In this article, the author continues from where his initial study left off: the future of virtual worlds; growth, market structure and economic impact. Using a historical review, the author argues that the demand for avatar based gaming is driven strongly by developments in gaming technology, and is thus poised to grow. In assessing possible market structures, he notes that virtual worlds produce network externalities on the demand side, suggesting a natural monopoly. However, he argues that due to differentiation, switching costs and nonexistent economies of scale on the supply side, the market will tend towards monopolistic competition instead. In my opinion design innovations such as instancing cast doubt on the point concerning economies of scale.

To assess the impact of virtual world usage to real economy, the author presents a simple utility function for time spent in virtual worlds. He assumes that player satisfaction is derived from challenge and reward, which can be criticised as an overly simplistic model. The author suggests that game time is a substitute not only for other consumption goods, but also for work time. This emigration may impact macroeconomic aggregates in the future. Virtual assets are currently not included in real GDP.

Several million people currently have accounts in massively multi-player online games, places in cyberspace that are effectively large-scale shared virtual reality environments. The population of these virtual worlds has grown rapidly since their inception in 1996; significantly, each world also seems to grow its own economy, with production, assets, and trade with Earth economies. This paper explores two questions about these developments. First, will these economies grow in importance? Second, if they do grow, how will that affect real-world economies and governments? To shed light on the first question, the paper presents a brief history of these games along with a simple choice model of the demand for game time. The history suggests that the desire to live in a game world is deep-rooted and driven by game technology. The model reveals a certain puzzle about puzzles and games: in the demand for these kinds of interactive entertainment goods, people reveal that they are willing to pay money to be constrained. Still, the nature of games as a produced good suggests that technological advances, and heavy competition, will drive the future development of virtual worlds. If virtual worlds do become a large part of the daily life of humans, their development may have an impact on the macroeconomies of Earth. It will also raise certain constitutional issues, since it is not clear, today, exactly
who has jurisdiction over these new economies.