Managing the economy of a game is, much like the real economy, a very delicate balancing act. If the economy is all player-driven, vast inflation, market manipulation or market crashes can be very common. If the economy is controlled by draconian measures by the game company, it can become virtually impossible to make any headway within the economy without spending inordinate amounts of time. Neither is particularly desirable and both are potentially inevitable.
What do we want our economy to look like?
Do you want to use money as a control mechanism for regulating player power and progress, or do you want it to be a measure of success? Do you want to encourage players to play the market, or should there effectively be no market at all? What items are players able to trade at all? These are all serious questions in regard to what kind of an economy a game should or will have. For example, many(most) games have a soul-bind or bind on pickup feature. That means that if you are awarded the drop, you can’t sell it or even give it to another character on your own account. On the one hand, that helps to limit the maximum power level of items that can be bought in the market. If you can’t buy the maximally powerful items in the market, there is something of a cap on what people will be willing to pay for less than the best equipment. On the other hand it means that if you get a rare item that is useless to you, you need to sell it to a vendor for almost nothing, even if it would have been useful on another character.
Selling things to vendors is a way that a company can enforce some measure of economic control by having items that are solely used for being sold and nothing else; these items are usually referred to as “vendor trash”. Money via item drops can be fairly easily controlled with a rarity system, a value system of items and other methods like gold sinks. By assigning a vendor price to tradable items that is somewhat reasonable you can have a consistent way for players to price items sold in the market, typically somewhere around the average between what you can sell an item to the vendor for and how much it costs to buy from the vendor. These prices can either be set as constants like Identification Kits in GW1, or they can be set based on how many have been bought from and sold to vendors like dyes and materials were in GW1. Making prices be static makes the economy more stable but at the same time caters to players who have accumulated long-term wealth because the prices to buy never change but their money always increases over time.
We can see some of the benefits and pitfalls of fluctuating vendor prices in GW1. For example, when the Hall of Monuments calculator came out, everyone was scrambling to get some elite armors for their points, especially Vabbian armors. The price of rubies and sapphires skyrocketed. The same happened with mini-pets. For players that had a lot of money saved up but no materials, a hefty chunk of their savings went out of the market if they bought the gems at that point. Similarly players that were poor lost hope for being able to afford these armors after the inflation. The benefit of course would be for people that had hoarded their gems before and didn’t need to buy Vabbian armor; they were able to make an absolute killing and could have become much wealthier almost instantly. Although that wealth wouldn’t have helped them to get Vabbian armor, it would have allowed them to have a virtually infinite supply of the more common armors or the everyday needs like skills and id kits.
In some ways this was a good outcome. Things that players wanted were expensive, but because the inflation was limited to luxury items, things that players needed like skills and basic armor became relatively cheap because of their ability to sell certain items. It means that as time passes, newer players will have much harder times acquiring luxury but much easier times acquiring necessities. If all items in the game are based on the inflation, it makes it so that players taking a break can end up with next to nothing in an inflated economy since player storage doesn’t pay interest or dividends.
With great auction houses come great responsibility… sort of
In this day and age, auction houses are not only common, they are pretty much mandatory. Every major MMO in the last few years has had some form of one and they have become so integral that nobody could make an MMO without one and not be called primitive. (Un)fortunately, auction houses have a huge sway in the economy. They can be used for normal purposes, but savvy players can and do play the market and can potentially cause strife for other players.
I’m going to use Aion for some examples of a market gone awry. I know there are lots of other examples, but I played Aion most recently so that’s what I remember the most clearly. Aion is grindy. Its crafting requires enormous financial investment before you can get even close to the level of items you could find out in the world. They are usually pretty good items that you can craft as you progress, but only when you crit on crafting. If that sounds weird, it is. Let me say this again- you can crit while crafting. A crit craft is of a better quality, essentially akin to getting a rare drop. Not only can you crit, you can double crit for an even better item. What’s worse, these crit items are sometimes required to craft other items. Sometimes even an item that can be double-crit-crafted requires the first crit state to be a component of another item, but the double crit state is a dead end. Let’s use some made up names to show an example. Let’s say you put in the materials to make a Sword. You might crit while making the Sword and end up with an Awesome Sword. Then, you might double crit and get an Uber Awesome Sword. Now after leveling up your crafting some, you might have a recipe for a Mega Sword. The components of a Mega Sword could be some iron + an Awesome Sword. So you have to go craft Swords until you crit and get an Awesome Sword, but then if you get “lucky” and double crit to make an Uber Awesome Sword, you can’t use it to make your Mega Sword; in fact you can’t use it to craft anything.
Aside from that being frustrating, expensive and time consuming, it has a really adverse effect on both the market and the crafters. Because of the stat difference between Sword and Awesome or Uber Awesome Swords, nobody actually wants Swords. You can’t even sell them at cost. Then since you want your Awesome Sword, you might end up making 10 Swords that you don’t want and can’t sell. I don’t even have to tell you what happens to the market when everyone wants to craft Mega Swords. This process floods the market with stuff that nobody wants and ends up bankrupting many crafters unless they get really really lucky. Since it is a market, people get to see all of your prices. This leads to everyone seeing a thousand Swords at say 80% of their material cost (so at a loss) and makes new sellers just want to get their money faster, so they sell it at 75% cost. Now there are 1000 Swords for 75% cost and 1000 Swords for 80% cost… which means they will never ever ever sell at that price. So then the 80% people lower their prices. And so on.
Does that sound bad? It gets worse. See, it takes forever to gather that much iron (or whatever other material you need), so you need to go to the market to buy some off other players. What happens then is that wealthy players go and buy all of the materials up, and then re-sell them at higher values, essentially making whatever cost-floor they want. People who don’t craft don’t really care; they kind of like it because their stuff sells immediately. The crafters though get double-screwed because the prices artificially go up to make their trash while their Swords go down because there are so many that nobody wants and people just level past the levels they are useful at. That leads to a lot of people just plain giving up on crafting which basically negates both a potentially fun element as well as a money sink.
To be fair, much of the problem with material cost inflation was with the bots. Botting allowed players to accumulate much higher market shares of materials to gain leverage with. That’s not much of an excuse since botting isn’t good either… though with the amount of grind in that game it seems hard to be mad at the botters either.
How can you police a market to prevent that kind of leveraging? Do you even think that kind of market play is bad? The answer to the first is that it is almost impossible to impose fair market restrictions. A nice benchmark is to include a way for sellers to see the average or recent prices that the same item has been selling for so that they can price how they want. Policing botting can help with the materials market, but anyone with enough wealth and know-how can do the same net effect with just compulsive buying and market watching. To answer the second question however is very personal. I don’t have any problem with a player seeing someone wanting to make a quick buck by selling an item cheaper than at-market price, picking up the item and then re-selling it for more. In fact that is a common trick to get lazy players’ money; you’d be surprised how often someone puts an auction up for less than the vendor will pay for it. That kind of thing is just market savvy and happens all the time. What an auction house allows is for some people to buy everything like that. Like I said, I don’t have a solution, and it isn’t always a problem, but it can be.
The good aspects of a market are of course quite obvious if you have ever played an MMO without one (like GW1). Players have to come up with all sorts of creative ways to trade their wares. While this limits market manipulation, it’s just plain so inconvenient that it’s hard to think about it as worthwhile. Sitting in Spamadan is not fun and often a complete waste of time. The market allows a fire and forget method of selling stuff for decent prices. If the game doesn’t have a bind-on-pickup system then it allows you to essentially exchange your Awesome Sword for an equivalent Awesome Axe, ideally making both players happy.
Sink my gold? Why?
This whole article I’ve been making some references to gold sinks. Most people likely already know this term, but for those that don’t a gold sink is essentially a consistent way to take money out of the player economy. MMOs have this problem that well, they can go on for long periods of time. That’s a problem because the loot you get comes from an infinite supply of monsters. When you get money in real life, it’s coming from someone else who has money. You can’t just make money out of nothing. Well, in MMOs that is exactly what you’re doing. That monster didn’t take his gold out of the bank, he just spawns with it. As time passes the wealth in the game grows enormously. If there were no NPCs that had services for gold, the money would just circulate forever and grow exponentially. That problem still exists, but that’s exactly why you need some gold sinks.
Unfortunately, gold sinks are really hard to design well. If they cost too much, players either just ignore them (which defeats the entire point), find a way around them through the market if applicable, or they bankrupt new players. You can’t make a gold sink necessary and expensive. It has to be one or the other to work well. Death penalties in some games cost a hefty amount of money. In the end, people have enough money that they don’t care, but in the beginning it can be a never-ending cycle of death, losing all your money, not being able to afford new gear, and then dying easier and starting all over again. It’s terrible and doesn’t even solve the long term issue. If it is something necessary (or basically necessary) then it has to be low enough to not screw new players but high enough to have some impact. If it is expensive, then it has to be something with a cool factor. This is something that GW1 got really right but didn’t go far enough with. Elite armors were really expensive back in the day, and heck some of them still are for most people. They don’t improve your stats in any way, thus passing the test for not being necessary, but they sure look cool and people definitely know when you have one. They cost so much more than the day-to-day stuff that they were a great sink, and because there wasn’t all that much you needed you had incentive to buy them. GW1 didn’t go far enough though because frankly, most people don’t want more than 2 sets of armor, especially with the low storage capacities. The best answers would be to make armor more hot-swappable (like costumes), take up less space in your limited storage and to have more than just armor that was cosmetic but awesome looking.
Gold sinks are something that GW2 is going to need to consider very very carefully. The beauty of the shared exp and loot system they have going is also a potential problem area. Now instead of simply having X monsters worth of loot in the game at any time, they instead have (X+Z)*Y worth of potential loot, where X is the number of monsters, Y is the number of players contributing to monster kills, and Z is extra monsters added to events because more players have scaled up the monsters. Instead of dropping 10 bog scales for one of you, a monster might drop 10 bog scales for 5 of you. This can lead to a potentially huge market. More problematic is the balance point they choose on drop rates. If you don’t want players helping you to be a bad thing, you also don’t want to be dirt poor if nobody helps you because they made drop rates low assuming that everyone is always helping all the time. While it will be nice to have everyone playing together get good loot, we don’t want to create a market that is so saturated that it is unsustainable, and we likewise don’t want drop rates to be so low that we never get anything good.
One thing that we know GW2 has going for it economy-wise is the reward system, more specifically Karma. Karma is an alternative currency that cannot be bought. It is earned through Dynamic Events and potentially the Personal Story and Dungeons. Karma can be exchanged for special rewards. The nice thing about this system is that it can’t directly contribute to inflation. Similarly, there appears to be a system for Dungeons where you are awarded some form of token that can be traded in for special armor based on that Dungeon. Not only does that reduce the need to grind content, it also means that there can’t be rampant inflation from non-tradable goods.
What does this all mean?
Honestly, I don’t really know. I don’t know how to make a perfectly desirable economy, or at least not one that I like. Eve definitely has its own take, but I don’t like where it has ended up and I feel it’s far too late to start into that game now. All I know is that the economy is subtle, it is important, and it’s really easy to screw up. Good luck ANet.