Economic Theory and MMOGs AGDC – September 7, 2006 Sam Lewis.
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Transcript of Economic Theory and MMOGs AGDC – September 7, 2006 Sam Lewis.
Economic Theory and MMOGs
AGDC – September 7, 2006
Sam Lewis
What is this about?
Summary of 2 GDC Roundtables
• Monetary Policy – managing the money supply
• Market Structure – creating a trading structure
• Industrial Organization – creating crafting/business relationships
Who Am I?
Sam Lewis
• Currently Lead Designer Cartoon Network
• Senior and Lead Designer SOE
• Designer and Producer Kesmai
• BA and MBA in Economics
What is Economics?
The study of how the forces of supply and demand allocate scare resources in a society.
Price
Quality
Supply
Demand
Price
Quality
Supply
Demand 1
Demand 2
Why Use Economics?
• MMOGs are Social Games
• Analyze Current Phenomena
• Make Design Decisions
Price Movements
Thanks to Dan Speed – EVE Online
Natural Market Places
Thanks to Ahn Sang Hoon - Seal Online
Final Reason
“You can’t screw it up any worst than it already is.”
- Gordon Walton
The Money Supply
Objectives
• Sufficient cash for the
economy
• Avoid monetary collapse
• New players aren’t “poor”
Monetary Collapse
Could be Considered Fun
Plan for Commodity Currency
• Divisible
• Uniform
• Storable
• Durable
• Compact (High Value/Weight)
P= MV/Q
• P = price level
• M = cash in circulation
• Q = quantity of goods
• V= the velocity of money
Hyper-inflation
Depression
Healthy
Quantity Theory
Quantity Theory
P= MV/Q)• Healthy
– Holding cash maintains wealth.
• Hyper-inflation
– Holding cash loses wealth.
• Depression
– Holding cash increases wealth.
Hyper-inflation
Depression
Healthy
Quantity Theory
P= MV/Q• Control Price via Money Supply
• “Poor” Players via Market Prices
Hyper-inflation
Depression
Healthy
Faucets and Drains
Player-to-Game Exchanges
• Faucet – Player selling to the game
• Drain – Player buying from the game $
Faucet Player Control
DrainGame Control
Faucets and Drains
• Players control cash creation– If they need more cash they open up
the faucets
• Drains are fixed– They stay the same size regardless
of the Price Level
• It will become Hyper-inflated– Its just a matter of when
$
Faucet Player Control
DrainGame Control
Solutions
Tie the Drain to Price Level
• NPC Prices rise and fall
• Auction
• Transaction Tax$
Faucet Player Control
DrainGame Control
Transaction Tax Example
Two Player Economy
• Adventurer needs bullets to kill mobs to get cash
• Crafter makes bullets
• Crafter sets price based on demand
• Crafter pays both a fix offer charge and percentage sales commission
Transaction Tax
Money Supply
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Time Period
Money Supply
Adventurer Cash
Crafter Cash
“Poor” Player Issue
Because Prices Increase-
• Value of starting cash declines
• Faucet stream “too” small
• Can’t buy good stuff
• Makes new players dissatisfied
Solutions
Non-inflationary Solutions –
• Have NPCs provide basics
• Make elder players dependant
on a starting commodity or
service
Market Structure
What Market Structure should be used?
• Real World Economy Objective – Pareto-optimality – resources optimally allocated– Perfect Market
• Game World Economy Objective– Fun – players are engaged and can win– Oligopoly
Market Structures
Perfect EconomyOligopolyMonopolyBarter
Structures Approach Perfection
Market Structures
• Numerous Buyers/Sellers
• Homogeneity of Product
• Freedom of Entry and Exit
• Perfect Information
• No/Low Transaction costs
• Secure Transactions
• Infinity Divisible Goods
• Few Sellers, Many Buyers
• Substitute goods
• Barriers to Entry and Exit
• Imperfect Information
• Transaction costs
• Secure Transactions
• Infinity Divisible Goods
Perfect Market Oligopolies
Few Sellers
• Fragment the Sellers by Location
– EQ one Auction House
– EQII two Auction Houses
– WoW three Auction Houses
– SWG one planetary commodity/many player
vendors
• Fragment the Sellers by Time
– EQ must be logged in
– WoW offers for limited time period
Many Buyers
• NPC Vendor of Last Resort
• Consolidate the Buyers by Location– SWG commodity auction info was server wide, but
you had to go and pick it up– EQII buyers view other auction info and purchase
for a higher price
• Consolidate the Buyers by Time– Posting offers to buy
Substitute Goods
Differentiate Goods Based on -
• Effectiveness Tradeoffs
• Esthetics/Fashion
• Scarcity
Barriers to Entry
• High Fixed Costs– SWG shop investment (house, tools, location)– EQ and EQII significant time investment
• Specialization– WoW one resource and one manufacturing skill,
but need 3 or 4 to make an item.– SWG (old) max two crafting skills, but need 3 or 4
to make an item.
Imperfect Information
In conflict with few Sellers/Many Buyers
• Create Arbitrage Opportunities– WoW market tracking software
• Future Economic Events– There players working payroll cycle
Transaction Cost
Player’s Currency is Their Time
• Make it Expensive to Change Vendors– SWG - have to pick up – WoW – time to get to the other locations– Makes location based competition valid
Security and Division
• Allowing players to cheat on a deal causes more customer service problems than it is worth
• Making goods indivisible means getting rid of cash
• Play with these at the risk of destroying the business game
Industrial Organization
Study of Industrial Structures
•Market Structure
•Manufacturing Chain
•Competitive PracticesConsumables
Equipment
CrafterAdventurer
Key components
Resources
Crafter
Crafter
Industrial Organization
Consumables
Equipment
CrafterAdventurer
Key components
Resources
Crafter
Crafter
Typical MMOG Relationship
•Adventurers Sells Raw Materials
•Others Supply Sub-components
•Crafter creates Final Product
•Sells Adventurers Items
Industrial Structure
Design Issues
• Manufacturing Chain
• Over Production
• Elder Dominance
Consumables
Equipment
CrafterAdventurer
Key components
Resources
Crafter
Crafter
Chain Solutions
• No Independent Crafters– Make sub-components– Make final products
• Competition on 4 Ps– Price– Product– Place– Promotion– (Predation)
Consumables
Equipment
CrafterAdventurer
Key components
Resources
Crafter
Crafter
Over Production
Caused by Oligopsony Structure
• Advancement Independent of Manufacturing
• Destroy Overproducing Factories
• Make Items Consumable
Elder Dominance
Caused By Natural Monopoly Structure
• High Fixed Costs
• First In Advantage
• Constantly Declining Marginal Costs
Declining Marginal Cost
• Cost to Produce Always Cheaper
• First–In Always Under-Cut
$
Quantity
Marginal Cost Curve
Overproduction Solutions
• Cap Quality– Elders make the same quality item
• Cap Cost– Elders cost the same, including wastage
• Use Comparative Advantage– Elders move on to supply their market
Conclusion
• Simple Economic Theory Provides Insights to Design Decisions
References
• Terra Nova
– http://terranova.blogs.com
• Flying Scythe Monkey– http://www.flyingscythemonkey.com/
• Eve Developer Blog (Dan Speed)– https://myeve.eve-online.com/
• Synthetic Worlds– Edward Castronova