Game thinking from Adam Clare

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Economics in Video Games

“For all intents and purposes, this is an economy that has activity equal to a small country in real life,” Guðmundsson says. “There’s nothing ‘virtual’ about this world.”

A recent article in the Washington Post on economics in video games is a great read. The way economists and video game makers can work together is fascinating. It’s a perfect cycle from the digital into the physical as economists can learn from game worlds while game makers can learn from economists. The thing is, as the author points out, the two groups of people don’t always get along.

Some companies like EVE, Valve, and ArenaNet have already hired economists as these companies have realised the importance of in-game economies. I’m often shocked when I see things like how smaller companies can really mess up their business plan because they don’t know basic economic theory (although the Wired article is on freemium, you get the idea).

In Eve Online, Guðmundsson oversees an economy that can fluctuate wildly — he says it expanded 42 percent between February 2011 and February 2012, then contracted 15 percent by the summer. His team will periodically have to address imbalances in the money supply. For instance, they can curb inflation by introducing a new type of weapon, say, to absorb virtual currency — not unlike the way a central bank might sell bonds to shrink the money supply. (In theory, Eve Online’s currency has real-world value — the highest-level spaceships, the Titans, are worth the equivalent of $5,000 to $8,000.)

“We’ve even seen large alliances trying to manipulate aspects of the market to control the supply and affect prices,” Guðmundsson says. “It’s a lot like OPEC.”

One of the great things is that the in the digital world a lot more can be recorded than in the physical world. As a result, economists can perform more detailed analysis to help our understanding of both virtual and physical economies.

“In real life, if you want to know what’s happening with car sales, you might call up a handful of car dealerships and ask what their sales are like this month,” says Dmitri Williams, a researcher at the University of Southern California. “In a virtual world, you just know everything. There’s no sampling, there’s no error. It’s perfect information.”

The article also mentions at the work Yanis Varoufakis is doing at Valve, lucky for us he keeps a good blog on the economies Valve is currently running.

Watch the IGDA Toronto on Freemium Business Models

The most recent IGDA Toronto event was called Dr. Gamelove, or: How I Learned to Stop Worrying and Love Freemium and they posted the panel conversation from it online.

Love it or hate it, many have a strong opinion on freemium and September’s IGDA Toronto panel is no exception. Join us on September 25th as we present a group of industry experts in Dr. Gamelove or How I Learned to Stop Worrying and Love Freemium to discuss the implications of this controversial financial model.

Our panelists include Trevor Fencott (bitheads/Playbrains), Rob Sandberg (Fuse Powered), Andy Smith (Get Set Games) and Nathan Vella (Capybara Games) and they’ll delve into the pros and cons of this much-discussed model and whether it’s here to stay.

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