Virtual Economy Analysis

In MMORPG’s (Massive Multiplayer Role Playing Games) there exists a virtual economy. Where prices are determined by the supply and demand of certain items. Games like; Runescape, World of Warcraft, Lineage, Anarchy Online, and Everquest. People who have played these types of games will likely agree to the fact that prices change within the game. Runescape for example, bears similarities with the real world economy. Items can be produced, traded, and used by the players. Players exchange/trade items through the Grand Exchange. The Grand Exchange (GE) is sort of like a real world market where items can be bought and sold. Prices vary within the GE just like in the real world primarily by the laws of supply and demand, which is the most basic

The differences with the virtual economy in Runescape and the real world economy is that prices in the game are only updated every 24 hours or so where as the real world, prices rise or fall at any given moment. The economy in Runescape also lacks risk free investments and an absence of government enforcement for financial contracts. It also violates, among other concepts, the efficient market hypothesis. These differences make the Runescape economy simpler.

Jagex, the creators of Runescape, is one of the biggest economic agents in the virtual economy or the government. They pursued a relatively liberal approach to the whole economy of Runescape. Players were the primary economic agents within the economy who evaluated their possibilities (skills like combat, trading, and interacting) with their constraints (money, time, and skills) in order to maximize their virtual wealth. The players determine the market prices for items. The number of players and the dimensions of the virtual economy grew so large that it started to spill over into the real world. By 2007, Jagex announced the size of the

As you progress through the game, the player is able to wear and use stronger and better equipment. The demand for these items such, as these are elastic with varying degrees. It is usually based on the items’ utility, availability of a substitute good, and also the players’ wealth.

The New Player Effect occurs when new players under the skill restrictions.

The supply and demand for the less functional items decrease overtime. When Runescape started, the demand for these less functional items were at an all time high, as players’ skills gradually increased, the demand for these less functional items decreased. But because of the influx of new players everyday, the prices are still affordable but the desirability span is short. Just like in the real world, why stick to cheaper items when you have the capacity to buy even better items?

All in all, the virtual economy is similar to the real world economy, sharing principles and ideologies. Players who understand how the in-game economy works can truly benefit from it just like those in the real