July 06, 2005

Economics and Sociability

I like playing the economic game. Thinking about how I played both SWG and WoW, it's interesting to see the ways that the implementation of economic transactions can have a large impact on the formation of long-term social relationships.

Commoditization Crafted items in WoW are commodities, in the sense that a Mooncloth Robe made by one tailor is essentially identical to a Mooncloth Robe made by anyone else. There is no customization available. As a result, price becomes the only differentiator in products that are widely crafted, and availability the differentiator for those that are more rare. In SWG, the situation was different. (I haven't played since December, 2004.) Raw materials themselves had varying qualities (along multiple dimensions) which were reflected in crafted objects and subcomponents. Crafters had to put quite a bit of effort into collecting good quality materials, and more effort into learning to combine them to produce marketable goods. In my case, I produced a type of armor favored by RPers and the fashion-sensitive. Each suit was custom-made, both in terms of color, and in terms of the additives the customer was willing to pay for. It usually took several days to negotiate an order, and a few more to fill it. Of course, I kept track of past customers. I had a clientele.

The fact that resources were not commodities meant that I had a competitive/cooperative relationship with a few other armorsmiths. Armorsmiths tended to fill niches, and I could cooperate more freely with smiths in different niches, but even with direct competitors, I would occasionally trade favors back and forth, knowing that we each had stockpiles the other could use from time to time.

In WoW, I don't keep track of clients. First off, they probably bought from me because I had the lowest price. But secondly, I don't even know who they are...

Market Visibility SWG and WoW both provide information about the seller to the potential buyer. When there is a sale, however, the two games differ. SWG sends email to the seller which contains the money, but also tells the name of the buyer. In fact, the in-game email appears to come from the buyer. In WoW, the money is attached to an in-game email from the auction house, and the name of the buyer is unknown.

Several sellers in SWG, including me, had a habit of sending a post-sale "thank you" note to the buyer. Several other practices were possible. Although SWG limited the value that could be sold through the main bazaar system, some craftsmen would sell certain items on the bazaar to advertise their vendor location, or to collect names of players buying certain types of wares. (Since crafted items could bear a crafter-supplied name, some tailors would place items on the bazaar whose name contain the address of their store.)

If we assume that crafted items in these games are likely to be purchased by a larger population than those who crafted them, then it stands to reason that sellers may have more of a vested interest in identifying and "locking in" high-volume or high-profit buyers. Thus, sellers may be more interested in collecting names of buyers than vice versa. But in WoW, it is only the buyers who can initiate contact. As such, the only contacts I'm aware of between a buyer and a seller otherwise unknown to each other involved a long-term contract for enchanting reagents and contracts for morrowgrain, needed in very large supply by people doing a rare quest.

All in all, I reach the conclusion that even minor facets of the crafting and economic can have a large impact in the social relationships formed among crafters, between crafters and consumers, and between buyers and sellers.

Posted by eric at 11:20 AM | Comments (9) | TrackBack

May 18, 2005

Thoughts on a No-Cash System

Barry Kearns has posted a very interesting article about how the economy would work for an MMORPG using a No-Cash System. A major goal of such a system is that it prevents twinking, and prevents players from buying game currency for real-world currency on the internet. Whether these are laudable goals is debabatable, but debatable elsewhere.

I find the ideas intriguing, but has at least two flaws: (1) It places constraints on the nature of objects that can be bought and sold, or (2) it won't work, anyway. If we understand these problems better, we may be able to re-design an economy that meets those goals.

Kearns calls this proposal a "continuous double auction with a closed order book." In his example, Ellen has purchased 10000 units of gold from James external to the game and is trying to deliver it. They try to use the commodities market to have James buy 1 of some item Ellen is selling for the 10000 gold, but they are stymied because the system itself is willing to buy items offered for sale at less than 25 gold, and is willing to satisfy demand for that commodity for any buyer willing to pay 75 gold. James can't buy Ellen's item for 10000, because the system itself will sell him cheaper items at 75.

But if I were James, here's what I would have done. It requires two things: one commodity market that is cleared of all buyers and sellers other than James, and that Ellen have enough funds to buy one item in that market. Assuming that James runs a business, and has a source of game currency, he may have to expend some of that currency to keep some market clear, but that's just the cost of doing business.

Once we have the conditions above, Ellen bids to buy one item at 26, and then James offers one item for sale at 26. Next, James offers to buy at 74, and Ellen sells one for the same amount. Ellen now has 48 gold profit, and we repeat the cycle, and she has 96 gold. Now we can do it again with 2 items, so that Ellen is up 192 gold. And so on.

With a clear market and enough cycles, James and Ellen can exploit the system-bounded price range to transfer as much gold as they want (in O(log n) transactions).

Sellable Items Must Be Common. To thwart this more subtle attack, it must not be possible to empty an market. But to do this would place constraints on the nature of objects that can be bought and sold.

For example, on my World of Warcraft server there's usually around 5000 items offered for sale by other players, of which 1500-2000 are "uncommon" armor pieces. (As an enchanter always on the prowl for cheap ways to get enchanting reagents, I happen to watch this market closely.) And after disenchanting about 10,000 items, about 15% of the items on today's market are ones I haven't disenchanted before.

To use the No-Cash system, the game would have to avoid these "rare" objects, which are so common in games like WoW.

All Sellable Items Can Always Be Purchased. This is a side-effect of the system having a sell-to-you price that bounds the highest price that may be paid for such an item. If this price is set very high, then Ellen and James can play their backwards arbitrage in a small number of iterations. When it is set lower, however, then anyone who wants that item can just fork over the bloated price.

Failure to Find the Correct System Buy and Sell Prices Results in Empty Markets. Let's imagine a situation where demand for Heavy Leather is strong enough that the price rises to 15 gold for a stack of it in a free-market situation. But the system price controls bound the price between 8 and 14 gold. The leather gatherers can sell all the leather they want at 14, but if they offer it at 15, the system underbids them. So they have to scratch their heads and ask, "Is it worth gathering heavy leather if I can only get 14 gold for it?" As long as demand stays heavy, and the price bounds stay fixed (which is not guaranteed), the market will stay empty.

Posted by eric at 10:09 AM | Comments (4) | TrackBack