A virtual world is a 3d representation of a setting where the player perceives his or herself as a virtual character that interacts with the environment. Millions of players log into virtual worlds each day on Massive Multiplayer Online Games, MMOGs, and many devote much of their available time towards playing the game and developing their characters. These worlds mimic much of what we know in today's society, but present it in such a different and unique way that grabs the player's attention. As these games become more popular, the games grow themselves. Developer’s add more content to the game and alter the game mechanics to maintain a stable and fun environment. Many of these alterations work at maintaining a stable economy within the games. What we are witnessing today is a fully functional market economy. Players use currency created in the game to buy and trade items. Not only do the games have a market within themselves, but many players take business outside of the game and into the real world with the use of EBay and other transaction resources. The differences between the real world economy and virtual economies are becoming more blurred as more people would rather pay for services than spend the time in game to earn them. The reality of the situation is that virtual worlds and their economies are becoming real. It is the intention of this paper to investigate how these economies within MMOGs are functioning and how they are affecting our real world economy.
Edward Castranova, a professor at
While background information was provided about virtual worlds, it is now necessary to see how these economies in the game work, and how they promote the game play. In many MMOGs, such as Everquest and World of Warcraft, a large portion of the economy is driven by the collection of dropped items from slain monsters and the trading of these items. Other sectors of the virtual economy are on goods that the player works to get by using their abilities. Examples include mining for gold or fishing. To look at the market economies in virtual games that use this monster slaying and specialization of abilities, it is necessary to define what a market is. It is often thought as the interaction between sellers and buyers for goods and services. Virtual economies are working markets that incorporate many practices of the real world economy but also differ in a number of ways. The economies in virtual worlds, similar to the real world, incorporate a limited resource. As you develop your character, you may only acquire a certain number of abilities, and you can choose which ones to acquire. As you gain experience while playing the game, by performing certain actions or slaying monsters, you can learn these new abilities and direct what path your character will take in his development. While these are similarities with real life, they are very different because all players have equal resources when they start out, but the resources become limited while you progress in the game and your characters begin to develop and differentiate themselves. Furthermore, according to Shapiro, “the second basis condition of self-regulating economic life in this virtual world, as in our own, is that nothing is free” (Shapiro, 2003). By developing new skills, and using time and earned currency to get new items, it is clear that nothing is free within virtual worlds. In addition, yet another element of an economy, specialization is present in virtual worlds. People specialize in the production of different goods by developing different skills and abilities in the game because it is more convenient to specialize in trade than to produce all goods by oneself.
In most MMOGS, such as World of Warcraft, there are two types of trade: player to player or player to computer (Castranova, 2001). When interacting with a computer, you have all the time to view what the computer has to offer and at what price. However, when interacting with players, you must first find the item you are looking for, or announce the item you are selling to other players. Once you find someone interested, the players barter for the price of the item. While it may seem to be more of a cost to perform transactions with players, there exists incentives to engage in player buying and selling. For example, goods offered by computer-run merchants are overpriced, and the goods bought by the merchant will be under priced (Castranova, 2001). This leaves a gap for players to form a market system with goods between each other because it is profitable to do so. Economics is driven by profit, even in the virtual sense. The developers of World of Warcraft facilitated the player to player trading by actually incorporating an auction system within the game. The seller of an item simply approaches an auctioneer at an auction house inside the game, places the item for sale, sets the auction duration and sets the buyout price. Buyers continuously enter the auction houses to browse for items, much like the use of EBay on internet sales.
The following video addresses the economy of
WOW, focusing on trade specialization and the auction house.
Now that we acknowledge that these virtual items are becoming an industry within the games themselves, we must address the connection between reality and the virtual worlds focusing on the use of real money in exchange for virtual items. These transactions are not very well approved by the gaming industry. Many companies have struggled to put a stop to the transaction of their goods on auction websites such as Ebay. Blizzard states that their in-game items from World of Warcraft are intellectual property of Blizzard and can’t be sold by players for real money (Balint, 2007). If a player is found to be engaging in this “illegal” activity, Blizzard claims they will ban the account and take further legal action (Balint, 2007). While Blizzard’s stance on the issue is clear, other companies are trying other means to handle the problem. Initially, Sony Online Entertainment, the creators of Everquest, were strongly against the selling of virtual items, and attempted to police Ebay (Balint, 2007). However, at the release of the second Everquest, they acknowledged that no matter how hard they tried to prevent such transactions, that players would find ways to perform them. Thus, they created a place called the Station Exchange where players could auction items away, and the company would ensure that the transaction was completed and the players received the items and cash (Balint, 2007). It seems that the best solution is to embrace the connection between the real world economy and the virtual economy rather than to cause players to use black markets to exchange their items. The internet is simply too difficult to police, and the legal incorporation of real money trades is the best way to maintain a stable virtual economy, and to ensure the use of fair transactions.
While the economies of MMOGs such as World of Warcraft have been addressed, it is necessary to look into a virtual game that is a replica of our society to explore the diminishing distinctions between real and virtual economies. In Second Life, players create people who live in a world just like ours in an online comunity. They can buy property, go to clubs, start a business, and design their own items. Many companies are recognizing such a close resemblance to reality and using it to test products and advertise. The following video explains the general idea behind Second Life with a focus on the economic incentives for real world companies to invest in the game and how the game can be used for education. As one can see, this game is made to resemble real life and a direct link to the virtual and real economy exists. The creators of the game praise this connection, as they give intellectual rights to the items created by the players, and provide a market where the linden dollars, in-game currency, can be exchanged for US dollars. The society thrives off of the buying and selling of other user’s services and goods. People actually set out in this game to work, design clothing, and manage a business. Furthermore, an actual real-estate economy exists within the game due to the buying and selling of land. The major transactions of land actually require real currency. The growing rate of a good lot of land is not cheap either, ranging around 1,000 dollars (Reena, 2006). The following video gives an overview of the economy of Second Life and how it functions.
Not only are players realizing this close connection between the economies, but as previously introduced, real businesses view Second Life as a business opportunity. Adidas has been working on selling virtual gym shoes in the game so they can see which shoes would be popular in the physical world (Reena, 2006). A number of other companies are also experimenting, such as
As more and more attention is placed on these virtual worlds, and business begins to enter into the equation, we face tough questions about how to realistically deal with a virtual world and the economy. In second life, there is no government, aside from the creators who can do what they want to the game. However, when you consider the blurring line between the virtual economy and our own, many feel that we must worry about virtual crime and the protection of virtual property. It is much less risky to act in a criminal way in a virtual world, where a criminal is merely behind a computer screen. However, it is a very real situation, as many hackers are stealing character identities and selling those player’s assets for cash. Furthermore, in Second Life, which resembles a real world society, players can choose to act in a way that would be wrong in real life. For example, using a child character in sexual ways in second life gives rise to issues over child pornography. The players found guilty of such actions are often found claiming “since when is fantasy against the law? (Sipress, 2007). It is necessary to find that distinction between real law and virtual law in games that mimic real society. Regardless of the stated arising problems with a virtual society, they must still be recognized as amazing spaces with an extreme potential. As shown below, a group created a U2 avatar to perform a virtual concert in Second Life, where many avatars attended. Such a spectacle truly exemplifies the amazing nature of virtual worlds.
As virtual worlds continue to attract more people, and their economies grow, it becomes more and more difficult to draw the line between reality and fantasy. As these complex systems develop, where functioning economies with virtual items and virtual services drive the success of the games, we must formulate ways to regulate the transactions of goods in the economies, and regulate other systems within the game. It is clear that the virtual worlds are providing a real basis of economic profit, and they must be recognized as economic systems, even if they aren’t “real”. As players in these games continue to believe themselves as citizens within the virtual worlds, we need to think about practices that regulate the economy and protect rights to maintain a stable economy, and protection of property. In time, it will be seen just how much of a real affect these 3D worlds and their economies have on our fantasy loving world.
Bibliography
Balint, Kathyrn. "Selling Fantasy-World Assets for Profit Raises Real-Life Concerns": State Journal Register: February 7, 2005. pg. 16.A
Blizzard Entertainment. "World Of Warcraft Reaches Nw Milestone: 10 Million Subscribers." January 2008.
Castranova, Edward . "Virtual Worlds: A First-Hand Account of Market and Society On The Cyberian Fronteir" October 2001.
Musgrove, Mike. "Virtual Games Create A Real World Market":
Ray, Michael. "The Virtual World of Online Gaming." Britannica Book of the Year, 2007. 2008. Encyclopædia Britannica Online. 23 Mar. 2008
Reena, Jana. "Second Life Lessons" Businessweek.com: October 30, 2006
Shapiro, Robert. "Fantasy Economics: Why Economists Are Obsessed With Online Role-Playing Games": February 4, 2003.
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