To market, to market

At the moment on the MUD-Dev discussion list there is a discussion on economic models of VWs. One of the contributors, a MMOG player and investment banker named Daniel Harman said "Personally I'd love games to setup markets that took a few lessons from the real world markets, and facilitated more complex trading strategies. Its would add an interesting axis of entertainment to the game. The first things to add would be player leasing of ships/vehicles (required for goods transport), insurance markets, contracts (should be limited so that humans are not required to arbitrate), multiple exchanges with limited memberships (creates arb opportunities), commodities markets (with seasonal variations etc)."

Obviously this is a complex undertaking, for the reasons that Nate Combs and you all articulate. But let us put aside the issue of difficulty for a minute and ask if it would be a good idea to allow user access to in-world financial markets? Obviously it's not a good idea if your economic system is profoundly, irredeemably broken (as most of the VWs are) because you just open up even greater opportunities for sploits: "Hey, I've discovered how you can leverage that gold dupe through margin buying on the EQ gold spot price...." But there do seem to me to be some obviously interesting ramifications of this idea:

1. Game devs will quickly discover if their economic system has problems. To give you an example, some students and I are building a database of virtual assets in a few games. Once you see the charts for various asset classes you start to realize that they are subject to stale-price market timing, time-sensitive market arbitrage opportunities, and supply shock buying opportunities. (More on this another day, once we've extracted all the money we can from the system--and Mia Consalvo and her conception of "not-cheating in games" can kiss my rosy red bank account)

Devs can use the market to discover how to fix their economic/fiscal model. As a result they would spend less time pullling every single lever of economic control and be like real world central banks who reset the economy with a very parsimonious set of controls (typically a small number of monetary and fiscal policy controls like interest rates and currency purchase)

2. Devs would provide a whole new set of fun things to do for people like Julian Dibbell, who don't really want to play the "game". They want to play the "meta-game" of the economy.

3. Devs can accommodate cat-assers like Julian D without offending RPGers like Ted Castronova. The typical reason why the role players hate the ebayers is that the ebayers kill the play-acting. Well, if you provide the market and economic mechanisms within the game, then the market-game becomes part of the roleplay-game, and no-one loses (assuming the markets are not primarily in assets that are the subject of the current ebaying concerns).

An issue with this was given by Mike Sellers (a game dev at Online Alchemy) on the MUD-Dev list: "I'm not sure I'd want to unleash the full force of things like factoring or shorting in markets, as these can become quickly bewildering. " But I don't think this is a problem. I happen to know very little (and care even less) about derivative markets in the real world, but since I choose not to invest or follow these markets I don't have to care if they're bewildering. I get on with the stuff I care about--like hanging around MMOGs--and leave the Black/Scholes Option Pricing formula to the kinds of people who care about such things.

4. The final reason for this is, of course, the dev gets to run the market and keep the commission on the trades, thereby creating a new income stream.

Am I missing something here? Is it actually a bad idea?

Comments

[Tessa Lowe]

1.

As a professional software developer working in the energy trading industry I've been waiting for a real workable market to emerge within a mmorpg for some time. I envisage exchanges/markets in various in-game locations, where players can deposit their goods or money and set an ask or bid price. When prices are matched the goods are exchanged automatically. If it's difficult to move between exchanges then immediately there are opportunities for merchants, traders, bodyguards etc and the people who supply the goods that these players require. I really see no disadvantages at all.

[Edward Castronova]

2.

Dan> Well, if you provide the market and economic mechanisms within the game, then the market-game becomes part of the roleplay-game, and no-one loses

Yes! That's the answer I'm looking for.

But to play devil's advocate: many of these instruments arise for utilitarian reasons. Calls and puts and son are there to manage time delays in investment. Margins and insurance are there for risk management and venture-level investment. Up to now, VWs don't show much need for things like that. Permadeath, I think, would rapidly create the need for insurance, however. I could see a play system in which you neede massive resources on a future date certain but not now, which might encourage a futures market. I certainly like the idea that markets allow you to do more than just set up sell orders - why you can't automate the 'buy' function I don't know. All of these will probably appear in future MMOs. But - only when they add to the fun. I'm not sure they add to the fun very much right now, except for folks whose day job is investment banking and they love it. But they are all playing EVE Online, I understand.

[Brask Mumei]

3.

I'd like to see a futures market in Star Wars Galaxies, for example. One can often predict massive demands on resources triggered by patches, etc, and stockpile against that. But it would be nice to be able to leverage my funds with less micromanagement.

Tessa Lowe:
"When prices are matched the goods are exchanged automatically. If it's difficult to move between exchanges then immediately there are opportunities for merchants, traders, bodyguards etc and the people who supply the goods that these players require. I really see no disadvantages at all."

This brings up an interesting sub-point. What makes VW trading *interesting* is arbitrage, no? The profit from these must be sufficiently high to attract the investores. The smoother you make transactions, the lower potential arbitrage profits will be, and the more the markets will be dominated by a few rich mega-corps with the capital to be able to survive on 1% margins.

This auto-transact system sound beneficial. But, in Star Wars Galaxies, when I was engaged in trading, the last thing I wanted was a more efficient market! Well, I wanted an easier way to find sales for *myself*, but I realized if everyone had access to that, the very opportunities I was exploiting would go away.

Thus, if having differential regional prices adds a fun meta game, why doesn't differential temporal prices? (My trading was usually done by buying up primetime goods and reselling them in the wee hours when people had little choice)

"Hey, I've discovered how you can leverage that gold dupe through margin buying on the EQ gold spot price.."

How would this be a sploit? I would presume the margin buying, etc, isn't driven by some broken AI, but other players. Thus, no currency can ever be generated by trading on your market. (Just as trading on NYSE doesn't cause bills to be printed, hopefully value is being generated :>) Since the margin prices are determined by player behaviour, and not a stochastic process, the would be duper exploiter is likely to second guess themselves into bankruptcy.

- Brask Mumei

[magicback]

4.

Bad Idea, unless the VW setting is modern world or sci-fi.

Bad Idea, unless you know what you are designing. Better hire a few 6-figure quant. analysts to design some cool trading programs.

Bad Idea, as power gamers will own the VW and leaving regular players with only twinkies.

There are hundreds of reasons why I think this is a bad idea. And this comes from someone from the Financial sector.

The key design question: are you adding the feature because you think it's cool or are you adding the feature because there is a clear logic, reason and need for it in the game setting?

Frank

[Nathan Combs]

5.

I like the idea.

I would share Frank's worry about introducing another Pareto opportunity for power gamers.

There might also be a need for a regulatory and contracting mechanism - especially if relying upon information and exchanges not completely enforceable by software and escrows.

-nathan

[Tek]

6.

This idea has been on my wishlist for a while. It seems that, among major MMORPGs that I've investigated, the progress made in the area has been slow. So any momentum we can give it would help.

Are there any VW's that focus solely on economic gameplay? You'd be led to think there would be a market for a game of this type, due to the glut of "tycoon" games out there. I think it would be best to achieve a successful economic VW before trying to implement one inside a standard world; it's a lot to chew off. Once the intricacies of virtual economic worlds have been documented, adding that aspect to the base world should be manageable, especially if the achievement and economic facets get along.

[DivineShadow]

7.

I'm arriving to a strange conclusion here: There is a market for "massively multiplayer financial economic simulator". Some people here seem to want to play it. ...

Do you guys ever think of just killing dragons?
Somehow the stench of the dragon lair and the bloodstains from my fallen guildmate don't mesh too well with the futures market.

[magicback]

8.

Well, there are lots of RL financial market competitions using real financial instruments and virtual (as in in-game) cash.

I am sure there is an educational and entertainment market for an online streamlined version of this.

But, we'll have to leave home the dragons and godzillas. Can't have GMs rampaging the game world with uberbosses.

My character is a wizard, a financial wizard :)

Cheers,

Frank

[Brask Mumei]

9.

"Are there any VW's that focus solely on economic gameplay? "

This, I would think, would be impossible to achieve. For there to be economic gameplay, there must be the economics behind it: goods, demand, etc. If this is not being driven by users, it is being driven by computers. As soon as you have your computer generated stock simulation, the players will decry Black Friday as a bug and ensure the programmers keep everything growing upwards.

The beauty of the current VWs is that you can play an economic game in a *real* economy. I can sell aluminimum at price X not because the game designer set its price at X, but because someone wants to buy it at X. This, by definition, elimminates the faucet/sink model of the economic mini-game.

From my experience of SWG, I could claim that SWG focusses entirely on economic style gameplay. I haven't actively gone seeking after dragons since shortly after release. My in-game title is "Businessman". (I was quite surprised to discover that SWG actually had a skill tree for my behaviour patterns :>)

What could improve on this? Of course more graphs, more complicated software enforced contracts (I'd love to be able to loan money for an easy payment plan...), ability to set up bank accounts for corporate entities (it's a fair bit of accounting I have to do as all sales go to my own account, yet need to be tracked back to the relevant vendor for paying the proper agent), etc.

Have to run now... Have a board meeting of the Bio-Engineered Pets company to attend...

- Brask Mumei

[Tek]

10.

Well, I'd say there is evidence that it's possible. The current line of single-player economic games do a fair enough job at simulating a background of NPC consumers. The stock market would be controlled by the performance of the corporations, which are run by PCs. There's a game called Capitalism (as well as it's sequel) that does these things pretty well. It would give a good framework for a VW economic game, I believe.

SWG does have the best economic gameplay yet in my experience with MMOG's. However, it is still shy of what I and others want, and any further steps in this direction will be taken slowly by the developers, since stabilizing the current versions should come first. No point in adding more cars to a train that won't go.

[Raph Koster]

11.

I'd add that it's not exactly what the name "Star Wars" inspires in people's minds. So we're more likely to focus on making combat and adventure cool first. It's ironic that we had more success with the economic stuff than the core of the license, in a lot of ways.

That said, SWG's economy is such that it probably wouldn't be hard to do. in fact, I'd venture to say that players could run these secondary markets themselves right now given the current tools...?

[Cory Ondrejka]

12.

Dan> Well, if you provide the market and economic mechanisms within the game, then the market-game becomes part of the roleplay-game, and no-one loses

Ted> Yes! That's the answer I'm looking for.

In Second Life, the Gaming Open Market folks have been buying up land and installing ATMs. Using the built in scripting language, they allow you to make L$ deposits into your GOM account. With the next SL release, the scirpting lanugage will (again) support bidirectional data exchange between the real-world and SL. Obviously, this would allow GOM (or IGE or whoever) to create banks SL that allow both deposits and withdrawals. It would also enable more sophisticated financial instruments to be run by players and/or external entities. This would echo the various external projects that users have already created using the out-bound data path, such as mapping and raffles.

So the question seems to become whether it is advantageous for the world operator to make their market more complicated or to allow players to meet the demands as they arise? The traditional Linden answer to this is, of course, to provide features to allow the users to create it.

[Edward Castronova]

13.

Tek> Are there any VW's that focus solely on economic gameplay?

Like I said, EVE Online seems really geared toward buying and selling. People who were looking for a combat MMOG said it was boring - but it's less about frying aliens in deepspace than mining and arbitraging using spreadsheets! I'd check it out if I were you. Report back, though!

[Nathan Combs]

14.

Ed wrote:

"EVE Online seems really geared toward buying and selling."

This is true - coming from an Eve player. Especially if one focuses on niches in corporation management (most decent size corps have a corp buyer/seller specialization) and/or trader roles (whether lone-wolf or corp sponsored).

But therein lies my 'rub' with: "VW's that focus solely (<= my emphasis) on economic gameplay" ...

IMO a good quality of a VW, over say, some sort of online multiplayer double auction tournament, is that a VW should be able to support many niches... So, for e.g., Eve has mining activities (resource harvesting - analogs to "camping" in fantasy mmogs), a (weak) quest system, a strong (many flavors) pvp dimension, and lots of opps to buy and sell things.

An economic (sub-)game tied into a larger, richer world system is to me more plausibly a VW.

To pun that old slur on service economies ("we can't all be sitting around giving each other hair-cuts"): we can't all be sitting around trading chits that have no bearing on some measure of a world.

-nathan

[Richard Bartle]

15.

Nathan Combs>we can't all be sitting around trading chits that have no bearing on some measure of a world.

And yet many people are happy to do a similar thing for combat. In DAOC, for example, Realm versus Realm combat is ultimately futile, but people still seem happy to do it.

There's no long term future in taking in one another's washing, but if the action of taking in washing is fun then people may be prepared to do it for quite a while. That applies to trading as well as to combat.

That said, I wouldn't recommend it as a design strategy.

Richard

[Greg]

16.

One of the most compelling "MMGs" I've played was a play-by-mail game called 1480. Trade was a huge part of the game, and Venice one of the major powers. While you got a certain amount of tax revenue by opressing your peasants, making real bucks, needed to field a substantial army, required trade.

In short, if you want to go this way, I think you need to build the game around the economics, rather than tacking economics onto a hack-n-slash fest.

[Ren]

17.

Greg> In short, if you want to go this way, I think you need to build the game around the economics, rather than tacking economics onto a hack-n-slash fest.

But is not economics simply the study of the way that value changes (is generated, exchanged, destroyed) – my point being that there has to be something that is valued for an economy to operate on. We don’t value coins because they are coins but because they are neutral tokens of types of underlying value: time, resources scarcity etc; so ultimately we will always be thrown back to understanding how to get people to value virtual things, or to put it another way how they create meaning, hence things like time or skill based levelling, resource accumulation etc. OK, the economic mechanism that this will fit into could be put into the design process, but surely it always has to be an add on – the mill not the grist.

Ren