Williams' research: Virtual worlds may act like developing economies

How would a massive multiplayer game respond to an economic collapse?

While prior research has looked at economic behavior on the individual level in virtual worlds, a new study is the first to calculate big-picture economic markers such as Gross Domestic Product (GDP) and inflation in an online setting.

“Our concern was whether the economic behaviors within a virtual world function in the same way that they would in the real world — where, it should be noted, currency is also largely representational,” communication professor Dmitri Williams said.

Williams, co-author Edward Castronova (Indiana University) and a team including three other USC researchers were given unprecedented access to 314 million actual transactions from Sony Online Entertainment’s large-scale online role-playing game “EverQuest II.”

In the August 2009 issue of the journal New Media & Society, the researchers showed that while economic behavior in “EverQuest II” on the societal level follows what one would expect to see in the real world, the fluctuations are much more dramatic than normal.

For example, due to population changes and an influx of money, inflation rose more than 50 percent in five months on one of the servers analyzed by the researchers.

“The rapid changes in GDP may not be a function of the fact that the economy is virtual, but that it has volatile elements,” Williams said. “After all, we have seen that kind of volatility during times of war and in developing nations in the real world."

Williams continued: “On the one hand, virtual economies may be very precise analogs for other kinds of real-world economies, such as frontier, developing or black market economies. On the other hand, our own economy has turned out to be less stable than we’d all assumed.”

By looking at the going prices for virtual currency on such markets as eBay, the researchers also were able to determine an “exchange rate” between real and virtual currency during the study period.

That, in turn, let them calculate that the real GDP of one of the servers was between $11 and $14 per registered user per month ($130-$164 per year). In the real world, that puts the average “EverQuest II” player on par with citizens in developing nations such as Liberia, Congo and Burundi.

Real-world GDP is measured as the value of the final goods sold in an economy, and the goods in “EverQuest II” correspond to actual goods, such as food (e.g., bread and alcohol), clothing (armor and shields) and materials (leather and herbs).

However, “in modern, advanced economies, it is true that almost everything produced is also sold,” Williams said. “In virtual worlds, by contrast, firsthand reports suggest that a great part of valuable production is consumed directly by the producer."

The researchers noted that massive, multiplayer virtual worlds such as “EverQuest II” are a unique tool for economists seeking to better understand economic theories. Not only is data recorded automatically and invisibly for the entire economy (something the government only estimates in the real world), but virtual economies also could be manipulated as a kind of large-scale experiment to test policy ideas.

The information Sony Online Entertainment provided for the research project was scrubbed of all personally identifiable information prior to being provided to the researchers. None of the information was connected to, or linked with, the real names or other personal information of any players.

USC Annenberg School for Communication and Journalism doctoral students Cuihua Shen, Rabindra Ratan and Li Xiong contributed to this paper.