in creating new Cash – If large amounts of new cash can be created without consumables, then there is no economic brake on cash creation.

Players set the prices of Consumable – This is the other side of the coin, since only player set prices can legitimately respond to changes in the money supply. Attempting to do this programmatically in such a diverse economy as a typical MMO is to invite failure. National governments have not been able to do this.

Fixed drains need to be in place – This provides a mechanism to remove a Crafter who is economically irrational from the business game, as well as to provide equilibrium in prices and money supply. Thus a regular fixed cash fee for doing business is required, and set by the game.

Variable Drains via percentage commission of the sale need to be in place – This provides a damper that mitigates wild swings in the money supply. Fictionally Sales commissions provide this damper. The percentage is set by the game, on Facility Type basis.

People building social games should read the whole thing.


1. Out to Pasture » Blog Archive » Links 5-6-08 - May 7, 2008

[…] Lightspeed points to a white paper on in-game inflation […]

2. Mike Gowen - May 7, 2008
3. David - May 14, 2008

The same as with real world inflation applies. Virtual currency hyper inflation is caused by too much money being created. In the real world this is done by credit boubles (often encouraged by the gov) or just a corrupt covernment printing money. In MMOs this is caused by unbalanced updates, introducing too powerful items/skills, or simply exploits, creating currency. As long as exploits and unbalanced updates are non-existant, there will always be some natural drain of money thatnks to players leaving the game and so on.

The MMORPG business is amazing, and it will grow too. The sky is the limit.

4. More on designing in-game economies « Lightspeed Venture Partners Blog - May 15, 2008

[…] today about designing games with gold farmers in mind. I recently noted some of the challenges of dealing with in game inflation when designing games. This panel deals with some other game design challenges when you have a virtual economy: On the […]

5. Inside Social Games » Controlling Inflation in Social MMOs - September 15, 2008

[…] about tackling in-game inflation and has also published a white paper on the subject (originally found by Siqi Chen via Jeremy Liew). He states that most MMOs tend towards hyper-inflation because they […]

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