MMO Economics

#1 The great thing about an MMO is you get players who like to do everything...

Lets take Eve online for instance my resent addiction... now granted it has money in it from killing npcs, most of the money made from the game is player generated...

Players mine ore, they use the ore to make things and then they sell them to players...

But in short you have to have a place for the money to come from first (The NPCs)

Because selling goods is no good if people cant buy them..

Basicly you need to make the money that is in the game circulate more then the game generated money..

I know thats hard to explain and hard to wrap your mind around.. but think of a way to keep players reusing the player cash instead of farming massive amounts of money to buy something from an NPC....

This also yields alot of problems...however

In short.. kill botting in your game.. that is the main reason for inflation in a games economy

#2 Well, my basic idea is have a fixed amount of money in the game to start. Say $1 million for sake of ease. Then, the market changes according to how many rich their are, how many poor their are, etc. You could even dynamically change vendor pricing of items and how much each NPC will pay for certain items. Run it off of supply and demand.

#3 If you were to limit the maximum amount of currency in the game, those who don't have money will be at the mercy of those who do. If someone (or a group of players) were to save up $500,000 of in-game cash, then the value of the currency will go up, as there is less in circulation.

If the value of the currency goes up, then that player (or group) may be able to buy what would usually cost $700,000 worth of materials or items. If that money was then freed up and put back into circulation, the value of the currency will drop drasticly and it would ruin alot of players experience.

#4 First, if you only had $1 mil in the system, it would take YEARS of playing to get half of that even for a group of people. You would be paying such small amounts out for things and things would cost such small amounts. I only used $1 mil for ease of the discussion, not for a practicle amount.

And you would still 'leak' money into the system through resource gathering and the like. A good example would be say trainers. If trainers aren't being used and players are simply training each other, then trainers will make less money (money sink) so therefore the 'government' pays less for you to quest. This will allow players to help mold the economy without spinning into a spiral of inflation.

#5

Quote:First, if you only had $1 mil in the system, it would take YEARS of playing to get half of that even for a group of people.

Don't be too sure of that. There was an interesting post mortem on an online game where they made a similar assumption, and the rich got richer while the poor got poorer, and the economy suffered at the hands of both.

#6 Have a link? If not, what's the game name so I can look that up, I'm always interested in post mortems!

Also, if this happened to them, they obviously paid out the wrong amounts to people ;).

If anyone has any good game economics links, place them here for easy reference please.

#7 @Isaac: Botting is a concern, but it's far from the sole cause of MMO economies going down in flames. Look at the disruptions caused by various exploits in the major MMO's, like the duping bugs in WOW, or the "pie tin" exploit in EQ... These caused massive inflation literally overnight, and the designers had to step in quickly to save the economy. IIRC, WOW actually needed to do a rollback to undo the damage. Very messy.

@Jonathon: Do you have a particular framework in mind for an economy? I like the idea of establishing a fixed amount of currency, but how does that tie in with commodities that can be bought or sold? How can the currency be kept in motion, rather than stagnating in someone's account? Come to think of it, what happens when wealthy players abandon the game? Are those funds out of circulation indefinitely?

The system I'm working on at the moment is fairly complex. I think it's got great potential once the rough edges are polished. My goal is to make a self-regulating economy that's primarily player-driven, but heavily influenced by NPC's. The NPC's act as the regulating force in the economy, moderating spikes and depressions.

Brace yourself, this summary gets hairy. I'll try to keep the math out of it.

Players can sell to other players as well as NPC's. (In my game, much of the selling will be automated, creating a sort of mini-game for the merchants and empire builders.) The commodities in the game are tightly interwoven, and there's a great deal of interdependence among player craftsmen.

The PC side of the economy is based on Marshall's model of supply and demand. It's governed solely by player-to-player interactions, and is subject to hoarding, spikes, inflation, and all the other hobgoblins that can plague an economy. That's okay, provided they even out: they're short-term challenges that add spice to the game.

The NPC side of the economy -- the factors that determine what products an NPC will buy, and at what price -- is based on Say's Law of Markets. Say's Law more or less states that demand is determined by supply -- the more of a product there is, the more demand there will be for that product. It's a theory that's been widely discredited as having no basis in reality... but this isn't reality we're talking about here. I think it's a perfect model for a controlled economic system in an MMO.

Each night, the server applies various formulas to each commodity in the game. These take into account the active population of the game world (POP), the average price each commodity is selling for at the moment (global average price, or GAP), and the number of each product that exists in the game world (SUPPLY).

Each commodity has an arbitrary factor, NEED, that represents the percentage of NPC's that will buy an item in a given day. NEED times POP gives you DEMAND, the total number of purchases to be made.

Once these numbers are determined, the fun begins. The server assigns a pricing factor to each PC merchant. This factor is a boost or penalty to that merchant's sales. It's determined by comparing the GAP to the merchant's set price for a commodity. Merchants selling at below the average price will sell more of their inventory (everyone likes a bargain), and ones selling above the GAP are penalized (because people don't like to be ripped off). The greater the disparity, the greater the bonus or penalty, up to a certain limit. (That limit is in place to prevent Wal-Marting, where a player tries to undermine the economy by selling a large quantity of goods at a ridiculous loss.)

Merchants are sorted based on their pricing. The closer a merchant is to the global average price, the more likely they are to sell their inventory. When DEMAND has been satisfied, no more NPC purchases will be made that day, so the higher the price is above GAP, the more likely they'll be shut out by the competition.

After the automated sales are calculated, the server looks at SUPPLY and DEMAND. If SUPPLY exceeds DEMAND, Say's Law dictates that more demand is created. So, the server increases that commodity's NEED factor by 2%. More NPC's will purchase that commodity tomorrow.

If DEMAND exceeds SUPPLY, the commodity's NEED factor is reduced by 2% -- demand will decrease tomorrow, and fewer items will be purchased by NPC's. Demand will continue to decrease until the economy is in equilibrium.

With the tightly interwoven commodity system, the whole economy will fluctuate and ripple from week to week, but is kept from spiralling out of control by the moderating influence of the NPC market.

I hope all that made sense! It's a little easier to understand in a spreadsheet, but hopefully, the idea is clear.

Test runs have been great, and I can't wait to try it out against live humans. So far, my testing has only been against a simulated player base... God only knows what sort of perversions the real players will introduce into the system! =)

-- JohnDopp

#8 I've been asked to comment, so I will. The most important thing to realize when designing an economic system in a MMO, not all the rules of traditional economics apply. For example supply and demand doesn't work the same way if a suppy is potentially infinite. The second most important thing to realize is things that are good for these economies, generally makes players unhappy. With these two givens, the best goal you can hope to achieve is a system that is self correcting.

The first facet of the design I would suggest tackling is inflation. Jonathon already said that unlimited currency moving into the game world and relying on users to shell out to remove it won't work. The obvious conclusion is that if you can't have unlimited currency moving in, you must have limited currency. The question becomes how should that limit be enforced.

The fixed amount off currency is a very simple idea to implement, so from a computing perspective it is very attractive. However from an economic perspective it has a serious flaw in that when players begin hoarding money for larger transactions, the circulation is reduced and the economy as a whole suffers as prices drop in response to a reduced money supply. This is then exagerated by players who scrimp and save even harder in response to their lowering income. Real world ecomics have demonstrated through the use of a federal reserve system, that a fluctuating money supply is crucial to reversing trends; More money to combat recession and deflation, less money to combat inflation and expansion.

Unsung Zero points out the problem that some players will try to corner the currency market. Players are clever so will can to count on this happening. Ted Southard points out that the system can create ultra wealthy, and destitute players, and that the play experience suffers on both ends. So Ideally a system would work to correct this. A basic idea is that wealthy players should have a hard time accumulating wealth when compaired to poor players. The difficulty will be creating a system that does this but can not be exploited.

JohnDopp's post is by far one of the most insightlful posts on the topic I have seen. The key is the he has already recognized the need for an adaptive system. This is the easy conclusion to come to. The argument starts when we begin discussing the the intricate details of how to do it.

#9 William: Interesting points.

What about this idea? Given the fact that money can be had by harvesting resources, and you want to limit the flow of money, how about regulating the flow of resources in such a way as to limit the amount in existence at any given time?

For example, say you have 100 rare blue diamonds in your game world that can be mined. If someone mines one, you're tempted to spawn another, but set the spawn chance down to 0.00001% compared to everything else that can be mined. Lo and behold, by the next day, everyone in the game has three. An obvious exageration, but we all know where that was going. Anyway, what about making it so that once the 100 are mined, they don't spawn at all anymore?

Well, you ask, what's the use of that? The use comes in when someone destroys the diamond from their inventory, or when it's sold back to an NPC, who then destroys it from it's inventory instead of reselling it (since it's a rare find, you don't want them just bouncing around the pawn shops, you want people digging for them to make mining fun and rewarding). But, for every diamond destoryed from inventory or sold to an NPC (who then does the same thing), a diamond is released back to the pool of diamonds that can be spawned to mine.

What that does is make some rare things an actual commodity that can (and probably will) run out. Maybe it won't run out totally- maybe the spawn rate goes from 0.00001% to 0.0000001% to slow it's appearance, and maybe the destruction of diamonds or the influx of them into the possession of the world will give an ebb and flow to the rate at which they're mined, helping to give it a less volitile price in the market.

The vulnerabilities to this is, obviously, hording. If someone were to gain possesion of, say, 80 diamonds, and stash them away in a bank, then that person would be in control of the diamond market. However, as the person held on, if the diamonds were still found (even at a much slower rate), then the stash of diamonds would diminish in worth over time, adding pressure to the person to "move" the diamonds by selling to other players, destroying them, or selling to an NPC to recover whatever their relative worth was.

The limitation of this system is that you can't track everything in the world like this, but you can track some of the more important things, and you could probably track in a "generic" sense the least important things that move in volumes (pelts) to try and slow down/speed up the economy. But that in itself begs the question: Would players then recognize a recession by the lack of diamonds they can mine, and then in turn stop or slow their mining efforts hoping to wait it out and in turn make the situation worse?

I'd like to hear any input people have on the above...

#10 Ted, Having a fixed number of items is just as bad as having a fixed amount of currency. But your right there needs to a restriction on things like mined diamonds, since many players will just mine and sell all day trying to get rich. Like money the question is how?

You do recognize the danger of hoarding, thats good. So here are a few things, that I think might help.

TINSTAAFL - There is no such thing as a free lunch. This is the idea that everything has a cost. Somebody paid something or sacrificed an opportunity. For example, free health regeneration is a bad thing, the character should require nurishment and or bandages to heal. Mana for spells might be free, but they should also require a component of some sort. Fighters should have to consume sharpening stones to keep their weapons sharp. As many things as possible should have a cost. There should also be a choice, players could spend more on good food, and be healthier (and more likely to survive), or they could skimp and eat the 'free' food at the in game equivelent of a soup kitchen but their health suffers. The things that players do most should all require some kind of consumable. These consumables don't need to be expensive, but enough to force items and currency to change hands. This also leads us to consider item decay. Armor should wear out. Thats all there is to it. At some point it should be better for the player to turn the armor into scrap and have a smithy make new armor.

The problem here? Players will likely hate this at first. When a person buys a car in real life, they know that someday it will break down. Its a given, and people expect it. When a player buys a horse in game, they expect that horse to always be as good as it was the day they got it. They get pissed if they buy some expensive armor and after a particularly fierce battle, its about to fall apart. Changing players expectation in this area I feel is the greatest challenge game designers will face before an MMO with a stable economy can be built.

Oh, and while I am thinking about it, Yes you can track everything, if you throw enough hardware at it. Modern hardware is probably at least 10 times faster than the equipment everquest's servers were designed to run on. Second Life already tracks everything, the hardware and network capacity is out there to do this. This means that you can do things like track every transaction every player makes. You can know every detail about the game's economy. Real world economists will never have this kind of information about the real world, but in a MMO, such a thing is possible.

#11 The most important aspect of any economy is scarcity. It seems everyone has touched on this concept, but there is one area where it has not been identified yet, and that is ability. The reason economies work is because everything in it is limited. Because of this limitation we trade the things we have for the things we don't have. The problem with MMO economies up to this point is that players have an abundance of ability relative to the time it takes to complete a particular task.

I played Star Wars Galaxies for a long time. They tried so hard to get a stable, healthy economy, but it never seemed to work. The problem wasn't really money supply, because they managed fairly well to balance money input with money sinks. The problem was that players did not have to trade with other players for abilities outside of crafting.

Say I'm a crafter. I can gain enough surveying ability to find any resource I need. I can gain enough crafting ability to make the best items in the game. I can gain enough fighting ability to survive anywhere I have to go to complete the process. Finally, it takes no special ability to really sell. I have no need to trade anything I have for any service aside from the product some other crafter may make. The only thing I can really do is stockpile money because there isn't much I need to spend it on.

Consider a game where one is not so blessed. What if I needed a resource, but had no way to survey for it? Wouldn't I need to trade something of mine for that service. What if I have the ability to survey, but the wilderness is too dangerous to be walking around willy nilly? Do I not need to trade what I have for protection? Now look at the whole chain of events. The crafter needs the surveyor to acquire the resources, so this cost is added into the price of his goods. The surveyor needs a warrior to protect him and adds the cost of this to the services rendered to the crafter. The warrior, needing to by the crafter's goods with the increased price must then charge a higher price than he normally would to the surveyor. Since they all need each other to complete the transaction, all will charge a price that is reasonable to the person they are supplying.

People intuitively understand the issue of scarcity as it applies to economics, but game developers only consider it as it applies to goods. Scarcity must pervade all aspects of the economy, or it will not be robust enough to survive.

#12 I have seen for years the crying about inflation in Everquest. People screaming to get rid of farmers, and ebay sellers that sell ingame cash.

Frankly I havent notised the inflation much at all. It hasnt effected me in ANY way. Not my playfun or how i play my game.

I dont think there will ever be a game with a fixed amount of cash in it. How can anyone predict what people are gone get of resources, make from it, what people are willing to pay for things in game?
Are game gone evolve?
How can economi evolve with it?
Thats sounds like years of years of planning, and tuning. By the time the tuning is done, game would be old. Every year there is a bunch of new games drawing players from current games. The more mmo's that comes out every year - the less time people will spend in each. I doubt any new mmo will be able to keep players for 6-7 years like everquest have. That era is gone. There is just to much competition now on the market.

Even if someone was able to make a game with fixed economi, would people enjoy the game more just for that reason?

#13 @Hege: The economy's not an attraction in and of itself; like stage lighting, it's at its best when it's completely unnoticed. It's only when it's flawed that it calls attention to itself.

As for tuning, I don't think a game is ever complete to the point where there's no more tuning to be done. Even if the game has a shorter lifespan than the giants on the market, you've got to maintain it after its release, or you'll guarantee that its lifespan is cut even shorter.

@Ben: Good points, but is labor scarcity viable in an MMO?

I've seen several games that try to encourage (force) players to rely on each others' skills. When a particular skill is scarce, usually because an insufficient number of players are drawn to it, things go downhill quickly.

Zones fill up with players pleading for a particular service, wailing about the fact that they're required to rely on an ability that's never available. The folks who do have that ability quickly burn out on the neverending stream of requests and demands, further depleting its availability.

If that service is crucial to other goods and services, and there's no other means of accomplishing it, the whole economy could stagnate.

In my experience, the game designers tend to relent after a few months, making that ability available more easily or to any class, and boom -- no more scarcity. Also, no more variety, and no more challenge. EQ has fallen prey to that more than once.

So, how can one achieve a measure of control over the scarcity? You could make the service available from NPC's at a significantly higher price, but I suspect that the players performing that service would just raise their rates to match.

#14 My team and I had a good six hour roundtable of economic torture. We went back and forth about what to do and not to do; what would work and why we think it would; what wont work and why it wont work. I wanted to bring some basic concepts we were thinking about and see what you think as a whole system. Some of the things will probably be what someone has said above, I'm just giving the whole picture so you can see all aspects of the system.

First, check out the current economics flow graphic for ultima online. Basically, we're taking this general flow and modifying it slightly. What we're proposing is that you regulate the faucet based on the drain. In other words, the amount of money that comes into the system is dependant on how much is coming out. Let me explain some resource systems to better understand how we will accomplish this.

Items - All dropped items will have different ratings (stats) and each spot that can drop those items will have a range of those ratings that it can drop. When inflation occurs, we drop more of the lower end and less or none of the higher end. For example: Say you must take a raid group into the dish_my_dungeon_mal city which has various dropped items that are basic, but also it can drop a level 80 shield, a level 80 sword and a rare recipe. Developers would actually have those items with stats (the sword and shield) randomly drop from level 50 to the uber level 80 ones. When inflation is rampant, you would rarely see, if ever, the level 80 or even 70 sword/shield. Instead, you would constantly get level 50s and 55s, etc. The recipe simply wouldn't drop during these times at all. Items sold from a vendor could become more expensive during this time as well depending on how bad the inflation is. NPCs would also pay less for items, stopping players who farm from wasting time as the benefit isn't as much.

The effect of the items control means that players are likely to raid less and buy less things. Instead, they will look to other things to do. This slows down the items going into the game, countering the inflation.

Money - Players don't get money from killing mobs directly. They don't loot it in other words. Instead, they get paid to do dynamic quests that SPAWN the mobs (like SWG's mission terminals.) So money goes into the system through quests. During inflation, pay less for the quests. The players still have to do the same battle, which causing wear and tear on their equipment and they need more food, etc, but it lowers the amount of money going into the game.

Resources - Players can harvest resources from the land. All resources have different 'quality' factors to them. During inflation, the quality of the resources could go up with the level of the inflation going up. This way, you have the same amount of end result items going into the game that were made from those resources, but the cost of the resources goes up, so more money is spent on them. You could even make higher end resource built items cost more upkeep. Or have a harvesting tax that is set based on the quality of the resources.

I think I got everything, but the whole idea is that during inflation, you want players to find other things to do that will slow down the amount of money coming in, but keep the amount of money going out the same.

#15 @Doppler: Labor scarcity is tough, but I think that it must be a major consideration. The problem stems from the standard design of the MMO. Almost all MMOs are based on the class as profession model, AKA the D&D model. By predetermining the profession someone will be, and the amount of power that profession will contribute to the world, you are dictating needs and the means to satisfy them. The problem is that you can never know precisely what the needs and wants are in an economy.

You will always have the acquisition of goods, which leads to a convenient means of trading, which leads to the acquisition of money. Other needs will inevtably arise. When new needs arise there must be a way to satisfy them. Most of the time this can be done, and sometimes quite creatively. The problem is more of a lack of incentive to fulfill the need.

"Zones fill up with players pleading for a particular service, wailing about the fact that they're required to rely on an ability that's never available. The folks who do have that ability quickly burn out on the neverending stream of requests and demands, further depleting its availability."

The reason that people burn out is because there is not enough incentive to provide the service to attract more suppliers of the service. This is most likely due to the fact that there is an imbalance in wealth caused by the issue that I orginally stated.

Let me go back to SWG. The crafters were generally the most wealthy. Once they reached a high enough level they had to spend very little in relation to the amount of money they brought in. They had a service that was demanded by other players. They could therefore charge very high prices for their goods, which is completely reasonable. The warrior types provided very little to other players. They had no skills that were in really high demand outside of clan and faction battles.

If there is a need that is in great demand, then those who can provide it will want to do so at a high price, especially if they can only provide it on an individual basis and not in mass quantity. If the customer base is made up of a bunch of poor people, like the warriors, there just isn't a real incentive to trade your gaming time to someone who can only pay you a pittance at best. Compound this with the fact that you can make so much more money off of your other skills and you have a service that may be in high demand, but goes unfulfilled.

I think the place to start is to redesign the structure of professions and how much power the individual player has. I think it may be time to do away with the class/level system. If you want to keep it RPGish, maybe a system where you pick skills, ala The Elder Scrolls, and advance strictly in those. I've always considered a game that is FPS like where everthing you do is twitch based. No classes and no abilities to choose. If you want to fight, you use the system of fighting the game has. If you want to be a caster, caster is twitch based too. Crafting, ditto. Everything is available to everyone, and the world is tough. No pussyfooting around in the wilderness, just doin your thang. Make it hard, from a time and resource standpoint, to be all things to all people. It problably wouldn't attract as many people as the main MMOs do, but I think it is in the right direction for a healthy MMO economy.

#16 @dishmal - Why can't you have items and money circulate. Say you have a central market place where players post goods for sale. Everytime a mob is spawned it "buys" the good from the market. That way there isn't an ever increasing supply of trash in the economy, and there is extra demand for player goods. The higher level the mob, the more powerful equipment they buy.

Money can be done in a similar fashion, but this time you start with the money sinks. As money exits the economy through money sinks it goes into a pool. Mobs that spawn draw an amount of money from this pool based on their power level. This money can also go toward the mobs "buying" equipment. everything is circulated and the economy is much more stable.

#17 @ben - if you have mobs of NPCs purchasing player-built things, then you aren't circulating it, you are putting money into the system and taking items out. I don't see the circulation in that point?

As to money circulating, you'll end up with more inbalance as you have unlimited going in through resources and merchants, yet the mobs are KEEPING the money that WAS going out IN the game by spending it and droppin ti when they die. Again, you are adding to the problem, not eliminating it

#18 @dishmal - Take this example. My player puts a sword on the market to be purchased at a price of $100. A mob that is spawning gets the sword and I am credited with $100. Now where did he get the money to buy the sword you ask? As the game progresses players pay into things that would be considered money sinks. Maintenance fees and stuff like that. That money collects into a pool. It is the same money that has already been in the economy. The new mob takes a portion of that pool to buy the sword. Now everything the mob has are items and loot that have already been in the game. In this case there are no true money faucets or sinks. There is nothing new, therefore no reason for inflation from the spawning of a new mob.

#19 OK. So let's take that same example. If that were happening, the weaponsmith is making money right? So, since he sold it, he has money and so will need to make another one, to put in it's place so he can sell more. Where does he get the other one? From crafting it using the raw materials which he gets from resources he harvests. Now he needs MORE resources because not only are players buying his stuff, but now NPCs are. So, he gets MORE resources to make up for the extra demand. Getting more resources = more money into system = inflation.

#20 @dishmal - You can limit the amount of resources that are out there at any time. In this way you can keep them scarce. The issue I see with the item dropping scheme you propose is that you are trying to limit inflation by discouraging trade. Your stated purpose is as follows,

"The effect of the items control means that players are likely to raid less and buy less things. Instead, they will look to other things to do. This slows down the items going into the game, countering the inflation."

The needs of the player are based on the actions he decides to take. The actions he decides to take are based on his abilities. his basic needs won't change all that much. A warrior who isn't raiding will just go find some other reason to fight. His equipment will still wear out and he will still have to buy things. Besides, you don't want to control inflation by discouraging trade. Your best bet is to encourage it. Trade is what makes an economy strong.

The method I proposed isn't perfect, but it goes a long way towards limiting the influx of resources into the game. Even with your item reduction scheme you still having an increasing supply of items. Some come from mobs, the others from crafters. The system I propose limits the items in the game to the ones that were there from the start, and ones that crafters produce.

I think both of our monetary methods are basically the same thing. Both seem to be based on regulating the amount going in with the amount going out. This is the first step in stabilizing the economy.