Journal of Virtual Worlds Research, an online outlet for virtual worlds -related “think pieces” and scholarly papers, has published its sixth issue, titled Technology, Economy and Standards. Below is my selection of economy related papers from the issue, with comments.
Markus Falk, Daniel M Besemann, James Michael Bosson
In subscription-based virtual worlds the fee a user pays for participation is clear. However, in worlds in which the provider’s revenue is generated via transactions made by users using a real in-world currency, lack of transparency in the underlying mechanisms can make it difficult for a user to gauge the service fee being paid. This paper studies the payback of mining activities within the virtual world Entropia Universe, with an aim to determine the cost of participation in this activity for the user. Entropia Universe developer MindArk estimates the normal service fee for an active user averages at $1 per hour. We compare our findings to this figure and observe how transactions between players can affect a user’s returns. A statistical approach is employed, based on a large number of data points acquired by two Entropia Universe avatars. A theoretical mining-returns model is also created, consistent with our data sets, and is used to make predictions about general cost and profitability for Entropia Universe miners. These methods could be used to analyse the economy of other activities in Entropia Universe, and possibly activities other virtual worlds.
This paper nicely summarises the Entropia Universe economy, which is described as a game of chance played against the house. A level of skill is required to maximise one’s chances of winning, but in the long run, the house always wins. Since Entropia’s virtual currency is redeemable for real money, it is essentially gambling. Blackjack seems to be the the closest comparison that comes to my mind.
The empirical part of the paper is a curious effort of reverse engineering the loot probability distribution set by the game’s programmers. It represents a sort of natural science of virtual spaces: meticulously executed, but of dubious scientific value, because no new knowledge is created (the programmers know the loot distribution, even if they won’t tell). The paper would have been tremendously improved if the authors could have shown what useful or interesting implications flow from this loot distribution table. For example, the results might have been linked to behavioural psychology, gambling studies or business model research. I hope the “Journal of Virtual Worlds Research” does not stand for “journal of research on how the laws of nature work in virtual spaces”.
Still, this is one of the better papers of the issue. For me, the most interesting parts are the (unsourced) descriptions of Entropia Universe’s players’ own conceptualisations of the activity they are engaging in, and of the approximately $1 per hour which they are paying for it.
Virtual worlds typically contain systems of resource allocation, production, and consumption, which are often called virtual economies. The operator of a virtual world clearly has an incentive to monitor the virtual economy, and users and outside observers would benefit from e.g. temporal or cross-economy comparisons. Standard methodology of computing macroeconomic aggregates for virtual economies would allow this kind of analysis, but such method is currently unavailable. This study fills this gap by employing the concepts of national accounting and unique log data from a virtual world. In particular, the focus is on virtual economies where the production of new virtual goods takes place as the users expend inputs to produce predetermined outputs along predetermined production paths. The major MMOGs fall into this category. Previous attempts on measuring the aggregate production of a virtual economy have been based on non-standard method and externally collected data. In virtual economies the operator can collect extensive data automatically, a characteristic feature that should be reflected in any standard accounting scheme. Macroeconomic aggregates for a national economy are computed using the UN System of National Accounts (SNA). It is a standard accounting system, and its probably most quoted outcome is the gross domestic product. The most relevant borderline in SNA lies between the national economy and the rest of the world: domestic production is included, whereas foreign production is not. SNA cannot be directly used in a virtual economy, as the concepts of “domestic” and “foreign” are not applicable. In this study, the concepts and methods of SNA are transferred to a virtual economy context. The relevant distinction in a virtual economy is made between production by the users and the creation of goods by the virtual world code. Application of the concepts of SNA and flow chart analysis result in an aggregate measure called the Gross User Product (GUP), which measures the value of the aggregate output of production activities – of both goods and services – by the users of a virtual economy. In the empirical part of this study, the potential of GUP is demonstrated by measuring it for the virtual economy of EVE Online based on extensive log data collected by the operator. Temporal comparisons are performed after purging the GUP values from the effect of significant deflation using a chained Fischer index. A 50% real growth per user is observed for the first half of the year 2007. The composition of GUP has remained rather stable during this period of significant growth. The concept of GUP is general, and it can be used for quantifying virtual economies other than that in EVE Online on the macro level.
This paper is one of fruits of HIIT’s research collaboration with CCP Games. In my opinion, Castronova et al. would do well to read this papers’ criticism of the notion of calculating GDPs for virtual economies.
Anna Vartapetiance Salmasi, Lee Gillam
Abstract— Online gambling produces a substantial turnover. Unfortunately for potential virtual world gamblers and gambling organizations alike, US law had forced the closure of gambling in the Second Life virtual world. However, an Open Grid Protocol could lead to the provision of off-shore gambling in this virtual world. Aside from legal issues, online gambling generally gives rise to ethical issues relating to prevention of harm. We considered the combined legal and ethical issues, and have proposed and begun to construct and evaluate a system with computational oversight: an ethical advisor. The system is grounded in recent research into Machine Ethics, which may offer insights into other legal and ethical matters, and provides a framework for responsible gambling in our EthiCasino (ethical virtual casino) in Second Life.