News, research and discussion on virtual goods, currencies and economies globally.

Transportable Avatars and Economic Concerns

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.  Read more

EVE Online's 3rd Quarterly Economic Newsletter published

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.  Read more

Deflation of Virtual Currencies, 2004-2009

I've published online a spreadsheet of data on the US dollar values of virtual currencies from eight different games, tracked over time from 2004 to 2009. And a Google Motion Chart also for those who like to look at pretty pictures (though this tends to draw attention to the two outliers more than the main deflationary trend).

To be found at:

Richard Heeks  Read more

What Would John Nash Think of Second Life?

The gold standard of MMORPG combatThe 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.  Read more

Gambling and econometrics in the new issue of Journal of Virtual Worlds Research

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.  Read more

The Genesis of the Virtual Goods Model

Guest post by Matt Mihaly on how the virtual goods sales model was born.

Matt Mihaly is a CEO and Creative Director of Sparkplay Media and Chairman (formerly founder, CEO, and Creative Director at Iron Realms Entertainment.   Read more

The virtual goods/microtransactions model dominates Asia and is now far and away the most popular business model for online games in the West with the meteoric rise in popularity of games on Facebook and MySpace. Twelve years ago, in ’97, I pioneered this model at the company I had founded two years earlier – Iron Realms Entertainment – out of pure necessity. This is the brief history of how the virtual goods model, and soon thereafter the dual currency model, came to be.

Virtual consumption: the thesis

Lehdonvirta (2009): Virtual ConsumptionMy 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) I also have some free copies to send to people, so drop me an email while they still last!  Read more

Call for Papers: Games Research Methods seminar in Finland

The Games Research Lab at the University of Tampere, Finland has issued a call for papers for its sixth annual game studies working paper seminar. The call is available here. I am posting this here because the seminar has previously had some interesting MMO related content.  Read more

Does Pressure Play Into Second Life Purchasing?

In the first quarter of 2009, the virtual world of Second Life saw $120 million USD exchanged through user-to-user transactions, with a record monthly $45 million USD in transactions in March. In August alone, users completed 28 830 768 transactions in with the greatest number of these happening around items that are valued at one Linden dollar, or about $0.004 USD [4].

Based on regular economic reports from Second Life developers Linden Lab and raw data files made available on their website, it’s possible to get a basic overview of the economic facts and figures associated with the virtual world. However, one of the questions that is asked on a fairly regular basis – especially by those who are somewhat unfamiliar with virtual world economic systems – is why people pay money for things that exist only virtually.  Read more

Aligning virtual economy design and business modelling

This is a rough working-in-proggress draft of a figure on how virtual economy design would fit into a business modelling ontology. Please forgive me the graphics quality and harsh colors, they will improve once I recreate it with a proper software :).

Figure on SlideShare.

The model is based on business model ontology developed by Osterwalder et al. (during 2002-2005), best documented in Ph.D. Thesis in 2004. Found here.

I will just leave the figure here as is for now, and later upload the whole thesis with more rigorous documentation and explanations.

The model is not supposed to depict all business related aspects, but
more preciesly the relevant aspects in revenue generation logic through
virtual economy design.

I welcome all comments and discussion.  Read more