Just the six questions to reply to, then !! 🙂

1) & 3) Causes of Deflation:

I think deflation is more an out-game than an in-game effect. It occurs due to real-world competition as more gold farming firms enter the field. The only way for new entrants to win market share is to undercut the opposition. From about 2005-2008, I think that occurred at least in part due to the gradual disappearance of the super-profits that firms like IGE were making. Today cost-competition probably occurs through squeezing labour costs (shift to cheaper locations in China; shift to cheaper locations like VietNam; and maybe more use of automated tools like bots), and through greater productivity (i.e. finding ways to make gold more quickly – in part in-game patches may help here such as daily questing on WoW).

If you want more details/evidence on this, see my online gold farming report (and maybe a forthcoming article in Journal of Virtual Worlds Research, if they are kind enough to accept it!).

Just an overall note that if you take a weighted basket of MMORPG currencies (i.e. weight them for estimates of numbers of players), then deflation against the US dollar has been 85 per cent from autumn 2005 to autumn 2009.

Also a note that prices for power-levelling have similarly deflated: 74% fall in price from autumn 2005 to autumn 2009 for levelling 1-60 in WoW.

2) New MMOGs:

I haven’t included it on the spreadsheet but I’m tracking Lord of the Rings Online and Warhammer Online. Over an eight-month period in 2009 (March to November) these deflated 24% against the US dollar: that deflation matches other games, so the slope seems similar.

Incidentally, the apparent flattening of the slopes is largely an artifact of scaling (i.e. currencies have deflated so much that the movement is much harder to distinguish in later years if you are still plotting the figures for earlier years). In general, deflation has been pretty continuous and relentless: of the order of 40% per year an average.

4) & 5) Data Collection:

Here someone may puncture my data foundations (!) but anyway . . . I have been collecting in real-time since June 2008, sampling every six months or so. I collect from five different sites (occasionally have to swap a new one in if a site disappears). Most recently these were: www.ige.com; www.brogame.com; www.thsale.com; www.mmorpg-shop.com; www.swagvault.com. Plus a couple of specialist sites to get prices for Runescape and EverQuest. The reason I’ve not done more than this is my experience was that prices do not vary very much – perhaps 10% at most. I always pick the same game server.

I think one criticism is that some of these sites might have common underlying ownership but, by sampling the same sites over time, I’m not sure that is an issue since you can see the deflation trend on all sites.

For the more historical data, used these same sites with a mix of http:/// cross-checked with some articles that listed current prices.

6) Outliers with Inflation:

The motion chart does highlight the two outliers – EverQuest and FFXI – which have both seen inflation in their virtual currencies vis-à-vis the US dollar. My own interpretation on that is: EverQuest (basic economics: demand is slipping back as the game ages, so prices rise but the foundation for the data here is thin); FFXI (basic economics: concerted actions against gold farmers have constrained supply, so prices rise). But others may have a better explanation.

Richard