A brief presentation I gave at Games-As-Services Seminar on March 2nd about the dilemma developers face when balancing between monetization and retention on game design level.

In September 2009, Second Life was sued for allowing individuals to sell fake virtual goods. The case has recently moved forward with the filing of a case management statement. While this lawsuit deals explicitly with intellectual property, these issues are also significant for virtual economies in terms of who makes money and which residents are willing to keep their businesses in Second Life.

In December, the world's biggest teenager virtual world Habbo plugged into Facebook Connect. This week Linden, the operator of Second Life, announced the acquisition of Avatars United. Avatars United can be described as a sort of "Facebook for avatars", complete with a third-party applications ecosystem.

What does this mean? It's a sign of walled gardens opening up. Virtual worlds and MMOs are traditionally silos where users and data are locked in. Through Avatars United, Second Life users will be better able to link their SL profiles with the outside world: the whole universe of existing social media services, feeds and applications. It will also enable new kinds of third-party innovation in the way SL integrates with other services. All this will increase the value of having an SL account to a user. This is assuming that SL opens up some interfaces to Avatars United: as of yet there is next to no data flowing.

In discussing the ease associated with having someone else do the work of gaming, more often than not large-scale services working to create offline profits like gold farming and power leveling operations are discussed. However, on a smaller scale the in-game economic systems of games like World of Warcraft can also provide players a way to avoid working for the things that they want, while simultaneously allowing other players the opportunity to profit from their in-world efforts.

Guest post by Jan Pontzen on a RMT free trade mechanism for MMORPGs and other virtual worlds.

The idea of developing transportable avatars – avatars that will be able to move both within and between different virtual worlds – has been raised in popular and academic forums for years. However, to date it appears that relatively little progress has been made on this front. While there are likely technical issues with developing such a large and complex project, it is also possible that some of the issues holding back this endeavor are likely to be economic in nature as companies seek not only to establish technical standards, but economic ones as well.

This came out a while ago already, but I missed it until now. CCP Games' Lead Economist Dr. Eyjo writes:

The 3rd Quarterly Economic Newsletter for EVE Online is now available. This issue has the standard economic indicator of population, ships flown in space, price level reports and market snapshots. The specific topic this time around is the latest news on "Unholy Rage," the Anti-RMT operation that has been ongoing for several months now.

The gold standard of MMORPG combatSince the 1950s, game theory has been one of the basic ingredients of economic models. Nash’s Nobel-winning mathematical discovery, nowadays known as the Nash equilibrium, opened up a myriad of ways to formally analyze situations where a number of agents try to fare as well as they can in a situation where their interests might be in conflict. Applications range from explaining specialization of animal species to predicting negotiation results between trade unions and industry representatives.

One does not need to be an expert on the workings of virtual environments to notice that most of them seem to thrive on conflict: players are encouraged to fight each other on blood covered battlefields, outbid one another in virtual markets and build alliances, guilds or corporations to get the upper hand on their adversaries. Thus, it is slightly surprising to notice that both game theorists’ interest in virtual worlds as well as virtual world developers’ interest in game theory seem to be nearly nonexistent. In this post I will first try to explain why I think that empirical game theorists and game theoretically oriented econometricians should pay more attention to these hang-outs. After that I will attempt fit myself into a developer’s skin and sketch how understanding game theory might help in designing more enjoyable virtual environments.

Journal of Virtual Worlds Research, an online outlet for virtual worlds -related "think pieces" and scholarly papers, has published its sixth issue, titled Technology, Economy and Standards. Below is my selection of economy related papers from the issue, with comments.

My PhD thesis on people who spend real money on virtual goods is now published. Thanks to everyone for your support! Here's the publication info:

Vili Lehdonvirta (2009). Virtual Consumption. Publications of the Turku School of Economics, A-11:2009, Turku. ISBN: 978-952-249-019-3 (printed) 978-952-249-020-9 (electronic) ISSN: 0357-4652 (printed) 1459-4870 (electronic)

You can download the electronic version of the thesis from the university library here. The print version can be purchased from the university's publisher: KY Dealing, tel. +358 2 481 4422, email ky-dealing(at)tse.fi. I also have some free copies to send to people, so drop me an email while they still last!