Two Wharton undergrad honors students, Evan Schneyer and Justin Nash, saw a presentation I gave on the economics of virtual worlds, and decided to study Final Fantasy XI:Online. FFXI is a tough world to study, coz the data is not out in the open like some other worlds: all auctions take place in game-hosted auction houses. So, for anyone who wants to try to do this, here is the process you have to follow:
1) Build an eleborate screen-capture-OCRing system to gather the data.
2) Collect a mass of data about the prices that objects sell for in the world, making sure you account for the different auction houses, nations, and the like.
3) Create a series of meaningful charts to understand what was going on.
Of course you don't have to do this, because they've done it and written up a report on the economics of the world, which I'm hosting here.
Some highlights of the report:
1) It's trivially easy, once you collect this data, to arbitrage prices across nations. Various places have wildly different prices for the same object, and transfer between places is a one-click process.
2) There is a pricing differential in exactly the same object depending on the time of day. This corresponds with the times that Japanese and North American users log on.
3) Certain objects are susceptible to supply shock, where an individual can easily corner the market in economically significant assets (à la the Hunt Boys and silver).
4) There's much more. Read the paper...
I don't know if Square-Enix are aware of these sorts of economic problems with their world, but they surely should be. Eventually every developer is going to have to have a better idea of what is going on in the economics of their worlds, otherwise smart young guys like Evan and Justin will start taking them for all their worth, without having to use sploits or dupes to do it. For any game developers out there who are starting to realize that they need to deal with the economics of their worlds, I happen to know that Justin and Evan are looking for jobs. Graduates with majors in Finance and Computing don't come along every day, especially ones who know gaming, and can do economic modeling of MMOGs. I'd suggest you send them an email. They do really really good work, as you can see for yourself.
Looking forward to reading this - but I did scan the technical methods page: impressive work. Hats off.
Posted by: Nathan Combs | May 12, 2004 at 11:54
Wow! Very impressive work.
Posted by: Cory Ondrejka | May 12, 2004 at 18:00
>>I don't know if Square-Enix are aware of these sorts of economic problems with their world, but they surely should be. Eventually every developer is going to have to have a better idea of what is going on in the economics of their worlds, otherwise smart young guys like Evan and Justin will start taking them for all their worth, without having to use sploits or dupes to do it
>>
IMO, this is not an economic problem though. And the game developers loose nothing at all when people do this. In fact this is very much the way real world markets work every day. How many people make a living simply by being merchants, brokers and taking advantage of arbitrage opportunities? The truth is, these people are what make market economies work - as more and more people learn to take advantage of these opportunities in the game, the margins get slimmer and slimmer and the markets get more effecient and mature.
Look at it this way, moving equipment to different locations or selling it at different times of the day is a SERVICE that helps other people obtain these items. Japanese players don't want to try to log in during US prime time, and players in high level areas don't want to travel across the world just to buy something because the opportunity cost is too great. They are willing to pay a premium for other people to do this service for them.
Posted by: Riley | May 12, 2004 at 22:54
This report is very interesting (also due to the fact that I'm playing FFXI :)) - but the data is still very fresh (only 2 months old). I remember the price fluctuation of platinum ore - one of the most expensive ores used in crafting. First (about 4-5 months ago) the price was about 30k. Then people started to flood the market with it - as it was one of the most profitable sources of income. The price dropped to as low as 15k. Now the price is about 30k again. But it took almost 5 months.
I think (as we saw earlier in SWG economy post) that GMs tend to manipulate the market to balance it (eg. - they buy out some stuff for much higher prices (bid price was 15k - they buy it for 30k - price history shows that all items were sold for 30k, next seller sells it for 30k).
Anyway - great report and methodology. Looking forward to seeing more updates soon. :)
Posted by: Tomasz Wozniak | May 13, 2004 at 09:52
Tomasz,
Then it would appear that GMs are the de facto central bankers, no?
People shouldn't have to build "an eleborate screen-capture-OCRing system to gather the data"
Good work, gonna have to read it,
Frank
Posted by: magicback | May 13, 2004 at 21:58
Most excellent to see!
I've had vague thoughts of throwing together a packet sniffer to capture an analyze SWGs prices (a bit easier than an OCR, but less legal I suspect).
I concur with the "This is a feature, not a bug" market. Primarily because I used arbitrage across time (buying during the cheap prime hours, auto-selling in the wee hours) to build my initial nest egg in SWG.
While tools like this should be available to the developers, I do not think they should come for free to players. Information is power, and it should be up to the players to gather the information.
- Brask Mumei
Posted by: Brask Mumei | May 21, 2004 at 09:25