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

Secondary markets

Update on Chinese Gold Farming

The following represents some notes and comments building on my earlier research report on gold farming. It draws mainly from a couple of interviews kindly given by Anthony Gilmore, who has been filming in China for his forthcoming documentary, Play Money: http://www.playmoneyfilm.com. Also from Rowenna Davis' earlier article that interviewed both myself and Anthony.   Read more

Guest article: Are secondary markets profitable for item sales based businesses?

The question whether secondary markets limit the profits of a monopolistic seller has generated a lot of controversy over the years. The “conventional wisdom” is that secondary markets eat manufacturer profits because used goods create competition for new goods by acting as close substitutes. Instead of buying a new good, consumers can choose to buy used goods instead; especially so if they offer better value in terms of price. However, it has also been shown that secondary markets have other implications as well and therefore the conditions under which secondary markets are detrimental to the profits of a monopolistic supplier are subject to debate. In this essay, I will review some of the previous microeconomical work on secondary markets and then seek to determine how their results apply the context of virtual asset markets. The key question would be “how do secondary markets affect primary market profits?”  Read more

Eurogamer on RMT


Fairly well written story series on MMORPG RMT at Eurogamer, just wanted to save the link somewhere so thought I'd post it:

http://www.eurogamer.net/articles/gold-trading-exposed-introduction-article?page=1

Guest article: Game Commerce from virtual item sales to gold farming

The following Guest Article by Steven Davis is an extract from his recently published book, Protecting Games: A Security Handbook for Game Developers and Publishers. The extract is from Chapter 22: Game Commerce: Virtual Items, Real Money Transactions, Gold Farming, Escorting, and Power-Leveling


Money makes the (real and virtual) world go around. In some sense, money itself is the oldest, most widely used virtual item. Because money is so universally understood, virtual currencies are widely used as incentives in online games. Whatever one's views are about “consumer culture,” we all seem to have a Pavlovian response to accumulating more things.   Read more

Follow-up: 20% Tax Rate on Virtual Currency Brokering in China?

We reported earlier about the 20% tax rate legislation on virtual currency transactions in China. Shanghai Daily has now published an article concerning this legislation and about the fall-out that followed.

 

    Read more

20% Tax Rate on Virtual Currency Brokering in China?

"The State Administration of Taxation said on its Web site Wednesday (in Chinese) that China will impose a personal income tax of 20% on profit from virtual money. The announcement, which was distributed to local tax bureaus, specifically takes aim at those who buy virtual currency from gamers and surfers and sell it to others at a mark-up. Taxation officials are granted the right to determine the original price of online virtual currency if the individual fails to provide proof of an original price, it says."- Juliet Ye @ WSJ's China Journal   Read more

The development aspects of gold farming


The Hindu Gold Dubloon -- photo by Swamibu

Professor Richard Heeks from University of Manchester recently made available a working paper titled Current Analysis and Future Research Agenda on "Gold Farming": Real-World Production in Developing Countries for the Virtual Economies of Online Games. Heeks summarizes pretty much everything that is currently known on gold farming. The approach is systematic and includes meticulously going through e.g. the estimates on on RMT market volume and aggregate spending on gold farming products, trends of RMT market prices and their effect on gold farming, the stakeholders in the gold farming industry, and the virtual world operators' incentives in reacting to gold farmers.

The paper can be found via the VERN bibliography. Instead of listing more of its contents here, I'd like to point out the viewpoint of development studies, which is novel in these circles at least to myself, and which is interestingly visible in many parts of the paper.  Read more

In-game RMT platform receives USD 6.5 M in venture funding


PlaySpan is a company offering a transaction platform for MMO publishers that wish to integrate microtransactions and real-money trading into their products. Now they say they've secured USD 6.5 M in venture funding. Worlds In Motion has the story.  Read more

MMORPG RMT and sumptuary laws


Queen Victoria and Prince Albert at the Bal Costumé of 12 May 1842 At some point during the discussion described in the previous post, Joshua Fairfield wanted to contest the status value of high-level characters by arguing that there is no correlation between the the level of a character and the skill of the player. Be that as it may, I think he eventually conceded that there may still be status value, if for no other reason than that the player has spent a lot of time leveling, and is thus a member of what Joshua called "time aristocracy" (which I think is an excellent term by the way).

We can question the status value from our own standpoints ("they are just kids with too much time"), but it is nevertheless real for some MMORPG players and may be worth protecting by operators that wish to cater to that segment. To explore this point a little further, I thought I would re-post a comment I left in a Terra Nova discussion long time ago.  Read more

The efficient level of RMT in MMORPGs


The efficient level of RMT

I am not intensely interested in MMORPG secondary markets that exist despite the operator's wishes, and I certainly don't have any agenda of legitimising them. But after the last SoP V workshops yesterday there was a rather lively coffee table debate on RMT in MMORPGs that resulted in a neatly economistic re-telling of that story. I'll try to convey the tale without misrepresenting the particpants too much.

Already during one of the panels Joshua Fairfield reminded us of the positive aspect of RMT: trade creates welfare gains ("Every time you stop someone from trading, God kills a kitten", as he politely put it). Richard Bartle obviously wouldn't have any of that and brought up the negative aspects, centering on the violation of the achievement hierarchy associated with character levels.  Read more