Deflation in WoW?

I want to piggyback on Ted's recent post on inflation but go in the opposite direction.

We all repeat the mantra that inflation in MUDs/MMOs is inevitable - both the RMT and the in-game economy. And if you've played SWG, you'll remember the run-away inflation there.

But here's the weird thing. I'm not seeing this in WoW. Prices for most goods and services seem to have fallen over the past few months rather than risen. Some examples on my server (medium PvE):

• Reagent: Large Radiant Shards - used to be 8-10g, now about 4-6g
• Crafted Weapon: Phantom Blade - used to be 50-60g, now about 25-30g
• Enchantment: Fiery Enchant - used to be 45-50g, now about 30-35g

And this is in the face of what everyone seems to think is massive influx of RMT into WoW servers - given all the fuss over gold farmers. But even if that were not the case, shouldn't we see inflation from an aging server anyways as more and more people hit 60? Stability is one thing, but deflation just seems strange.

So my questions are:

• If you play WoW, are you noticing deflation on your server?
• If there is deflation in WoW (rather than the typical inflation), what is so different about WoW's economy that's causing this to happen?
• Has Blizzard actually figured out how to prevent inflation?

Comments

[hikaru]

1.

simply, prices are dropping because there is less demand.

over time, less people are playing the game.
of those still playing, the need for items which can be purchased with money decrease.
unlike in the flesh world, you reach a point where the next level of durable goods are bind on pickup, and the consumables, such as those shards, you no longer need, as you've already reached 300.

think, an X amount of linen cloth is being created for Y number of players. Z is linen cloth consumption, for skill-ups and for the demand for linen goods. after some time, Y decreases as players leave the game, but X will continue to increase. the decrease of Z is inevitable.

[Nick Yee]

2.

Hikaru - several problems with that analysis:

1) It's not clear at all that players are leaving WoW at a rate faster than any other MMO. Also, players leaving hasn't stopped inflation in SWG.

2) The skill-up limit you describe in fact would create inflation because now people have more money in their pockets. The increase in money supply is precisely why inflation occurs in MMOs in general.

[Chris]

3.

What you are seeing has likely nothing to do with inflation or deflation per say.

What is more likely is that as individuals reach level 60, the time and energy they need to expend getting certain items is decreasing, thus in the short term they are passing on those savings to their customers.

In the long run WOW is injection far too much gold into the system for the economy to remain stable.

[Nick Yee]

4.

Chris - that would imply that the WoW market is operating under good-will rather than greed and self-interest. I find that a little hard to swallow ...

Also, by passing on those savings, those low and mid level characters now have more money to spend. That increase in spending power should lead to inflation.

[Galrahn]

5.

This is bigger than WoW.

I have often wondered why some economies in MMO games tend to have inflation over time, while others seem to have deflation. It is very hard to compare games because of different economies, but why does SWG have inflation while WoW has deflation.

Lineage 2 has deflation too, so it got me wondering, is it because gold or adena in WoW or L2, depending upon the game respectively, retains its value than credits in SWG?

I don't know.

[babylona]

6.

My personal guess is that it's a combination effect of the auction houses - a freakishly nigh-perfect neo-classical economic device, as far as I know of unseen to this extent before now - with more high-level players having reached level 60 and now furthering crafting, especially since WoW crafting (very much unlike SWG crafting) is extremely simple and relatively accessible.

This may also be compounded by the level 35 (!!!) requirement to reach the highest level of crafting. This would force highly crafting-oriented players to significantly level multiple toons in order to produce a variety of high-level goods.

Also, while there is probably not a "goodness of the heart" aspect at work, what may well be true is that people leaving the game, becoming wealthier and replacing old goods, and/or finding new goods at better prices are offering those goods on the AH at lower prices, driving down the cost in general.

[Chris]

7.

Greed & Self Interest: You will want to sell what you have rather than hold it as inventory. The person next to you will want to do the same thing.

Micro-Economics: In a perfectly competitive environment with undifferentiated goods (which is exactly what WOW is); goods will be priced at the cost of the lowest cost provider. Cost here is the price to acquire for a LVL 60 character with the best equipment. If your cost is higher than the equilibrium price, you are simply priced out of the market and will not acquire those goods.

So, what your seeing is micro economic activities of a perfectly competitive business environment.

[Nick Yee]

8.

Chris - But those are general economic principles that operate across (presumably) all games. What's special with WoW (and L2)?

[babylona]

9.

Nick - they're not necessarily economic principles that operate across all games. That's why I was mentioning the neo-classical model.

In the neo-classical framework (dear lord, I hope I'm not mixing up my terms, which I may be, and if I am, please correct me - I may here be thinking of the classical model in actuality), the expectation is that [Nash] equilibria will be attained, but the huge caveat is that all economic agents are expected to have equal and complete knowledge of the current pricing of available goods. The models I'm talking about never exist in the real world, thus, neither do true equilibria exist.

WoW's auction houses provide for this model to exist, at least to a greater extent than is usually possible. Complete or nearly-complete agent access to pricing information changes the formulae quite a bit, and also reduces both localized activity and localized economic phenomena.

[Nick Yee]

10.

babylona - Thanks for the elaboration. But here's the part that intrigues me. Wouldn't it mean that the actual money supply is increasing dramatically (since everyone is saving money due to the competition) and having no effect on inflation? Or is that extra money actually going somewhere else and keeping the money supply stable?

[Some Guy]

11.

It might be related to an out-of-balance end game. People have completed the end-game tasks that require or are accelerated by auction house items. Thus, not only do they not buy those items, but they themselves farm and sell the items because they believe there will be a demand for them. The buyout price option also encourages undercutting other people's auctions, which will trend the average price lower if there is a relatively stable supply of the item.

[babylona]

12.

Well. There are a lot of possibilities to answer those questions. The first thing is that even wealthy folks rarely will want to pay more than the going rate. That said, many if not most AH auctions are "buy it now" auctions, meaning that the price set is the price you pay. So frequently the "auction" aspect of auction houses is minimized.

The second is that there are not a lot of high-level money sinks in WoW (yet?) Housing is frequently the biggest big-ticket high-level item, and that doesn't exist in WoW (nor, as far as I can tell, is it planned in the near future.) The money might not be being saved purposefully, but it might not have many places to go.

Third, players will frequently save in anticipation of future expansions or patches. The upcoming developments don't look all that money-sinky though.

Fourth, RMTs may be part of the force causing deflation, since that is a place for extra cash to go. If players have nothing very interesting to purchase with their cash, the temptation to sell it for real-world dollars will increase, especially as common knowledge of the possibility to do so grows (as it has.) RMTs and their effects on game economies I think are far less well-understood than most of the posters here seem to want to acknowledge, particularly as pertains to their potential for helping the general population as opposed to harming it (not that it is universally good; only that there may actually be some advantageous effects, and if there are, ain't nobody mentioning it on sites like these :)

Personally, I'd beg you to do another survey, on this subject specifically - all we see are pricing data and RMT values, we have absolutely NO information about player motivation for either in-game or extra-game trades & savings.

[Ricardo Chirino]

13.

Interesting.

I'm no economy expert, but this is a bit of my own experience with the in-game Auction House system:

I'm a Blacksmith/Miner Paladin, lvl 41. I ususally sell my leftover trade goods on Ironforge's AH, and sometimes I even sell them as means to get money to buy items or skills I need. Since I want to sell them fast I usually ask around for average prices or check the AH prices for the same goods I'm selling, and then I put them on auction for about 10% to 15% less than the other sellers... I've seen prices dropping steadily and my guess is that people want to buy things at most competitive prices. I've tried putting the goods at the same price range or even more (longer auction times too) and most of the time they don't sell. It's like an unsaid convention for pricing on said goods, perhaps people say others "I got the Gold Bars for less than that, you were ripped off!"

Don't know how much impact this would have in the economy on the long term but it might be a factor to consider, since like in real life, when I go to a store that sells the same good more expensive I don't buy it since I can get it at a lower price.

Hope to hear your opinions.

[Timothy Dang]

14.

Nick Yee> We all repeat the mantra that inflation in MUDs/MMOs is inevitable - both the RMT and the in-game economy.

I think we actually use "inflation" as shorthand for "inflation or deflation". I'm having trouble recalling, but as Galrahn mentions, there's also sometimes deflation. The "problem" is that the economy becomes "too rich", which can show itself on either the cash side or the stuff side.

I recall that shortly after I started playing Legends of Kesmai, a random player who I'd spoken to for maybe 30 seconds gave me some really nice armor. Only later did I find out that it was the uber-armor of the entire game, acquired through killing the biggest baddest dragon. Shortly thereafter I died and lost it.

Players like that had become so wealthy that it wasn't worthwhile for him to sell it. The warm fuzzies of handing it to a newbie were of greater value. as I understand conversation on this topic, that still falls under the broad heading of "inflation".

It may well be that WoW is balancing the stuff-inflation and the gold-inflation enough that it doesn't show up much in prices. Does it nonetheless happen that the increasing wealth breaks the game? I certainly experienced largess in WoW as well (starting out, at least two strangers gave me a gold piece, for instance).

[Eric Nickell]

15.

In WoW, there are 7 drains on the currency supply. (Bear with me. I'm new to analyzing MMOG economics.)

/1/ Postage costs.
/2/ Transportation costs.
/3/ Costs to train new skills.
/4/ Armor repair.
/5/ Purchase of items from NPC vendors.
/6/ Auction house fees.
/7/ Deletion of characters.

(Am I missing any way for WoW gold to disappear?)

We can also categorize the expenses based on whether they're one-for-all or recurring. Level 60 players who continue to play (especially PvE) continue to incur postage, transportation, and auction house costs, and if they may keep buying vials and thread to produce articles for sale. But once they have their mount and epic mount, they're unlikely to buy another.

So, as the population continues to have a higher fraction of 60s, we would need to compare the money coming into the economy via grinding or questing to the recurring costs incurred by the end-game players.

My guess is that the first two, while recurring, are negligible. Training costs are one-time. Armor repair is significant, but I would guess smaller than the grinding gold. There are big-ticket items you buy from vendors, but they're one-time expenses. The ongoing stuff is fairly cheap. And let's assume that the last is insignificant.

Hmm. That leaves /6/.

Since the AH is so central to the economy, I've been wondering whether the AH fee (5%? I think) is more significant in balancing the economy that previously thought.

[Rohan Verghese]

16.

I think it's a side-effect of WoW's soulbinding system increasing the supply of materials. Most of the really good items are bind-on-pickup, found in the instances. So most 60s are constantly going on Instance runs looking for specific pieces of equipment. During these instances, a lot of excess stuff like Shards is picked up. The player has no use for these items, so they are dumped on the open market.

As well, for crafted items, most people tend to charge material cost + small constant profit for items. (Heck, most enchanters will enchant for free if you provide materials.) So if the materials drop in price, the crafted price also drops.

If you really want to see if there is inflation, check out the bind-on-equip world drops. Things like Glowing Brightwood Staff and other weapons. Stuff that a 60 would buy to twink out an alt.

The supply of these is relatively constant, so they should be a better measure. Not a really good one, though, as bind-on-pickup stuff tends to be better. Another interesting item to check out would be Arcanite, as that item can only be made once a day or so.

[lewy]

17.

Rohan Verghese wrote:

"If you really want to see if there is inflation, check out the bind-on-equip world drops."

Agreed. A couple of months ago a friend of mine put a purple staff that dropped in Scholo or Strat up on the auction house for one thousand gold. To our amazement it sold almost immediately.

So far as the reagents listed goes my guess is that as the population of the server matures and moves into the higher level instances the supply of the stuff that drops in those instances is outpacing the demand. Another guild mate, one of those types who watches the auction house obsessively, claims that the lower level shards were actually costlier than the higher level ones for awhile. His guess was that the bulk of the server population had moved past the instances which provided the low level shards, so the market for those had tightened up even as the market for the higher levels ones crashed. Inflation is just a general trend, it doesn't have to apply universally to every commodity.

[James Grimmelmann]

18.

It's important to note that the "inflation" that Ted is talking about and the "inflation" that Nick is talking about are different things. Ted is concerned with the relative purchasing power of VW currencies against the dollar (or other real-world currency). Nick is concerned with the relative purchasing power of VW currencies against in-game items.

In Ted's terms, both VW currency and VW items are subject to inflation, since with time, it takes more of them to buy you a US$. In Nick's terms, some VWs see inflation in currency and deflation in items, since it takes more VW currency to buy a VW item. WoW is seeing the opposite--it takes less VW currency to buy an item.

"MUDflation" and "database inflation" are Ted-type inflation, and I've seen plenty of convincing arguments that they're more or less inevitable. Something I haven't seen is an attempt to create a value-weighted basket of VW commodities and to track its value against real-world currency, which would adjust measured MUDflation stats for the continual introduction of new kinds of items.

Nick's question has much more to do with the relative balance of "currency" and "items" and their sources and sinks within a VW. (Note that in some sense it's arbitrary whether we call a given set of bits "currency" or an "item;" currency is in a sense just an in-game asset that's especially freely interconvertible into other in-game assets.) Lots of comments above address the specific balance within WoW quite helpfully.

[babylona]

19.

James - could you clarify that? I'm a little bit perplexed as to the exact differentiation you're making (I'm not saying you're wrong, though I suspect I may disagree on some of what you're saying - I'm just not exactly certain what you're stating.) I'm particularly wondering what you mean by "basket of VW commodities."

[lewy]

20.

Mr. Grimmelmann and I are wondering the exact same thing. I posted a similar question in the Tedflation thread. Put simply it looks like the cost of 100 WoW gold in US dollars is declining and has been for some time. The question is what relation does this have to the items that WoW gold buys? Assume that the price for 100 gold has fallen from $10 USD to $9 USD. Is that really a sign of deflation if the price of weapon X has increased from 10,000 WoW gold to 20,000? What is the trend for inflation of in game items in terms of USD, not WoW gold?

Deflation of WoW gold in terms of USD is inevitable because every player acts like a mint--he or she can go out and "produce" more gold by killing orcs. More gold is added to the game databases, hence the term database inflation.

[Green Armadillo]

21.

It should be noted that the examples in the OP are all related to the in-game crafting system. I would argue that this system isn't showing a lack of inflation, it's just taking longer for prices to stabilize than one might expect. I think what we're actually seeing is the tail end of a "baby boom" of sorts.

When the game launched, there was a period of time where copper, the lowest quality ore, was unusually valuable, to the point where it was more efficient to mine copper in the newbie zones, sell it, and purchase tin or iron than it was to actually mine the tin or iron. This was because the bulk of the server's crafting population, regardless of what level (and what disposable income), needed to grind through their copper phase. I lack hard data to back this up, but my impression was that over time (as the bulk of the server's players advanced their crafting skill) the higher level minerals each in their turn went through a high demand period and then stabilized in price once most players had moved on. This creates an artificial sense that deflation has occurred when in fact the problem was that the supply chain had not yet matured sufficiently to meet demand.

Yes, people can switch and make a new character on a different server at any time. Sure there were people who lagged behind the pack and still need lower level materials (though I'd argue that their economic impact is limited, as the game's rest system for occasional players has the net result of making casual players have LESS money than regular players of the same exp level by doubling exp without an increase in loot). And yes, alts with a large grant from their rich level 60 uncle have a lot of money to spend. But I would argue that this dwarfs the effect of most of the average population of the server being same level (exp or crafting) at the same time. The rate at which lower level characters need money (and thus farm items/materials for sale) eclipses the rate at which level capped characters with ever increasing supplies of cash want lower level materials and equipment.

Thus, as other people have mentioned, the places to look for inflation are things like rare, saleable world drops and consumables that are of use to top level players. For instance, I'm seen a 150% increase over the last 2 months in the reliable going rate (i.e. the rate at which the item WILL definitely sell in the 2 hour minimum on the AH) of swiftness potions, a low level alchemy product that happens to be useful in PVP. There definitely IS inflation, it's just not affecting lower level items as much because there isn't DEMAND for those items.

(As an aside, players of the web game http://kingdomofloathing.com>Kingdom of Loathing might notice a similar trend - there are ridiculous amounts of in game currency in circulation, but the inflation doesn't reach low level items because lower level characters readily supply those items in far greater quantity than the rich would have an incentive to purchase.)

[babylona]

22.

Thank you, Lewy, that helped me understand better.

For one thing, those statements assume that the conditions of inflation and deflation are defined by conversion values to real-world currency. I'm not saying that's an erroneous definition; I'm saying that I don't know. I do think that to decry RMTs in one sentence and yet compute inflation & deflation by comparison to real-world currency is both self-defeating and a little bit absurd, but I suppose that is beside the point.

What is, I think, more the point is that none of us here ARE actually certain whether decreased prices for in-game items *constitutes* inflation or deflation, which is sort of remarkable. Real-world inflation - as I believe Mr. Grimmelman is saying - is always and invariably accompanied by an increase in price points, and *never* a decrease. By that definition we are certainly looking at deflation in Mr. Yee's post. Yet real-world deflation is also (presumably) accompanied by all market participants owning less currency or currency-convertible items - less wealth, especially less generalized wealth. Yet the assumption in a MMOG is that if prices go UP (traditional inflation), people have more money than otherwise (traditional DEflation.)

It's an interesting conundrum, furthered by the fact that the reverse can just as easily explain the phenomenon: people having less money driving prices down. I think what this points to is the fact that we actually haven't the slightest idea how liquid the average WoW player actually is, and that that fact could completely flip everything we're saying here on its head.

Would be interesting if we could get per capita income anonymous statistics from one of the developers. (ha.)

[babylona]

23.

(Amusingly, upon reread of my last comment, I just realized that the assumption is that players have more money REGARDLESS of whether prices are going up or down. If it's inflation, players are wealthier, if it's deflation, players are wealthier. Compare this post with Castanova's post referenced several times herein - all comments on both posts are trying to explain increased wealth. That's pretty remarkable in and of itself.)

[Nick Yee]

24.

babylona - well put ... and I'm also wondering if the money supply is actually shrinking per capita ...

[PJ]

25.

Ummm, I've not played SWG for a year or so, I left over the change to merchant, if there is ingame inflation on item prices NOW - thank that change, fewer outlets of goods - higher prices, and the ability to have a monopoly.

I ran a shop there for nearly 3 years, I never changed MY prices since day one and retired very VERY wealthy.

I'll take your word that on your server the items mentioned have actually gone down to a 'reasonable' cost - but that's only because there isn't really a demand for them, and you will be very lucky to GIVE them away. That's what I would expect to happen as supply and demand sorts itself out, until it normalizes.

On other items - that folks actually have a use for, potions, purple epics, etc - the price has gone thru the roof.

The Auction House is a decent system, but it has no competition. I often wonder what folks are smoking by the asking prices of items they set.

Now, if I had boatloads of gold from buying it - yeah, it really wouldn't make a difference. If I'm EARNING that cash ingame, heck no I'm not going to pay those prices, I do it myself - or do without.

SWG had private vendors. With enough private vendors as WELL as a central system you really can't have a monopoly.

The Auction House is packed day and night with people ready to scoop up a 'deal' and remarket at obscene rates. While this isn't necessarily a bad thing - toss in buying gold from outside the game and the natural breaks that would normally be put on this process are gone.

I won't list things at normal prices to have someone turn around and resell them, if I had a private vendor and it actually took some effort to go around LOOKING for good deals - yeah, that's ok - but not simply camping the auction house.

The Auction House can not only serve as a monopoly function, it also gives players a warped view of value. Just because someone lists something at a price doesn't necessarily mean it sold at all.

Gold Farmers in WoW also monopolize resource gathering - to the point that it's practically impossible to find some of the upper end resources no matter where you go - or what time, it's a 24/7 operation for them. Believe me - THOSE resources they can charge whatever they like for. The only exception is Thorium - because there is tons of that - that's not what they are after, they are after the rare gems, not the metal - which still fetch premium prices.

There is precious little left at lvl 60 a player really NEEDS, although the high-end game of WoW is noticeably absent coin - coin which is needed for everyday repairs. People are quitting over not only enough content at 60 - but the need to 'farm' gold just to be able to continue to DO the 60 content.

What is noticeably missing in all the mainstream big MMOs is a BUYERS market, reverse auctions where the BUYER sets a price and says - I want this and that - this is what I'm willing to pay.

[babylona]

26.

PS - I was, after all, correct in my terminology. See http://en.wikipedia.org/wiki/Neoclassical_economics for a more complete explanation of neoclassical economics theory.

27.

Errrr... Couldn't this have absolutely nothing to do with gold inflation, and everything to do with less demand for those items as more and more of them enter the world? Using those examples to say inflation is not happening is, er... Idiotic.

[babylona]

28.

Huge apologies for comment spam, but I'm frankly getting kind of excited about this. I think we're seeing something we don't have a name for yet, something discrete from inflation or deflation, and I think we're basically seeing a behavioral Markov state (that of increased player wealth), which, if I'm right about it, is just really really interesting. It would be an ergodic (in the highly traditional sense of the word) outcome within not only economic confines, and not only highly simplified economic confines, but economic confines reflecting several existing economic theories that in essence defy this outcome.

And it also kind of oughtn't exist.

I have a big long thing about it posted now, and it's already linked in trackback, not going to be so spammy as to link again, but I'm too excited not to post the theory :)

[Jonas P]

29.

Think of it in terms of inflation but not of currency, but in terms of items. Inflation typically occurs as a result of large amounts of currency being introduced into the system. When this happens in a system, the currency is then worth less and less. This is happening, but the money sinks are taking care of some and besides, thats not really the issue. The issue is that there are new players being made every day, each one fighting the same mobs, crafting the same stuff, all the way up the experience ladder and all of these items are being introduced into the system. The key is that every item in game is, in theory, unlimited. (rare drops are not limited, just rare, so technically, you could get lucky 500 times in a row and have 500 of one rare item) THAT is inflating the system because every duplicate item that is introduced into the system decreases the worth of that item. So, in this case, the items take the place of currency in the traditional inflation model.

When viewed this way, it makes sense for items to be selling for less and less, becuase they are worth less and less due to the fact that there are a ton of em. Just like the Russian ruble during post WWII. It was worth less and less the more rubles there were.

[jbz]

30.

One bit of information that's missing, as we all talk about population aging (level-wise) and the like: is this happening relatively evenly? Or is this change in conditions indexed tightly to the date-since-open of each individual server? Perhaps not linearly, since the oldest servers had 'game learning curve' to cope with. But since (as far as I know) you cannot transfer gold between servers without utilizing gold merchants (and how many people want to transfer badly enough to figure out how to be both sides of that transaction? honest question) the aging and changing of each server environment, compared to that server's age, would be revealing data.

Of course, it's quite possible someone posted that and I missed it entirely. It's late. :-P Gotta get back and get my 45 mage up to 52 so I can raid w/my guildies.

[Timothy Dang]

31.

babylona> (Amusingly, upon reread of my last comment, I just realized that the assumption is that players have more money REGARDLESS of whether prices are going up or down. If it's inflation, players are wealthier, if it's deflation, players are wealthier.

I don't think there's anything surprising about the possibility that players have more money and there's deflation (or that they have more money and there's inflation). Inflation happens when people really want to buy stuff and so push the prices up. Deflation happens when people don't so much want to buy stuff and so push the prices down.

In principle, either one can happen even though there's a lot of cash around. In general in RL we expect inflation to go along with economic growth to some degree, because people getting paid more are prone to want to buy stuff more, etc. However, there's not just the money side of things, there's the stuff side of things. If the economic growth means there's a lot more stuff to buy (say a whole lot of new computers), then the price may fall even as the wealth is increasing.

In MUDs it's clear that wealth increases over time. They're built that way because that's what it seems players want (see Dr. Cat's post in the http://terranova.blogs.com/terra_nova/2005/08/is_inflation_fu.html#comment-8886782>other thread). But there's two wrinkles. First, more wealth != more cash. Wealth is stuff and the stuff-value of cash. Some of this stuff value is fixed (via game-set prices), but some isn't (player-to-player trade), and so inflation does push down the wealth of players holding cash. Second, whether to expect inflation or deflation would have more to do with the proportion of stuff to cash. Lots of stuff, little cash -> deflation; little stuff, lots of cash -> inflation.

(It's even possible that you could get inflation or deflation for other reasons, but those are the biggest likely causes.)

Anyway, this might all miss the point you're trying to get at?

[Nick Yee]

32.

The problem with the "it's just a huge supply driving down prices" theory is that it happens in all MMOs. Most items in every MMO are in theory unlimited. There were also more and more of everything in SWG, but the prices there went up. What's different about WoW?

Besides, how does the currency retain its value if it too is also increasing (both from the normal inputs and from the savings from lowered prices)? Items lose value but somehow the expanding money supply can maintain its value?

[Timothy Dang]

33.

I'm trying to compare to the big games I'm most familiar with, and I can't offhand think of a particular thing that's different about WoW which would account for the difference. There's the auction house, but EQ has the bazaar (I assume EQ2 has something similar?). SWG has an auction system, but encourages other ways of trading so it's likely not comparable to WoW's auctions.

So, maybe the AH has something to do with it, as others have suggested. I've gotten the feeling that (outside of guilds, at least) the AH significantly dominates other forms of trade (no data, just an impression). But while I guess that's possible, I don't really buy it. I would not be surprised to see a particular market institution (such as the AH) affect how high prices are. I would be surprised to see the institution significantly affect whether or not there's inflation. In other words, I would expect a market institution prone to low prices to show inflation in those low prices about as much as a market institution prone to high prices would show inflation in those high prices. (whew! I hope that can be followed.)

WoW has more "soulbound" stuff than I recall seeing in other games. When I last played EQ (ages ago) NO DROP items were an anomoly, not the norm. However, you would expect that making things non-resellable would push the prices up, not down.

It could be that saving up for the big-ticket items of mounts might affect people's willingness to spend?

Inflation is a macroeconomic topic and I have a strong tendency to think in microeconomic terms. So, here's an argument you an draw on a supply-and-demand graph. It's kinda inappropriate because we're talking macro, but I think it contains some truth:

Draw your supply and demand curve. Remember economists are weird and draw price on the vertical axis and quantity on the horizontal axis; Demand slopes down, supply slopes up, where they cross is equilibrium. Now, if the amount of money increases, then players are willing to spend more to buy something, so the demand curve moves up/right. If at the same time, the amount of stuff is increasing, then players are willing to sell more stuff at the same price, so the supply curve moves down/right.

So the new equilibrium is to the right of the old one, more stuff is getting sold (both of these effects cause more stuff to get sold, in fact). The price could go up or down, it depends how the demand & supply curves are shaped, and how much they move.

So, my guess is that it's a balance issue (and that this balance will be different from game to game), that WoW has a net-stuff-feed that's (in some sense) great than its net-cash-feed, and so causes prices for stuff to fall.

Although, as others point out, could this be due to your focus on profession outputs? WoW has the common learning-by-doing approach to professions which means players want to make stuff for its own sake to skill up, and may be willing to sell for dirt cheap thereafter. It's possible that due to the muturity of your server, there are a lot of players in that range of their profession now?

Here's a question, do you think there are negative effects from the deflation? Has WoW acheived a good balance, or is the deflation going to cause harm just as inflation might (for instance, by making professions less worthwhile for newly starting players).

[bruce boston]

34.

It's pretty late to be jumping in here, but I wanted to make a few comments...

Timothy: "WoW has more "soulbound" stuff than I recall seeing in other games. When I last played EQ (ages ago) NO DROP items were an anomoly, not the norm. However, you would expect that making things non-resellable would push the prices up, not down."

In the design of the economy of There.com, I use an assumption that goes something like "increases in the secondary market value of an item increases its primary market value". But, I would guess the opposite to be just as true. Due to the fact that WoW has a high number of soulbound items, the secondary market value of most items is low. As such, I think there is an argument that would expect that increases in 'soulboundedness' could cause the values on the primary market to decrease.

I think there are also supply and demand issues going on in WoW. But, what economy doesn't have these.

Switching topics, I'd like to open an assumption for discussion. Is it safe to say that you can't have deflation without having inflation? What we label an economic shift as all depends on your perspective. In highly liquid MMORPG economies, which may or may not apply to WoW,
(a)stuff/services=(b)currency=(c)stuff/services. Most likely if someone is seeing increases in the availability of (a) or (c), someone else will see increases in the availability of (b). If someone sees increases in (a) without seeing the increases in (b), they may claim that the market is in a period of deflation, if they see increases in (b) and not the increases in (c) they will claim that the market is in a state of inflation.

So, second question, are prices a good measure of wealth, or economic health? If the price of green swords has gone up, and the ownership rate of green swords has gone up has real wealth thus increased or decreased? If the price of black armor has gone down, and the ownership rate of black armor has gone up has real wealth thus increased or decreased? If the consumption of linen has decreased but the price has decreased has real wealth gone up or down? I think there is a strange assumption that when prices move, real wealth decreases. But, increases in supply are often very good signs of an overall increase of real wealth. As are, oddly enough, increases in price, and/or increase in production.

This leads to three more questions, what's bad? And, is the game funner with less cheap-linen, more expensive-green swords and more cheap-black armor. If it is funner, for how long?

-bruce

[babylona]

35.

Timothy: Individual market institutions MORE often affect that kind of thing than otherwise, especially when the institution in question facilitates agent communication. There are entire fields of study that focus primarily on how and why and in what ways individual and differently-scaled and differently-modeled institutions affect economies in all ways.

Bruce: I think what you're saying there goes back to my original point, which is first that we basically don't know what we're talking about due to no data about player liquidity, and second that I personally believe we are seeing a phenomenon here that ought to be described seperately from inflation and deflation; a new phenomenon, in fact.

But what is true is that for whatever reason, the AH and/especially the player behavior centered therein is fairly peculiar to WoW, and that may be at least partly caused by other factors, including the soulbound items.

[Mark Wallace]

36.

As people have pointed out here, there's just not enough data available to allow anyone to say why any of these things occur. We know what conditions drive real-world inflation/deflation because there's a vast amount of related data that's produced every day by a large number of government agencies working in a fairly transparent economic system. MMOGs, by contrast, give no economic data at all. We don't even know if deflation actually is happening in WoW. I don't doubt that it is, but a few anecdotal examples aren't enough to really go on. Some kind of CPI generated from the basket of VW goods that James Grimmelmann mentions above would be a good start, but even that would leave us pretty much in the dark given a lack of population figures and money supply statistics.

As far as a Markov state is concerned, that seems to me to be a fancy way to dress up what anyone who follows markets already knows: that the past is never a predictor of future performance. If it were, no one would ever lose money on their investments.

That said, I agree that there's a bothersome lacuna in most economic analyses like these, which is only exacerbated by the environment we're dealing with here. That's the theory that economic agents always make the rational choice that will maximize their gain. This is fine as far as it goes, but the problem is that we tend to define "gain" too narrowly. Not everyone wants to ding as fast as possible. I was flying a mission in Eve the other night, lost my ship, and then had the guy I was flying with give me a better ship for free. He didn't do this because he thought he'd later profit from the deal. He did it because he wanted to have some fun pwning Gurista pirates. That, to him, was gain at that moment. To my eye, the traditional supply and demand curves have more limited application in environments like MMOGs, where a greater proportion of people define gain in other than purely economic terms of stuff / currency / level.

[galiel]

37.

Mark, I was with you all the way in your second paragraph, which I thought was insightful, until this last sentence:

To my eye, the traditional supply and demand curves have more limited application in environments like MMOGs, where a greater proportion of people define gain in other than purely economic terms of stuff / currency / level.

Is that really your perception? That non-economic activity is *greater* in an MMO than in a real life society?

I guess YMMV drastically, but in the world I live in, people do generous/spontaneous/foolish/friendly things all the time, without calculating the "rational-man" outcome. In fact, that is the default for the human interactions I participate in in society. It is abstract entities like "corporations" that act, most often, in utterly amoral ways.

If anything, current MMO commercial games tend to encourage, by measuring, designing for, and valuing, amoral decisions, while ignoring if not actively thwarting non-market transactions and interactions.

I would love to hear if you think differently, or if I just misunderstood your statement.

[Stephen Routledge]

38.

One thing I have noticed is that the introduction of Blackwing Lair has drained a massive amount of cash out of the top end of the economy. Last night I estimate our guild spent somewhere in the region of 1000 gold on repair costs (each player had total repair costs of 20-30g for the night depending on their class, this doesn't even include other stuff like reagents for spells and so on). This morning I helped several guild members grind for cash as they were getting to the point of being broke; one of them couldn't even afford the cost of a griffon flight. I'm sure this is having an impact on things.

[Timothy Dang]

39.

Bruce> In the design of the economy of There.com, I use an assumption that goes something like "increases in the secondary market value of an item increases its primary market value". But, I would guess the opposite to be just as true. Due to the fact that WoW has a high number of soulbound items, the secondary market value of most items is low. As such, I think there is an argument that would expect that increases in 'soulboundedness' could cause the values on the primary market to decrease.

You're right. I was thinking only of the supply side of things, that restricting resale would reduce the supply and increase prices. But reducing resale should also reduce demand (people pay a lot for houses assuming they can sell them later), and decrease prices. Then the question is, which effect dominates.

I don't really follow your "(a)stuff/services=(b)currency=(c)stuff/services" paragraph. Sorry, I'm trying to get used to ascii discussion; I'm most comfortable face-to-face with a handy whiteboard when talking about things like this. If we're reasonably strict (which I haven't previously been) in defining inflation as a decrease in the purchasing power of cash and deflation as an increase in the purchasing power of cash, then they can't both happen at once (although it is conceivable that different market baskets could show one or the other). But I may well be misunderstanding you.

Bruce> So, second question, are prices a good measure of wealth, or economic health?

MUDs are funny because IRL we mostly think that wealth and economic health are pretty much the same thing (with lots of caveats for wealth distribution, how that wealth is created, environmental impact, etc.). In MUDs, traditionally too much wealth has been considered at least as much of a problem as too little wealth (maybe more of a problem because it's easier for those running the game to increase wealth than it is for them to decrease it).

However, if just talking wealth, I would assume you want to look at the stuff more than the money. How much to concentrate on the stuff depends on how much stuff the world provides stuff (or services) at fixed prices. The more significant fixed-price NPC purchases are, the more real wealth in cash is.

babylona> There are entire fields of study that focus primarily on how and why and in what ways individual and differently-scaled and differently-modeled institutions affect economies in all ways.

Yep, I know about this. I'm not trying to discount the importance of institutions. For instance, I know that experimentally posted offer markets (such as we're used to in retail stores) often show higher-than competitive equilibrium prices while double auction markets (such as NYSE*) tend very strongly to show the competitive equilibrium price.

So, for instance, if you were to take SWG's market institutions and substitue them for WoW's, I wouldn't be at all surprised to see the price level rise.

That's static, however. I'm not familiar with (maybe you know of some) any research which shows that the market institution affects the rate of inflation. Just because the SWG-institution might have higher prices, I don't offhand see any reason to expect that the SWG-institution would result in faster rising prices. Thinking about it, I guess it wouldn't be too weird to find out that the institutions affected inflation, hmm.

Also, it's probably the ascii trouble for me again, but I don't think I understand what you're saying about what's new about game inflation/deflation.

* Of course, NYSE is a stock market. Experimentally, markets for things like stocks often seem to have bubbles. The double auction markets which show strong consistent convergence to equilibrium are for commodities, rather than instruments like stocks. But NYSE is a nice example of a double auction cuz most people know kinda how it works.

[Timothy Dang]

40.

OK, I hate to do it but I have to follow-up on myself now:
So, for instance, if you were to take SWG's market institutions and substitue them for WoW's, I wouldn't be at all surprised to see the price level rise...
Thinking about it, I guess it wouldn't be too weird to find out that the institutions affected inflation, hmm

So there's two empirical questions. We have hard data on the first from laboratory experiments: Given identical demand and supply conditions, some market institutions are better at achieving competitive equilibrium than others. We have no data that I'm aware of on the second (do market institutions affect inflation).

There are a number of economists who would be downright giddy to examine one or both of these questions systematically in a MMOPRG. In the first case, getting a different, deeper environment than the laboratory to study the same thing could reinforce that it's not an artefact of laboratory conditions. In the second case, laboratory experiments are not well suited to studying such macroeconomic questions.

This is kinda my spin on what Prof. Castronova said in http://terranova.blogs.com/terra_nova/2005/07/what_do_you_wan.html>an earlier thread. They're interesting questions for the real world and for game worlds, and there's people specifically trained in this kind of thing (raising hand) who would love to collaborate to figure it out.

[Brian 'Psychochild' Green]

41.

I find it interesting that most people are focusing on theory and generalizations. I think the explanations for this based in gameplay issues.

I think one of the biggest things is that the high level game is so completely different than the low level game in WoW. When the game first launched, people went on and on about how the game had "no grinding". In fact, advancing through the first 30 or so levels is actually quite a bit of fun. However, once you get to 60 your only means of advancement is getting better drops. Eventually you get to the point where the only improvements will come from going on large raids in the high-end lairs. You have to spend a significant investment of time, then hope not only that an item you can use drops, but also that you win the random roll to get that item. Some of the high end equipment comes in sets, so you have to repeat this many times in order to get your equipment. This is, in a word: grinding.

It's also important to note that two of Nick's examples deal with the enchanting tradeskill. As most people know, enchanting is one of the few tradeskills that has less limited earning potential. People at higher levels are going to want enchantments on their weapons more than they're going to want my high level leather items which are inferior to just about any reliable leather drop in instances. Back in the day, Enchanting was tremendously profitable; a guildmate of mine bragged about making 120 gold off on the Crusader enchantments, but tried to downplay the money he made by saying it cost him 100 gold to get the materials. I could do nothing but marvel at the idea of making a 20% markup on any of my leather goods. I've been sorely tempted to drop my main character's leatherworking tradeskills and pick up something more profitable multiple times.

So, what happened in the game because of these factors? Many people that reached 60th level decided they didn't want to grind, so they started new characters. Personally, I have about 4 alt characters between 20-30 level. Every character gets tradeskills, so many people chose a tradeskill that they saw made money. They worked up a character again, and with prior knowledge and cash gifts from the previous characters were able to do it more efficiently. This means that there were more enchanters, increasing the supply. As we know, increasing supply means that prices drop, as they did. This also explains the price shards dropping as well; more people were destroying more trash magical items and making more enchanting components. People didn't need as much money the second time around, so more items got turned into enchanting components. It's also interesting to note that large radiant shards are available from some of the drops in Uldaman, which is where the high level Enchanting trainer is.

The alt theory holds out because prices on the lower end have actually gone up noticably. More alts being created means more demand, which tends to increase prices. I see this first hand as all my alts are about level 20ish, and even with small gifts (about 10 gp each) from my main level 60 character (after buying an epic mount with money I earned) cannot afford most of the tradeskill recipes up on the auction halls. Demand has driven these prices up beyond the buying power of even a modestly funded alt. Also, with people playing alts instead of high-level main characters, this would drop the demand for higher level goods and services, leading to a further drop in prices.

There are a number of other gameplay factors as well. The high level drain on cash (from epic mounts and the cost of repairing truly high-level equipment as Stephen mentions above) is keeping the high-level cash supply low for now. We don't see this as much at the lower levels because a large gift for a low-level character is almost insignificant to a high-level character. However, I'm sure that if we come back in about a year's time we'll see some of the more expected economic behaviors in WoW that we find in other well-established games. As we see alts reach higher levels, we'll see more people doing their own tradeskills, further dropping demand. One reason I haven't dropped leatherworking on my main character is because I can provide leather armor to my Rogue and Hunter alts at cost; that's one less person buying from alts working leatherworking themselves. And many more.

Overall, I think we're still seeing the game in the early state economy before characters pool at the top and make more money than they can reasonably spend. I suspect that this will stretch out the time before costs will rise as seen in other games.

My thoughts and observations,

[Initria]

42.

Demand:
* No equipment decay. Your item never needs to be replaced, so if you are happy with what you have you never have to buy again.
* Bind on Pickup. No supply so no demand. Just about everything that's really desirable just cannot be bought. (This includes the product of some of the best crafting recipes... only the crafter can use it.)
* Bind on Equip. No supply so no demand to sell hand me downs.
* Except for notable exceptions, crafted items are or have the reptuation of being less desirable than drops. By the way, those notable exceptions are inflating.
* With a bored population of level 60s, players have a plethora of items from raiding. On many occasions I have seen a whole party not even pick-up some drops becasue they were "so worthless."
* The crafting is very simple. People already have their alt's profession leveled up by now, which means the once lucrative recipe market is drying up as crafters have what they want. (I now regularly see recipes which used to be priced at 500-1000g down to the 70-90g range, with every indication that prices will continue to drop.)

Supply:
* The huge amount of raiding (with all the 60s WoW has) causes a lot of items to show up on the AH and it is now a buyer's market.
* WoW drops a lot of items, if not cash. Supply easily keeps up with demand from levels 1 to 59 now from all the alts going through the levels again with the advantage of hindsight.
* A tremendous number of quests. From levels 1 through 60 you can fully outfit you character with very decent quest armor and weapons. Quest items are Bind on Pickup so no hand me downs.
* Poor itemization of "bosses." By now the bosses have been min-maxed so you know who has what and how to get there so even their rares have become easy to come by.
* No intelligent randomization of item stats. Items are not randomly generated to fit the class that finds it so it is quite common to get something of absolutely no use to you. Because of the high number of drops, you just want to get rid of it. This should have been an inflation producing mechanism, but its effect is diluted due to the high number of drops.

Don't forget that folks that start alts are not playing their 60s so the main bread winner is not earning. They're still going to be bargain hunting.

[Raph]

43.

It's database DEflation, dammit! :)

I don't think the economies of SWG and WoW are very comparable.

In SWG just about everything breaks or is consumable. In WoW it's the opposite.

In WoW the currency doesn't officially float; in SWG it does (there are VERY few things in the game where the currency is pegged at an absolute value).

In SWG goods are far more tradeable; in WoW many of the most valuable things are soulbound.

All in all, I am not even sure what people mean when they say "inflation" or "deflation" anymore. :)

[Scott Hartsman]

44.

I'm with Raph on this one. I don't think SWG and WoW can be compared, but WoW and EQ definitely can.

Not to be a wet blanket, but this appears to be much the same thing that has been occurring in the markets in EverQuest for quite a few years. :)

During periods of few new items being added, prices slowly go down. More of the same items are in circulation, and more people are capable of generating those items for a shrinking number of people who do not yet have them (and care to get them), so the trade price decline.

During periods after an expansion (and a new pile of powerful toys) comes out, the price of the "old toys" goes down even faster, as the desirability now goes down also.

That's not to say that inflation isn't occurring somewhere. People's stored cash increases, as there becomes less to spend it on that anyone cares about.

What does the RMT price per block of coins look like recently? If it's been going down steadily as bank supplies go up and in-game prices go down, I'd bet on this one.

- Scott

[Björn Laxvik]

45.

Inflation in all its glory - is it really strange that items devaluate in a game where better weapons are being introduced constantly, thus comparativly speaking, deflates the value of them?

"Most items in every MMO are in theory unlimited." Hum? - Since they require TIME as an input to actually produce them, and since TIME isnt unlimited - aren't items in a mmo limited..? )

I would say that demand (and in the long run - value) for any given item in a mmo that focus on an "itemdriven upgrade path" alá EQ and WOW MUST be decreasing - if not it would imply that there is no reason to upgrade said item. One could draw attention to the AoNecropotence of EQ, which only raised in value and price as the demand for it didnt dwindle, and the supply was farily limted, while other things, like any standard weapon, got cheaper as better items were made available.

[Mark Wallace]

46.

galiel > Is that really your perception? That non-economic activity is *greater* in an MMO than in a real life society?

Very quickly: That's not quite what I meant, even though it does look like I was unclear about it. What I meant was that the proportion of greed to non-greed related activity is lower in virtual worlds than in the real world. I.e., direct economic gain is slightly less important overall than it is in the real world. I don't think there's more non-greed activity than greed activity. I just think the greed activity is less overwhelmingly prevalent in virtual worlds than in the real world.

Put another way: I still think greed outweighs non-greed in VWs, just by a smaller margin than in the real world. Therefore, non-greed gain will be more of a motivating factor than we usually think of it as.

Greed or non-greed, though, it's all economic :)

[Mark Wallace]

47.

Sorry, galiel, reading you again, perhaps that is what I meant. Have to revisit later. But in any case, I do think that gain/utility in VWs often has a lot more to do with fun than with hoarding gold, levels or equipment, which is what we most often assume. And fun quite often doesn't necessitate hoarding those things in VWs.

[magicback]

48.

Wow, a lot of comments to read through so apologies if I'm repeating or missed something above.

I think Psychochild's observation is a good general explanation of what's happening in WoW. Another additional point I would emphasized is the end-game economics that Brian noted. Blizzard has balanced the top-end economic for players to grind a bit more for the next shiny and whatever remaining funds are passed to the alts.

So, it would be really good see the median cash hordes of lv60 characters, or, even better, avatar's cash flow statements per level at an aggregate level. If we assume that there is a rationale utility for the buildup in gold, we can observe what they are spending the gold on and comment about that.

As for the inflation-deflation-devaluation thing: It may be good to specify whether we are talking about macroeconomic or microeconomic level. An economy can experience overall inflation while experiencing pockets of deflation. A good example is the increase in housing prices in certain areas and a general decrease in consumer good prices.

Oh, I agree someone should create a basket of goods across game economies to calculate purchasing power and determine PPP (yes, I know it's not so easy to do). So far we only have gold-to-RL$ as an indicator.

Frank

[anthiypatus]

49.

Brian 'Psychochild' Green has got it: "Many people that reached 60th level decided they didn't want to grind, so they started new characters. Personally, I have about 4 alt characters between 20-30 level."

When I left the game, I had a bunch of mid-range level characters and no gold left in the bank.

From level 1-40 the game is perfectly balanced for the experienced player. If you play well and utilize the AH and your tradeskill to make money, you should hit 90g (mount money) just as you hit level 40. For the first 40 levels, every gold you make goes right back out through gold sinks. This isn't unusual in the early game for most VWs though.

However: having lots of alts is the _norm_ in WoW. From level 1-40, solo PvE and questing is a pure joy. After 40? Not so much.

Combine this with the radically different classes, the two factions, and the different races. Also throw in PvP and PvE servers as an added stimulus to reroll from scratch.

In UO and most muds I've played? The early game just wasn't as fun as the early game in WoW. Thus, the early game generally wasn't that much better than the late game. So rerolling was a much less attractive option.

Let me reiterate: rerolling new characters is the absolute _norm_ in WoW. Literally _every_ person I knew in WoW had multiple alts. Of the hundreds of toons in my guild, I'd say 3/4's of them were alts.

I think I had about 15 different characters on a bunch of a different servers when I finally quit. In UO and every mud I've ever played, having 15 different characters at the same time was _absolutely_ unheard of.

Does L2 also reward rolling a new toon?

I seem to remember Bartle suggesting Permanent Player Death as a good thing for the health of a VW. In essence, WoW has created a situation in which players are voluntarily choosing to "commit suicide" and reroll.

While this doesn't completely explain the lack of inflation, it's certainly an important piece of the puzzle. If far fewer people are playing the end game then the end game won't disrupt the economy as much.

[galiel]

50.

Mark,

Greed or non-greed, though, it's all economic :)

But of course, there is a tremendous difference. For one thing, nearly all economic theory focuses on greed (or, to put it more charitably, "rational-man" theories involving measurable, descrete (which almost always means monetizeable) transactions).

It is not just intangible currency such as love or trust or respect or honor or tradition or culture that are ignored; even clearly economic phenomena such as peer production is not considered or included or accounted for in most economic theory.

As Yochai Benkler and others have noted, this activity, which is not organized in corporations and not conducted via markets, shouldn't even exist according to classic economic theory, and there are no satisfactory mathematical or statistial models that account for it--yet it is very, very real, and has very, very real economic impacts, whether one is talking about the scientific community or Apache & Linux, or Project Ginsburg & Wikipedia &the Open Directory Project, or OhMyNews & Indymedia & The Regular, etc., etc.

There is certainly less of this activity in MMOs than in the "real world", and, in my opinion, that is because it is not recognized as desirable activity by the developers. It is essentially democratic, decentralized power, anathema in today's MMOs. (Of course, it is treated with great hostility and fear by "real-world" corporatists as well...)

I am still puzzled by your insistence that there is less greed-driven activity in MMOs. Since they all focus almost entirely around personal achievement and character development, the *only* thing developers measure is greed. What else is there in an MMO design?

The fact that players, being human, desperately seek other forms of interaction, and play their own meta-games--with great difficulty and often despite developer antagonism--in order to bring in those non-greed-driven activities, just indicates how important they are. But there are certainly less of them in an MMO than in "real life".

Free society is full of non-greed-related, non-greed-based social organizations and mechanisms, from churches to schools to clubs to pick-up games to food kitchens to academia to families on and on and on.

Where are the MMO analogs to these?

[Mark Wallace]

51.

Galiel, you may be right. Perhaps I only notice the non-greed-based activities more often: people dancing together, people giving things away to strangers, people opting for better-looking armor rather than more powerful, the not at all uncommon message in chat that goes like "I'm bored, does anyone need help with a quest?", the helpful advice, the people who stay in their friends' guild rather than joining a more powerful raiding guild, the people who spend a lot of time exploring and/or socializing (54 percent of Bartle test respondents as of April 2003 classed themselves as explorers or socializers, and only 46 percent as killers or achievers) and also the people who have "uber'd out" at level 60 in WoW and who you often can't get to go on quests because they prefer to just sit around and chat to friends.

So really, I'm not at all sure what the proportions are, but even though much of what I mention above does have its economic motivations as well, I'd say that at least there are more ungreedy people than we usually assume.

btw it was good to read your refutation of rational-man theory above (refuation is probably too strong a word, but anyway). We're completely on the same page on that score.

[galiel]

52.

We are on the same page. I think the last remaining misunderstanding is that by "where are the MMO analogs to these" I am referring to the lack of design consciousness about them.

The things you refer to are not MMO phenomena, per se, they are just regular real-world people acting in the ways they do in real-life, constrained by the limitations of the MMO designs.

This is not just semantics or trivia, BTW. It strikes to the core of what I have frequently argued about a design approach to society in MMOs: it is the relative poverty of non-greed tools and measures and rewards in MMO designs that, in my opinion, make them such high-maintenance creatures; if we enabled and afforded and empowered more of these critical relationship-building and community-building factors, we would have less expensive and more sustainable MMO communities.

[Mark Wallace]

53.

galiel > if we enabled and afforded and empowered more of these critical relationship-building and community-building factors, we would have less expensive and more sustainable MMO communities.

Ted, perhaps something like this is just what you're looking for to help immunize VWs against RMT...?

[Fotis]

54.

I am not sure that you can base a diagnosis like "Deflation in WoW" on three numbers. As others have pointed out there are always different trends in a mmorpgs economy at the same time.
All objects which can be looted or harvested in high excess of what is needed will drop down from higher prices until a level is reached where the market prices are just above the merchant prices. P.e. many people are doing solo instances in the new Splitpaw extensions, so all loot which drops here is now quite common (Taking my examples from EQII, because I know this game better). The same is true for crafted objects as long as there is no shortage of materials and as long as there are many crafters.
Other objects are rare and quite in demand - and I think these objects are better indicators of inflation or deflation, because a stable high price shows that there are enough people able to pay that amount of money. This happened to the harvested rares in EQII, (at least on the server Splitpaw, where I play ), which are needed to create better spells.
and sells just a bit over the merchant prices.
Actually I think because in mmorpgs there are always possibilities to create value by questing or by getting drops which are not related to the market we will have at least 2 dynamic systems interacting with each other.

[Thabor]

55.

babylona - well put ... and I'm also wondering if the money supply is actually shrinking per capita

That seems possible to me.

Part might be attributed to twinking activities. For example my level 60 character gets a fairly stable income now from AH activites. That income freqently gets mailed to alts who use spend it on other pure drains (IE: Skills).. All draining activity.. I have six alts, and all generate significantly less money than my level 60 could..

At the high end, there might be a decrease due to saturation of characters. Instances are a relatively stable pool of income. Running an instance with 20 characters as opposed to 15 would reduce the per capita.. You might be slightly faster at finish the instance, but there is extra overhead in coordinating and getting people there to do it again.

[Raph]

56.

I tend to agree with Galiel that the greed is the central motivation explored by developers; the altruistic or communitarian behaviors tend not to get recognized by the game code and often not by the community team either.

I'll go further and point out that often these behaviors have been corrupted by the presence of greed (as often happens in the real world), when developers have attempted to create feedback mechanisms to reward these behaviors. I've often summarized this behavior as "people will do whatever you reward them for"--when you start rewarding behaviors that appear altruistic to the game code, then the non-altruistic will show a marked tendency to hammer on that particular trigger; since much of the social reward mechanism for altruistic behavior is informal, tthe people who truly are doing it for the intangibles often complain that the intangibles are devalued ("I do it for real, not just for the reward") and feel chased out.

It may be that including tangible rewards for these behaviors is a mistake; in which case, we should seriously consider whether the right nodel is not to have ANY tangible rewards at all, because a system with tangible rewards for a specific behavior at the expense of other behaviors will likely exhibit a selection mechanism biasing towards a population that prefers that behavior.

The thought-experiment: a perfectly traditional MMORPG but with no level markers, no signals given from the game that you are doing "the right thing." This is different from the "positive feedback for diverse behaviors" approach exhibited by the games I've done, and different from the "positive feedback for only acquisitive behavior" that is the traditional Diku model.

Would anyone play it?

[Tony Hoyt]

57.

WHat I think your seeing is a diffrent kind of Mud-flation then your expecting. It's still going on, rapidly so but not as you expected.

As more players play, more people farm, more people farming mean more goods in the Auction house or more people crafting and that means more in the auction house as well.

As more and more people play, the cost of many goods will drop untill they finaly stablize to the natural market, this could take at least a year from release to happen or more. In this case, the year is coming up, people are reaching level 60 and working on the tradeskills, thus more and more of all the older gear and even epic raid gear is going to show up in the marketplace.

Supply is going up up up, which is just another sign of Mud-flation.

Tony

[Bart Stewart]

58.

I don't know about real-world inflation of in-game assets, but I've been thinking about in-game inflation recently. This may have some bearing on what Blizzard might be doing that could be leading to a deflationary economy in WoW.

Over in SWG, there's been a thread called "THERE IS NO INFLATION!!" running there since March of this year that debates many of the questions raised here on TN. Some of my comments there are applicable here, so let me try to summarize. (Yeah, good luck on that, Bart...)

* The "Market Basket" Concept

Inflation is usually calculated by considering the prices over some period of time for what's called a "market basket" of goods. These are items chosen to represent the kinds of things that consumers buy that are generally produced in stable amounts: things like clothing, groceries and household goods. Note that this definition excludes items such as shelter, transportation, and medical care, which tend to spike or decline in price for transitory reasons.

What this means for SWG is that if you really want to see whether inflation is happening, you need to pick an appropriate market basket of goods. You can't just look at the prices of weapons or buffs or high-end loot drops to know whether prices are tending to rise -- you need to watch the prices of the more stable items, such as Tailor-made clothing, Chef-made foods, and Architect-made furniture.

If prices for those kinds of goods are generally increasing, you know you're probably experiencing inflation. Likewise, if prices are generally decreasing for a market basket of goods, your economy is probably deflationary.

* What Kinds of Inflation Are There, Anyway?

As I understand it, there are three main types of inflation. Let's look at each, and see how SWG has them (or not).

A. Standard Inflation

Standard inflation is the money supply kind -- print a lot more currency without an equivalent increase in "market basket" goods on which to spend that money, and you get the generally understood kind of price inflation.

As a faucet/drain economy, SWG is designed to allow mission payouts and service fees to be tweaked to insure that overall income closely matches overall outgo over time. So when a lot of money suddenly enters the SWG economy, it must be due to something else -- usually a credit duping exploit.

In a player-run economy like SWG's, money dupes are inflationary. As more money circulates, more items are purchased; as this occurs, human players readily perceive it and respond by raising prices on the items they craft. (The same thing would happen in the real world's "player-run" economy if counterfeiters could add an equivalent amount of money as money dupers can add to a game economy.)

B. Demand-Pull Inflation

Suppose in your game world you slowly cut back on the kinds and numbers of goods being created in that economy, or a lot of new players join the economy but production remains constant. As either of these occurs, the prices of goods will generally increase as people consider goods to be worth more (i.e., as demand increases without an equivalent increase in supply).

This is demand inflation, or demand-pull inflation. As prices rise for the same goods over time due to scarcity, an individual unit of currency is worth less and less.

Demand-pull inflation doesn't happen in SWG primarily because each person entering the SWG economy has the chance to be a crafter. As long as enough people decide to craft goods because they perceive value in that gameplay, the supply of necessary goods will rise to satisfy demand, and prices will as a result tend to remain stable.

But if SWG ever does suffer from inflation, this will probably be the type of inflation it gets. It's very important for SWG's current developers to keep crafting fun for crafters because if the ratio of crafters to non-crafters drops too far, the supply of crafted goods will fail to support demand and prices will rise, making it hard for new players to afford basic goods. This could happen if too many crafters leave the game or shift to combat play, or if not enough new players become crafters.

(On a personal note, I believe that combat gameplay in SWG continues to be given too much emphasis over non-combat gameplay, including crafting gameplay, and the likelihood of demand-pull inflation is one of the reasons why I'm concerned about this design trend. Of course, if I'm wrong about the trend, then hey, no worries.)

C. Cost-Push Inflation

"Cost-push inflation" is what you get when the costs to produce goods rise generally. This kind of price increase is usually driven by increased secondary production costs (such as "minimum wage" increases or hikes in corporate taxation) that get passed on to consumers.

Cost-push inflation doesn't happen in SWG because the costs to produce goods are basically static. Since it remains insanely cheap to harvest raw resources, and since "taxes" haven't increased, and since producers are all basically sole proprietorships (no wages to pay!), there's been no push from rising production costs to make prices rise as well. Ergo, none of this kind of inflation, either.

* So Is SWG's Economy Really Inflationary? (Answer: No.)

All the theory says we shouldn't be seeing much inflation in SWG. What about hard data?

A number of months back, Raph put together a very helpful essay (complete with colorful charts) that showed bits of SWG's economy over several months. (If you have access, you can see it at Economy Stats on SOE's SWG forum.) It's a thing of beauty for an analytically-minded kind of person.

My main takeaway from the charts and text was that no, there's not significant inflation in SWG as some people claim. In fact, for the period covered by the chart, SWG's economy was actually somewhat deflationary.

As noted above, spikes in the money supply have occurred during a money duping exploit, but these are cured (mostly) when the duped credits are removed so that prices don't jump much. There are also spikes in the prices of certain rare and/or fad items, but those don't constitute market basket goods and so don't necessarily signify inflation.

Finally, there may be creeping inflation, but even if there is, that's nothing like the massive inflation that people have assumed to be occurring. Overall, it does not appear to be correct to say that there is runaway inflation in SWG.

...

I'm not currently playing WoW, so I'd be interested to hear its economy analyzed in terms of the definitions and discussions above. (And of course if a "real" economist wants to correct any errors I may have made, I'd appreciate it.)

If the kinds of things I've described can cause inflation in a virtual world, is Blizzard allowing deflation in WoW by doing the opposite of these things?

--Bart

[Bart Stewart]

59.

Raph: The thought-experiment: a perfectly traditional MMORPG but with no level markers, no signals given from the game that you are doing "the right thing." ... Would anyone play it?

Doesn't this depend on how one defines "the game"?

If "the game" is just the system software that provides direct rewards to players for performing certain predefined actions, then the question becomes whether players will have the ability to reward each other.

If so, then "the right things" will become whatever the game's players decide they are. If players can reward each other with tangible goods for doing what they collectively decide are the right things, wouldn't that form a kind of economic system?

What kind of system would that be? What would the overall game be like that rode on such an economy?

And to revise slightly: Would anyone want to keep playing it?

--Bart

[Hellinar]

60.

“A Tale in the Desert” is unusual in that the developer provides no “official” money for players. Only barter. Players can however print banknotes on printing press, and assign value to them in any way they choose. Here are some comments on one such banknote, called the “TN”, with which I was deeply involved in the last run of the Tale.

The TN was based on a basket of useful commodities. Players submitted one deben of iron, one of copper etc to receive a 1 TN note. They could redeem those notes on occasion for the same basket of commodities. So what happened to the “value” of the TN during the course of the Tale? Inflation, deflation or what?

The first thing to note is that unlike most MMOGs, ATITD is a construction game. Over the course of the Tale, players research an build better and better production technology. The constituents of finished goods rarely change during the Tale. What does change greatly is the efficiency of production machinery, in terms of player output per hour of any particular raw material or finished good.

The result is that the “value” of the TN, in functional terms, didn’t change significantly over a game year. You could still build the same cooking pot with three iron at the end of the year as you could at the beginning of the year. You could still build a greenhouse at the end of the year with two sheet glass, just as at the beginning of the year. As a trade item though, its value with respect to a particular good would change as the production methods for that good improved, or as the production methods for the underlying commodities in the TN changed.

What surprised me is the high stability of trade prices once they were established. Goods tended to trade at the same price regardless of technology changes. Once people had established a “fair” price for a good, the mental and social effort of generating a new one wasn’t worth the hassle. I put this down to ATITD being a production game, with the real reward being the fun of making stuff. Trade was just an extra peripheral game for those who liked that sort of thing. Most people made most of the stuff they needed. If they really enjoyed making something, they would become the guild supplier of that, or just simply give the stuff away.

People who did trade were mostly concerned with giving others a “fair deal”. This kind of altruistic behaviour is much easier in a world in which there are no living expenses, all income is discretionary. There is no requirement for food, shelter or sleep in the world of ATITD. And no death either. I concluded that importing standard economic models was very not effective in such a world, as the underlying drivers of behaviour are so different from the familiar world. At the root of much real world economic behaviour is the fear of starving, being homeless, or even dying if we don't "keep up". None of these fears apply in ATITD.

One thing that carried in from the familiar world, which again surprised me, was the sense that currency is worth less the more of it you are paid. People would stridently argue that the TN had “devalued” because, with improving technology, they could make 20TN worth of goods an hour rather than 10TN worth of goods per hour. To my mind, this indicated they were now twice as wealthy. In the simplified world of ATITD, it was easy to demonstrate they still produce the same goods with 1 TN worth of supplies as they could before. This is clearly a glass half full, half empty argument. But I was surprised so many people took the pessimistic view.

I’d say from my experience that “market price” can be a pretty poor indication of “value” in a VW, if little of the “value” in the world is tied to goods acquisition. It may be more significant in an acquisition oriented game like WoW, but not a production oriented game like ATITD. I think even in the familiar world, “value” and “market price” have got too closely conflated. But then, I think the joys of being a consumer are overplayed relative to the joys of being a producer, and one view naturally follows from the other.

[Mark Wallace]

61.

Raph > The thought-experiment: a perfectly traditional MMORPG but with no level markers, no signals given from the game that you are doing "the right thing."

Raph, I love this idea, but I'm not sure it doesn't already exist. Do you include loot drops from slain mobs in the category "signals from the game that you are doing the right thing"?

[magicback]

62.

Well, I think a perfectly traditional MMORPG but with no signals given from the game that you are doing "the right thing" is by definition not a "perfectly traditional MMORPG" given that levels, loot drops, crafting, and grind are the definition of a traditional MMORPG.

The only other massive multiplayer online role-playing game is a game were people play different roles for fun and as a game, like what supposed to occur in a RP server. I think the popularity of this failed with the experiments with RP servers :)

Frank

[Raph]

63.

Say rather "implausible loot drops." :) Most loot drops in Diku-inspired designs are illogical. Mark, what games were you thinking fit this definition?

Magicback, by perfectly traditional MMORPG I was referring to a fantasy world, one with the usual assortment of activities. I probably shouldn't have used that wording. Let's say instead a" typical fantasy milieu, with the usual wish-fulfillment activities available."

64.

I've been pondering WOW economics for a while. I play on a pvp server (horde) and am relatively new to the game, but have been fascinated by the fact the economics of WOW function remarkably like a real world economy.

I haven't seen a trend of inflation or deflation in the 2 months I've played. I commonly sell various potions, as well as various herbs. What I HAVE found is that there is a huge variation in price as a result of the server maintenance most likely. As an example, at the "start" of a week (Tuesday), I see and sell fadeleaf for upwards of 10G per stack. Towards the end of the week, the going rate is more like 4-5G per stack. It appears that since auctions still "occur" during the maintenance period, those economists who log on right after the server reboot tend to set the price high (which is logical since it appears that the "supply" is limited until at least Tuesday evening when everyone logs on). However, in the 2 months I've played, this price has not really increased or drop.

Furthermore, although I've only been able to "transmute" recently, my friend, who has been playing for over a year, has commented that her transmutes (for arcanite) consistently fetch 3-5G. So, at least for those two things, there don't appear to be supply OR demand issues.

It did occur to me that in such an economy, there should be inflation, since there's an influx of money, but no "real" outflux. However, what I realized is that items that people buy, and retain their value are never sold for anywhere near the same value after use. An epic item, even BOE, may be bought for 1k G, but will only be vendored for a fraction of the amount after use. Therefore, what is in effect here seems to be a self regulating system where, even if the inflow of cash (ie more people looting more gold, more items) were to increase, the corresponding amount of wealth that decreases from the system (via vendoring, attrition, or what have you) seems to counterbalance that. What this means is that if more people get better items, (increasing the overall wealth), then there is some corresponding loss of wealth in the system (via vendoring, training fees, etc.) that at least partially counterbalances the effect of inflation. I would suspect that the wealth/character over the entire server has remained pretty constant after the initial "server" startup.

Another thing that was interesting me - I had pondered attempting to corner the market in some commodity, and then selling that rare commodity back at a high price, but realized that this would be impractical alone - there are just too many sources to find good items, etc., and no barriers to entry to make monopoly behavior practical. I did ponder forming a "cartel guild" which would specialize in using economic power in artificially setting higher prices on selected commodities to earn money for the guild. However, there, again, you have the problem of enforcement, and no mechanism to "punish" those who break the cartel (which will inevitably happne).

As to my economic health, I only have 334 GP, at level 57, and am FAR away from having enough for an epic mount, which is my goal, so I would find it difficult to argue that inflation is a factor...

[Dmitri Williams]

65.

How is the server maintainence affecting prices? Do they reset or something? I've been assuming that the in-week price fluctuations were more about the varying levels of supply and demand as the player population shifts due to free time on the weekends vs. weekdays.

[Raph]

66.

I play on a pvp server (horde) and am relatively new to the game, but have been fascinated by the fact the economics of WOW function remarkably like a real world economy.

But all your examples are of cases where it DOESN'T act like a real world economy! :)

WoW has a tremendous number of factors that make it act in special ways. Probably the most notable is the way they handle items and ownership...

[dean_axel]

67.

For a period of 6 hours, during the server reset, the following happens:
a) auction items are not bid on (and therefore possibly not bought)
a1) Those who manage to "win" items buy them at lower prices than the prevailing market rate
b) no auction items are being added

At the end of the server rest period, it therefore appears that there is a reduction in the supply of materials available - which could cause the first person selling item X to see that there appears to be a shortage, and to therefore, jack up the price. The next guy, of course, tries, and undercuts him slightly, and so on... until the next server reset.

Most people set auctions for 8 hours (therefore, if they do manage to set up an auction just before the server reset, when the server starts up, those items are not on anymore). I tend to use 24 hour auctions.. despite the higher fee. Furthermore, I specifically do NOT put things up for auction on Monday night for this reason (reduced chance of selling things successfully, and lower sell price if I do sell, AND watching this trend, I try to take advantage of the artificially inflated prices on Tuesday (with some success) etc.). Perhaps others do the same also.

As to Raph's comment - I still contend it DOES behave like a real world economy in terms of the behavior of the individuals who act in this economy. I think that most people behave as they would with "real" items in the world, and that WOW would act like a real world economy, given the same real world condition.

There's no inflation because the economic conditions don't merit it - where is the corresponding interest rate? What forces are driving the devaluation of gold? If wealth somehow "disappeared" in the real world spontaneously, I believe that a similar situation would arise. I would agree that of course WOW does not have the same conditions as a real world economy, but, I think that they would behave similarly, if not the same, if the conditions allowed it.

(I'm not an economist so it's not entirely clear to me which causes what - does high inflation cause high interest rates or the other way around?) I would think that if the bank somehow allowed you to "deposit" money and earn interest, you would see inflation... would be an interesting experiment to run, and I would think, a relatively simple one at that - anyone able to get funding for Blizzard to do this kind of thing?

[magicback (Frank)]

68.

Sorry Raph,

Should had just stated that I personally think we haven’t hit the mark on a role-playing game where you can in fact play different roles for fun and game, an expansion of the kind of game we played as kids with action figures, dolls, teddy bears, and other objects; also an expansion of the immersive stories and fantasies we indulged in as adults via books, movies, TV shows and so forth.

Not saying that I got the answers, but I think the type of game that would work would be a theme park world where you can do different activities and are there for “the fantasy experience.” Example: Jurassic Park Online that focuses on exploration and socialization without any form of coded feedback system, but do provide the tools for the participants to institution their own feedback system. For some reason, “what would Betsy like” came to my mind.

Another design which is less manufactured/structured and more organic is a high-fidelity reproduction of a well-imagined fantasy world like Middle Earth with all the attendant life, activity, and details. You go there as an visitor or you can go there to settled down and have an online life. Here I think of SWG without all the fuss of the Empire vs. the Rebels, the missions. I would pay to build and maintain a vacation home on the beaches of Thailand and I’ll be happy to build and maintain one in SW universe. I think many still do on UO.

Frank

[Mark Wallace]

69.

Raph > Mark, what games were you thinking fit this definition?

I was thinking (as usual) of EVE Online (though I know Jessica maintains that it's just UO in space). It's not "perfectly traditional" in the sense that it's not a swords-and-spells game, but it seems close enough to fit. And it has no level markers and no other way in which your actions affect your character's skills (which I think is what you're talking about here). You could just sit in your hangar for months on end and improve your skills by studying skill books, if you wanted to.

It does have loot drops, of course, but I'm not sure how illogical they are.

Or are you thinking of something even more bare-bones than this?

Also, this just occurred to me: What about signals from the game that you are doing the wrong thing? In EVE, for instance, a pretty sure signal you're doing the wrong thing is when your bird gets wrecked by a PK because you strayed into low-security space. Although even that is part of the fun -- which brings me full circle in my argument here: success in an MMO does not always equate to enhanced financial position or character skill, at least not in the short term. People don't PvP only when they can be sure of winning; a lot of people just like to get blood on their hands, even if it's their own.

Galiel, I'm with you on the fact that MMOs don't often build these considerations in. But as a couple of people have pointed out above, it might be necessary to not build that stuff in, because it seems that as soon as you do, people bring it under the rational-man greed umbrella as soon as they can.

A related story: I'm told that in Star Wars: Jedi Knight II, gamers developed the habit of using the game's crouch animation as a way to bow to each other before lightsaber duels. Total emergent behavior, independent cultural trope growing up out of nothing. So LucasArts built a bow animation into the next version of the game. What happened? No one really used it, and the tradition of bowing that had sprung up more or less died way. The moral? There does seem to be inherent value in not building certain things into the software. Tricky line for devs to walk, I imagine. But interesting for the rest of us to watch. :)

[galiel]

70.

it might be necessary to not build that stuff in, because it seems that as soon as you do, people bring it under the rational-man greed umbrella as soon as they can.

No matter how many people continue to "point that out," it remains more the product of a political ideology than an empirical fact.

This is like discussing supply-side economics as if it were scientific fact, without reference to the fact that there is no empirical evidence that it works at all in the real world.

Empirical study of actual societies suggests that rules evolve naturally out of emergent behavior, rather than the other way around.

As for the bow animation example, drawing conclusions about cultural behavior from that is highly unscientific. It does not account for any number of variables, such as user interface, style, etc. To assume you know that people didn't use it because it was there is foolish. In Guild Wars, people use the built-in animations very extensively to perform social conventions.

We have to be careful that we don't look at phenomena in games merely to reinforce our preformed beliefs about the world and about worlds. One can always find examples to reinforce one's beliefs, but that doesn't mean the examples are global.

If we really want to learn from behavior in games, we need to learn at least a little from how valid research is conducted in the real world. And we need to figure out how to account for the distorted environment current games present--just as we must if we look at people's behavior in Disneyland, which may or may not have significant differences from their behavior in downtown Manhattan or Mumbai.

[Bart Stewart]

71.

galiel> No matter how many people continue to "point that out," it remains more the product of a political ideology than an empirical fact.
> This is like discussing supply-side economics as if it were scientific fact, without reference to the fact that there is no empirical evidence that it works at all in the real world.

I would say that dismissing supply-side economics out of hand is more a product of a political ideology than of empirical fact. The 1980s were not the only time that cutting taxes increased government revenues by increasing taxable spending.

But your larger point about the value of trying to base one's opinions on available facts is still a good one. The thing is, what do you do when there's a large amount of anecdotal support for a belief, and not much hard evidence against it?

That's pretty much the situation we have with economics in MMOGs. The reasons are unclear -- maybe it's the game's economic rules; maybe it's the kind of people who play the kinds of games that are being made -- but a significant number of players are reported to be highly min-max types. Whatever they do, they seek maximum advantage from minimum time/effort... and the game's economy is just one more sphere in which that's the prevailing style.

Bearing in mind that the burden of proof is on the affirmative (which in this case is "most players are 'rational-greedy'"), is there any empirical evidence to the contrary? Are there good reports of major game worlds in which economic altruism is more common than advantage-seeking?

--Bart

[Hellinar]

72.

Bart Stewart >Bearing in mind that the burden of proof is on the affirmative (which in this case is "most players are 'rational-greedy'"), is there any empirical evidence to the contrary? Are there good reports of major game worlds in which economic altruism is more common than advantage-seeking?<

I'd say ATITD is a good example. Profit based based trade is pretty rare there, and usually more of a playstyle by people who want to play traders. Most MMOGs are competitive, consumption based games. Its not surprising that min-maxing dominates in such a world. ATITD is producer based, and has a strong cooperative streak. Most trades are "fair trades" or outright gifts. Again, something I think follows from the kind of world it is.

[Randy Varnell]

73.

Fascinating discussion! Quick input from a non-economist:

Have we ruled out the simple explanation that Blizzard has built a counterweight into the economy?

For example, if a purple "Sword of Doom" sells on the auction house for 300g three times in a week, do more "Swords of Doom" begin dropping?

Is there some kind of code which monitors overall economic growth and adjusts the drop rate of items? Is there code that watches for fluctuations in the auctionhouse market and adjusts the drop rate?

All those things strike me as possible to program, but I'm not sure if they did it, or if there would be an effect. I'm pretty sure the explanation for deflation (and yes...I've seen it as an avid auctioneer) is a mix of factors, some of them quite complicated.

[Dr, Cat]

74.

Raph, if you mean to be limiting the discussion to games of the form "there are monsters programmed into the game, and there are methods for attacking the monsters with sword or spell that will kill them", I think you couldn't implement that in the "conventional" ways without giving players "signals that they're doing the right thing". If you allow any improvement in ability whatsoever, and simply don't inform the player of it, they'll take "I used to kill minotaurs in 5 or 6 blows, now I kill them in 2" as a signal that they did the right thing. So I think you'd have to make people's abilities in combat constant rather than something that would improve over time. Likewise, ANY kind of loot drop, even a hide or some meat, is a signal that drastically sets this activity apart from all others. I don't get additional items added to my inventory by chatting with people, by discovering new places and exploring them, by starting a guild, maintaining the web page for the guild, writing a journal of my adventures, organizing a festival, or by drinking more ale than anyone else in the tavern (unless I placed a bet on the drinking contest beforehand). The fact that killing stuff gives me items sets it apart from other activities, as does perhaps mining, fishing, crafting, etc. That sounds to me a lot like giving the player a signal that they're doing the right thing.

I'd say a game where you never get any better at killing monsters, ever, and you never find any money or items on the corpses would be closer to "not telling the player what's the 'right' thing to do and instead letting them decide for themself".

If you aren't going to limit the thought experiment to "games where you can hack and slash stuff", I'd say TinyMUDs. Also Furcadia, which is highly TinyMU* family influenced, though we're going to pollute our world with things players can and will take as "goals". Players WANT that in games. For the most part, they want games to A) provide goals that will be satisfying if reached, B) make it easier to tell what the goals are & what helps acheive them than it is to figure out those things in real life, C) have far fewer potential goals than real life (both so you don't stress over picking - look how short the menus grow in most fast food places, and also so you don't have to feel like you're "missing out", you can accomplish ALL the goals even if you have to make 2 or 3 or 5 characters in some games. But most games only have one, see solitaire, minesweeper, etc.) and D) make the game easy enough that any player that spends enough time will probably eventually win. That's what players want. Many games commit the sin of being too hard to win and/or too hard to figure out, and then they're only for hardcore gamers, not the general public.

Of course some games don't fit that mold at all, like The Sims (best selling computer game of all time), or TinyMUDs for that matter. In my personal taxonomy, things that you "win" or "lose" are games, thing that you just "play with" in various ways are toys. Certainly toys can be hugely popular too. Roleplaying was not often categorized as a form of "game" when it was mostly something kids did (cowboys and indians, cops and robbers, etc.) If you used hats and guns and masks for it, those were "toys", your Monopoly set back home was a "game". It started being a game, and being something for adults to do also, when D&D came out in the 70s and made the activity of roleplaying a much more formalized activity, adding rules beyond the single classic time honored "Bang you're dead - No I'm not" rule used previously. :)

Single player computer RPGs were all very much about wish fulfillment. Making our multiplayer ones about more than that - developing social skills, meeting people, simulating societies, exploring different government structures, sexual roles, distribution models for art writing and music... These are things we're really in our infancy regarding. Users and developers alike, most of us are groping in the dark trying to figure out what else these kinds of games/worlds could be good for. I'm always a little cautious about building something that might be what everyone will want in the future, but is also what almost nobody wants yet right now.

Still, as ever, I want to see more games where you can't hack monsters to bits. I feel now just as I did 10 years ago - that activity, and the acquiring of "fat loot" is so desired by so many, that any game that has it is almost certain to see it overshadow many/most other activities.

Regarding Warcraft, by the way - my perception has been that some items (refined deeprock salt, for one) have tended downward in price over time, some have gone up, and some fluctuate nicely as more suppliers are drawn to the market when scarcity brings prices up... When prices are driven down by competition, some of them drop out because the amount of return on their time and materials invested gets poorer. Then the prices can come back up some again. I've seen this in rugged armor kits, for instance. I've also noted the phenomenon of commodities selling for the best prices on weekends.

Of course overall, the total supply of gold is going up all the time, and the total supply of items is going up all the time, and their value against the real world dollar is steadily shrinking. The question of whether a particular item is going to trend upwards or downwards in prices of in-game gold is just determined by whether the rate at which the player population is getting tons more of those items is faster or slower than the rate at which the player population is getting tons more gold (or platinum if you're in Everquest). If you want a game where prices will drop, make the items flood into the game faster than gold does. If you want prices to rise, make the gold flood into the game faster than the items. I think Blizzard did a good job mostly in that some items go up, some go down, and some fluctuate nicely. But the underlying problem that you're just bloating everyone with the fantasy of being rich until everybody has so much of everything that the fantasy loses all effectiveness is still there, regardless.

Oh, one other thought on Raph's comments I forgot to mention earlier - though it seems germane to this inflation issue also. Given that the problem with rewarding other forms of behavior is that min-maxing greedy players will swarm onto the behavior and press its levers obsessively in whatever fashion the crude game algorithms say will give you a food pellet... Maybe the solution is to have the game give "rewards" that the goal-obsessed players don't give a damn about or think are "stupid, worthless rewards", but the players that want to do those kinds of activities find useful or desirable in some way. Accent on the useful - Conan might not find a tool that facilitates organizing social groups to be worth striving for, someone who plays the game primarily to acheive social goals would. Giving rewards with a strong visual element, or that you can easily show off to others, or that involve any numbers you can brag about can be problematic. Also you may need to have alternate goals Conan would like, or he'll just go for what few you do offer anyway. For many players, any reward is better than no reward.

[Timothy Dang]

75.

Raph> The thought-experiment: a perfectly traditional MMORPG but with no level markers, no signals given from the game that you are doing "the right thing."

How about instead a very standard MMORPG with level markers, XP, and positive feedback but make all rewards common? What would people do if every quest they completed, dragon they killed, etc. gave ALL players XP, and if every equipment drop made that item available to all players free in the armory?

[Timothy Dang]

76.

dean_axel >(I'm not an economist so it's not entirely clear to me which causes what - does high inflation cause high interest rates or the other way around?) I would think that if the bank somehow allowed you to "deposit" money and earn interest, you would see inflation... would be an interesting experiment to run, and I would think, a relatively simple one at that - anyone able to get funding for Blizzard to do this kind of thing?

Generally, you expect an increase in interest rates to decrease inflation. That's because people would rather loan/save their money at the higher interest rate than spend it, and would rather not borrow at a higher interest rate to spend. So they spend less, and inflation goes down. So you'd expect if you could deposit money to earn interest that inflation would probably fall at least some. Although in a MUD, I'm not absolutely confident of that since it could result in enough growth in cash-wealth to counteract the saving-vs-spending effect.

If Blizzard wanted to do interesting economic experiments in a careful and public (i.e. publishable) way, then there would certainly be resources available to help them do so.

[Darniaq]

77.

Randy Varnell wrote: Is there some kind of code which monitors overall economic growth and adjusts the drop rate of items?

I personally doubt it because this sort of code would heavily bias the powergamer/farmer, effectively allowing them to monopolize. They would control not only their personal acquistion rate of the Swords of Doom but the presence of all such Swords in the worldspace. They'd have complete dominance over who got such a Sword, and therefore the method by which they do so, which would invariably be through the RMT.

Basically, it seems to me that in all of the Diku-iterative experiences, mudflation is not only an intrinsic reality, it's actually better. There's two basic reasons I feel this way:

1. This prevents the above monopolization and inevitable cartels.
   
2. It engenders a high replay value to the game. Mudflation partly comes from the introduction of new/different/better items into the game over time making existing items obsolete/less-effective. That drives down their price, of course, but also directs people away from acquiring those items in favor of getting new ones. That is, inevitably, a supply-side control facilitated by new for-pay expansions.

I admit I'm making a collosal leap here :)

Something else I didn't see mentioned above about comparing SWG vs WoW economies. I completely agree they're incomparable for the reasons mentioned plus the fact that the former is almost entirely about player created goods, a cycle of supply and demand mostly within the scope of player-directed content (players craft, players sell, players buy, players repair, players replace). Conversely, WoW is about the drop rates. Players acquire drops, players sell drops, players replace with other drops. Crafting in WoW is dominated by consumables, which in that game, include the incremental weapon and armor one outgrows within five or six levels.

[bruce boston]

78.

Hi Timothy,

Sorry for the delay, its been a busy week.

"I don't really follow your "(a)stuff/services=(b)currency=(c)stuff/services" paragraph. Sorry, I'm trying to get used to ascii discussion; I'm most comfortable face-to-face with a handy whiteboard when talking about things like this.

First off, I fully understand the whole ascii issue, I feel the same, and much prefer face-to-face.

That said, I think what I was trying to get at is two things.

a) In a highly liquid MMOG economy, stuff can be easily traded for cash, and that cash can be easily traded back for stuff. A simple example is that no matter how much linen you find in WoW, the merchant price never goes down, and there is an unlimited fixed price demand for the linen. In a similar way, there is an unlimited fixed price supply of many items that vendors sell. No matter how many arrows you buy from the bow merchant, the bow merchant always has more arrows at the exact price that he sold at the day before.

If you combine those two examples, you get stuff=>cash=>stuff, and the likelihood of either inflation or deflation in terms of vendor sold/bought items is nill, despite the fact that people might feel that there are changes. More likely, players can (and do) feel changes in loot drop rates, which has nothing to do with vendor price inflation or vendor price deflation, but I'm fairly confident that if you took 100 players and put them in a micro-world with all fixed prices and then changed the loot drop rate, you would very quickly get comments that the economy was inflating or deflating, even though by the technical definition it would be impossible in that world because all prices would be fixed. As such, if players are likely to misinterpret loot drop rate changes as inflation/deflation, they are also probably just as likely to mistake production rate changes as such, especially in a semi-open economy like Wow.

In the case of production rates, obviously an economy that is highly skewed toward level 60 players is going to have different needs than an economy that is highly skewed toward level 20's characters. I think there is an inherent trap for would be mmog economic analyst to set market baskets of level 20's gear, and then measure them over time as everyone morphs into level 60s and then claim that the market basket of level 20 gear has deflated, and then make the mistake of claiming that the whole economy of Wow has deflated because of what was observed with that one market basket of goods. If that problem is hard with one market basket of level 20s gear, try explaining the situation when you have 12 market baskets all of gear under level 40, because level 65 gear didn’t exist until just recently. Again, its fairly likely that what people are observing as increases or decreases in price points are based on production/need changes, and/or changes in drop rates, which can cause effects that may look (and feel) like inflation or deflation, without actually being such.

Ok, so that was point a,

b) From what I can see, I think it may be better to treat WoW currency as a traditional commodity, rather than as a modern fiat currency. For a few reasons including, the fact that the number of gold pieces in the economy is by no means fixed. I'm not sure there is much difference between 'grinding for resources' and 'grinding for gold', in the end they both seem to act very much like commodities to me. For example, how much difference (from an economic view) would the following two examples be. Case 1) players grind for iron, that they use to repair gear with at the local blacksmith, for 27 units of iron, they are able to repair 9 units of armor. 2) players grind for iron that they trade to the local blacksmith for gold pieces, and then use the gold pieces 30 secs later to pay for armor repair. The final rate is 27 units of iron for 3 gold pieces, which pays for 9 units of armor repair. Just because WoW uses method 2 above, doesn’t seem like justification for us to then say that gold prices should follow modern day money supply models that we see in the real world. More likely, if we simplified player transactions into what the actual behavior is, ie, why are they grinding for iron, oh, its to pay for repair costs, and then treated the gold pieces as just another convertible resource, I think the models that you would expect to find are closer to the way player's economic decisions are being made.

Hope that makes sense.

-bruce

[Raph]

79.

So this looks to me like classic mudflation:

http://blogs.parc.com/playon/archives/2005/08/change_in_level.html

At least, it's one of the classic signs of it.

[Bart Stewart]

80.

The problem of minmaxing players inflating or deflating a game economy (through creating money or generating loot drops, respectively) seems to boil down to having tradable collectibles.

If your game contains lots of levers that reliably dispense tradable reward pellets, then it's safe to expect that your game will attract minmaxing Achievers. And once they're your predominant player base, your game economy will inflate or deflate according to their whims. Assuming you don't want Achievers to be too discouraged from playing your game, that means changing how collectibles are generated.

I would suggest that the most important tradable collectibles commonly implemented are:

* combat gear (weapons & armor)
* money

(Does anyone disagree that these are the collectibles most important to the typical minmaxer? If so, what other collectibles are coveted more? Should experience points be included, even though they typically aren't tradable and therefore aren't a direct participant in a game's economy?)

If these two really are the the core collectibles, then I'd like to see a two-pronged approach to reducing their "system reward" aspect (and thus their economic impact as Achievers try to generate them):

1. Combat gear can't be purchased or traded -- you can only get it if it's assigned to you.

To merit combat gear, you're assumed to be a member of some in-game profession that's authorized to carry arms, such as a police force or a military organization. Rather than buying gear or taking it from the nearest corpse, you get it by requisitioning it from the organization.

Whether you actually get some bit of gear you've requested could be based on factors such as:

* your rank (based on your contribution to winning difficult battles)
* your need (as perceived by higher-ups and/or Supply bureaucracy)
* your visibility (earned any medals lately?)
* availability of government funds authorized for the police/military
* requested gear has been created by crafters or NPCs
* having a logistics expert (i.e., scrounger) in your squad/unit
* random factor (war is hell)

Include the ability to maintain and repair gear, and you get a system where people aren't just competing to score the biggest/most loot drops. Instead of worrying about accumulating pellets, they're out enjoying your exciting combat content.

(Note: It would be a good idea to have lots of exciting combat content. *g*)

2. Money can't be looted through combat operations -- you're paid a salary. (If you needed money, it would have been assigned to you.)

Making money ought to be the province of the business-oriented character (who IMO should not also be a combat-oriented character). Of course, if you allow players to collect money, then you're back to needing some game rules that discourage the minmaxers from mindless lever-mashing. (I like the idea of business gameplay being balanced by government regulations and media exposure, with players themselves exercising both functions and with other players acting as checks on those two roles in turn. No doubt there are other ways.)

Meanwhile, characters who prefer shooting mobs and blowing things up should join the military... but they shouldn't expect to get rich that way because they're already being rewarded with action-oriented gameplay. ("You're in the Army now...", etc.)

...

By removing most of the lever-pushing sources of the two major collectibles from the game economy, I think you'd wind up with a more stable game economy. Limiting the collectability of the two most volatile components of most MMOG economies -- combat gear and money -- should reduce the economic impact of minmaxing behavior.

My questions:

1. Have too many players been conditioned to believe that "no lewt" == "no fun"?

2. Has something like this already been tried? By what game? What happened?

--Bart

[bruce boston]

81.

Hey Raph,

So this looks to me like classic mudflation:
http://blogs.parc.com/playon/archives/2005/08/change_in_level.html
At least, it's one of the classic signs of it.

So without saying that mudflation is or isn't happening in Wow, this could also be due to the design of WoW.

With the rest bonus, and the fact that the story arc is pretty much the same the second time through, and the fact that most people have friends to help them out, its not hard to save 20%-30% your second time through. This could easily lower the average time to level for all players on an older server by 15%.

I think its also interesting that Nick's hunch is: "we're seeing the activity of alt characters lowering the overall leveling time."

Had it been, 'there are far more/better/cheaper armor/weapons available for new players then in previous months', then I think I would agree with the mudflation diagnosis.

-bruce

[magicback (Frank)]

82.

Now that the conversation has come to the part where the economic parts are working more efficiently (faster leveling, more efficient pharming of resources, more money in circulation, increase in demand for scarce goods, the decrease in inefficient and common goods, and a floor price in raw commodities), isn't a bit like in RL life where you "upgrade" your education, your computer, you home theater, your tennis racket, etc.

You can buy a simple and functional straw shoe for US$1, but that new sneaker is going for US$100. And nevermind the limited edition sneakers tha goes for US$1,000+ on eBay. Are we just desigining into MMORPGs a consumption-based economy (as opposed to a production-based economy of utilitarian goods)?

Frank

[RedWolf]

83.

According to the basic laws of supply and demand, the more supply of something you have, the cheaper it will be. The demand has not fallen due to a constant influx of new WoW customers. Items on established servers are getting cheaper because more people are getting them and compteting to sell them on the Auction House.

I personally am waiting untill I have enough gold to speculate on the Arcanite market (totally buy it out and re-sell at a significant profit).

[dean_axel]

84.

I don't think you could speculate on the arcanite market - aside from just finding it, (which I assume is possible), how would you prevent people who could "create" arcanite essentially for free to undercut you? (Xmute)

[dean_axel]

85.

Let me further clarify my previous comment. Arcanite is one of these goods that there is a large supply that is readily available (meaning people don't have to go out and "gather" it), that is usually not procurable under normal market conditions. This ranges from people who are attempting to "save" 20 arcanite for an arcanite reaper, OR, for people who sell arcanite/arcanite xmutes. At one point, I was carrying 7 transmuted arcanites, waiting for the right selling price for transmutes. I've typically found approximately 5-20 arcanites available on the AH for sale. I would consider that buying out the AH, in of itself would not be enough. You would then have to go out, and "buy" xmutes from everyone who was selling xmutes. Lastly, you would have to attempt to buy from the people who were saving up to actually use the arcanite (probably for a premium). Additionally, I would find it very difficult the resolve a high price gap between the price of 1 Arcane Crystal and 1 Thorium Bar. The current going rate implies 1 Arcane Crystal + 1 Thorium Bar +Xmute (4G) = 1 Arcanite Bar. If you attempted to raise the price of arcanite to say, 100G, this could only be maintained if any combination of the prices of Arcane Crystals, Thorium Bars, and Xmutes went up correspndingly. The supply of Arcane crystals is relatively constant, the supply of thorium bars is relatively plentiful, and the supply of Xmutes is gradually increasing (as more characters gain that ability). Therefore, I would find it very likely that the market would support a large price increase in the market price of arcanite, in light of all of these factors. However, it might support a slight increase. But would it be worth all this effort?

[Raph]

86.

With the rest bonus, and the fact that the story arc is pretty much the same the second time through, and the fact that most people have friends to help them out, its not hard to save 20%-30% your second time through. This could easily lower the average time to level for all players on an older server by 15%.

Between June and late August?

[bruce boston]

87.

Between June and late August?

Yep.

At an average of 24 hours a week, it will take someone 20 weeks to get to '/played 20 days', and it'll take them another 18 weeks to get to '/played 18 days'. Assuming that most players do other things. This could very well put most high to mid range players in the May to October time frame for their first alts hitting 60.

Looking at the 2x rest bonus in particular, I would expect that players that level slower in calendar days, level faster in '/played time', particularly Alts. On older servers, there is a fair chance that, Alts that hit 60 in August are leveling up slower in calendar days than Alts that hit 60 in June, suggesting that the Aug group might very well be leveling up with less '/played time' as a result.

This is even before we start discounting things like less trips to the auction house, less trips to a merchant, less time spent looking for the last part of the quest, etc. And, if you are really smart, you started an alt a long time ago, and have played nothing but rest time.

Again, I'm not saying that mudflation isn't happening, I'm just saying that the design of WoW lends itself to this sort of observation, even before the effects of mudflation start to kick in.

-bruce

[J. Micah Roos]

88.

In agreement with other posters, I think it is less an issue of total economy deflation than an issue of specific markets. For example - I recall being told about they heyday of tailoring in WoW by someone who played from launch - and how as time passed and more tailors showed up, eventually some items cost more (to buy reagents) than the finished product would auction for.

Given that the prevailing wisdom in WoW is that disenchanted bits sell for more than the items themselves; it isn't that surprising that the market became flooded with enchantment reagents, which then drove down the price.

[Jenny]

89.

Deflation is generally caused by more players are available to hunt/make the items that are usually expensive. For example, when a player is low level, he can only have so much access to hunt/skills/spells. But as more and more players hit high levels, those set of people have the access to hunt/make the more valuable items. When there are more items available in the market, the price drops. Not necessarily less people buying, but more people got into the game long enough to have the access to the valuable items.

Plus, as the game get long enough, players themselve developed a set of tactics to get whatever they want, this also causes prices falling.

and I'm speaking of this in a general sense, not just Wow.

[Darniaq]

90.

Raph wrote: So this looks to me like classic mudflation: http://blogs.parc.com/playon/archives/2005/08/change_in_level.html At least, it's one of the classic signs of it.

Going back to this link for a sec, I noticed something somewhat unrelated to this current discussion: the spikes at 30, 40, and 50. The spike at 40 seems obvious, what with players probably getting knee deep into farming for gold for their first mount (unless a Warlock or Paladin). However, 30 and 50 are a bit harder to explain. I decided to try though (linked because it's long and off-topic).

[Patrick McKenzie]

91.

There is a really simple explanation for this, and you have to play WoW to understand it: the items which are cited are among the lower level tiers of goods available to a player at level 60, and as players progressively become more powerful as they gather better, rarer dropped items from instance runs, Onyxia and MC raids, and the newly introduced PVP rewards, the demand for suboptimal items available to the same characters drops. What you're seeing isn't deflation, its a substition effect. (Large Radiant Shards can't be substituted for, of course, but as the demand for the enchantments they can make falls, while the supply in the economy from nuked crud drops remains rather constant, the price will inevitably fall until it hits either the NPC-established floor or drops below the point where people consider the effort of nuking and selling them to be worthwhile).

[XP]

92.

Your data seems rather sketchy. My personal experience on low-level reagents is that their price fluctuate a lot. I've seen Strange Dust go from 20 silver a stack to more than 1 gold..
You'd need to not only track several commodities, but to track them in time.

My wife used to buy a lot of 40ish magical stuff, disenchant and resell the reagents. Well, that "junk" stuff is now definitely priced higher.

[Raph]

93.

Given that this thread is still (amazingly) alive, I thought that it was worth linking to these two locations:

http://feetofclay.us/?p=51

http://babylona.org/?p=78

as I think they add to the discussion. There's some talk in the comments on the latter that is directly relevant to the question of whether or not WoW is suffering mudflation...

[Dan]

94.

My observations were that end level items had a severe deflation becuase the end game of WoW consisted of several areas that were rich in these materials. But if you look at level 35-50 items the prices we're severly inflated because not many would choose to go back and farm them.IE the high level shard brilliant was 4-6g but the step below radiant I believe was 8-10g

[Timothy Dang]

95.

Getting back to you, Bruce, after much longer than you took to respond. Addressing things out of order:

Burce:From what I can see, I think it may be better to treat WoW currency as a traditional commodity, rather than as a modern fiat currency. For a few reasons including, the fact that the number of gold pieces in the economy is by no means fixed

WoW gold certainly has some things about it which make it map messily to the real world. I think it's still better to consider it a currency than a commodity, although that largely depends on how much it's used in different capacities, about which I can only guess.

My guess is that WoW gold gets used primarily in inter-player trade, with a moderate amount of ongoing moderate expenses (teleport runes for my mage, equipment repair, crafy supplies, maybe food, training) and occassional big expenses (mounts).

The stuff that's bought from the game I would say make the currency something like a backed currency, in that there is a world-set commodity value for a silver piece, regardless of what else players may decide to do with it.

The AH makes the currency an "inside fiat" currency. (Actually, this is a term I've heard from one source. It's not commonly used, but it's good to have a term for it.) Whether backed or not, it's needed to participate in an important part of the economy. I can't bid to trade healing potions for a sword at the AH.

As for whether the supply of currency is fixed, my limited macroeconomics makes me think that the supply of dolalrs isn't fixed, either, due to banking. That is very different from going out and digging up dollars in my backyard, however, which is effectively what you can do in WoW.

Bruce:n a highly liquid MMOG economy, stuff can be easily traded for cash, and that cash can be easily traded back for stuff. A simple example is that no matter how much linen you find in WoW, the merchant price never goes down, and there is an unlimited fixed price demand for the linen. In a similar way, there is an unlimited fixed price supply of many items that vendors sell.

I don't know how important the stuff=>cash=>stuff cycle is. Traditionally, there's a big loss in the cycle. A quick check shows that I can buy a Rune of Portals for 20 silver, and sell it back for 5 silver. Also, while you can sell (almost) anything that way, most things aren't available to purchase from NPCs. These items provide backing for the currency, and the NPC prices set upper and lower bounds on price fluctuations, but it's really not clear how important the specific prices are in the overall economy.

I think your overall point makes sense, that "inflation" maybe doesn't mean the same thing in and out of game. I've been using it in a vague way myself, which doesn't match what's meant by RL inflation. I mostly have been using it to describe when wealth (cash and goods) grows to a point where things start getting screwy. Sometimes that will manifest as price inflation or price deflation in the traditional sense.

[richard]

96.

Not to over-simplify (it seems a lot of you like to get into very long-winded academic responses, which by all means is wonderful coming from an economics background myself), but I really think it's just the simpliest reason that is right, supply and demand.

Over the past few months I have made a living at the IF auction house, following prices and trends. Now like mentioned before, it seems any "rare" item under level 40 has seen significant inflation. I have not done any research, but intuitively, these items are put there not for a person's main character, but more for an alt. The inflation could reflect the fact that high level mains have the gold to spend on lower level alts. Also, some of the BG's have level requirements that people don't want to get past (one of my friends refuses to get past lvl 39 because of BG), making these items more desirbale.

As far as the higher level items, it would appear to me that most people 55+ will be going after set items or BoP items that cannot be sold, as they are in most cases better than the BoE items you will find at the AH. As such, the items you see at the auction house are not in as high demand.

Another example is with Pristine Black Diamonds. I'm sure most of you have noticed that these are dropping MUCH more frequently after the 1.7 patch, most likely a revision to the loot tables. Now before the patch, i would see PBDs in the AH for anywhere from 500-1000g. The day after the patch, 400-500g. A week after the patch 150g. I also firmly believe that these prices will continue to drop. It's not like the usefulness of a PBD has changed with the patch, it's just that there are more of them.

....that and farmers flooding the market with goods, it's hard to get a good price on that glowing brightwood staff when there are already 15 up for auction.

sorry for the rambling not so organized fashion of this post.

[Aurelion]

97.

Actually, deflation is exactly what every efficient market should see over time. Inflation is a product of poor lawmaking policy and too much of an attempt to control prices. The markets, which are entirely uncontrolled in WoW, are extremely free. Deflation is inevitable, as costs go down (more people get to 60 and mining objects is easier) and people optimize the movement of materials (for instance, get larger bags to hold more before spending money - i.e. through flight or teleportation - to transport the goods back to the Auction House).

Also, the Auction House, like ebay, greases the market quite well, because it puts willing buyers with willing sellers...and yet, they are allowed to advertise independently.

What should cause *inflation* is the printing of more money. In fact, every time looting takes place on a corpse, money is printed...which is exacerbated by Chinese Gold farming and other like activities.

[gmt]

98.

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[Mithra]

99.

Is no one actively moderating TN to remove crap like what gmt just posted above? Why am I also not amazed to see that their website is a chinese domain? No doubt gmt is a 25-cent per hour employee tasked to cut and paste their standard honed-english advertisement and paste it into every blog and forum they find through Google (the non-functioning hyperlink and keyword meta-tags ought to be a giveaway), but they cannot otherwise read or understand the content of this blog. I wish the MMOG industry would seriously take these guys to task. This is just shameless, blunt and invasive strategy for f*-all commercialism.

[printing pepair]

100.

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