Virtual Economy Research Network

This paper explains how transactions in virtual worlds (VWs) are influencing law and Internet governance in Korea. It builds on a new stream of research from MacInnes (2004) and Whang (2004) about transactions arising from virtual world items. Korea leads the world in both broadband access and online game usage. Findings from the case study reveal that property rights over digital items are not yet determined. Game developers for the most part want to control their own content but players want to have the freedom to conduct transactions and be able to enter and exit games freely at any level they choose. The also want to obtain items more rapidly and on some occasions earn money. There is currently a small group of players acting as arbitragers in virtual world economies. This enables less involved players to develop an understanding of exchange rates and prices in virtual economies. Some players engage in transactions involving thousands of dollars.

Developers differ in their views about whether or not to allow transaction of digital items. The larger and more established companies are against item trade while smaller developers consider this activity to be crucial for their business models. Users appear to agree to most terms of end user license agreements (EULAs) but, for the most part, are in favor of digital item transactions. Hundreds of item trade companies have been established to serve as intermediaries including ItemBay, the largest.

Even though the number of transactions is still small they have led to a significant increase in teen crime. The Korean government is currently simply applying general criminal laws that may not be adequate for the digital realm specifically when many of these transactions may soon be international.

This research shows that most players do not engage in item trade but nonetheless approve of the idea. Very few want to make profits or a living through item trade but they serve a large market that simply wants to buy items conveniently and sell what they no longer need. In other words this is a normal marketplace. It has many users and very few arbitragers. As in any marketplace rules will need to be established and enforced to ensure appropriate behaviour.