Terra Nova

Micro rewards have weird effects on decisions

Most games use a sequence of little rewards to nudge players around. This is very different from most salary and hiring and review structures, which are big rewards in big intervals. Much has been made about the power of the games approach and how it should be used everywhere. To date (I haven't been looking very hard), I'd not seen a hard analysis of how a sequence of little payments might affect the quality of decisions. Do they help people solve new problems? Do they help people remember what they are doing, and transfer the learning to other situations?

Here's a little experiment by economists Neilson, Price, and Shor that comes to these conclusions:

• If you give micro rewards when people are doing the right thing, they remember the right solution for the current problem and transfer it to similar problems. But they don't learn how to solve new problems.
• If you give micro rewards when people are doing the wrong thing, they get better at figuring out new problems, because they learn more about the dimensions of the problem (including bad strategies). But they don't remember much about the current problem and how to solve ones like it.

Resources for Designing Virtual Economies

Recently I've been hit up a few times for resources on virtual economy design. I haven't written that paper yet, nor has the other most prominent academic virtual economy guru, Vili Lehdonvirta. No, instead we decided to write a book on the subject, which should be coming out next year. Meanwhile, though, here are some links that will help.

Vili's talk on currency design

Simon Ludgate (what a great name!) at Gamasutra

Matthew Warneford on pricing virtual items

Richard Bartle's chapter on virtual economy design in his book

Julian Huehnermann's hands-on balancing

And finally, I would keep a close eye on Valve Economics and Yanis Varoufakis

 

Virtual Currencies Appear on Central Bank Radar

The European Central Bank has issued a report on virtual currencies. There's nothing to worry about, they say. Virtual currencies are no threat to the real world, since they are small and not enmeshed with the real economy in a significant way. This reminds me of a story. An optimist falls off a 30-story building. Passing the 15th floor, he says "So far, so good." When he hits the ground he says "Wow, I didn't see THAT coming."