Vili Lehdonvirta, Helsinki Institute for Information Technology HIIT
An annotated bibliography of articles and other materials on the topic of economies of virtual worlds, with a particular focus on the interaction between virtual world economies and real world economies, and the legal issues that such interaction gives rise to. Work in progress.
Dibbell, Julian, "MUD Money: A Talk on Virtual Value and, Incidentally, the Value of the Virtual" Presented at Stages of the Virtual (April 1995).
http://www.juliandibbell.com/texts/mudmoney.html
The author, a journalist and a MUD player, talks about his experiences with early attempts at trade and currency in MUDs.
Grimm, Thomas, and Mitlöhner, Johann, "Developing a Virtual Reality for the Simulation of Agent Based Economic Models" Vienna University of Economics and Business Administration (1995).
http://www.mud.co.uk/dvw/developingavr.html
Agent-based simulation is a research method often applied in economics. The authors describe a plan to modify a MUD system to act as a platform for such simulation. The MUD is amended so that it facilitates economic transactions between players, but instead of human players, the world is populated with artificial agents. Established algorithms are used to implement the behavior of these agents. Human players can be used as well, either as observers or as part of the simulation.
Castronova, Edward, "Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier" CESifo Working Paper Series No. 618 (December 2001).
http://ssrn.com/abstract=294828
A starting point for the academic study of virtual economies for their own sake, this article by economist and sociologist Edward Castronova focuses on the massively-multiplayer online game Everquest. The author conducted a user survey and combined the results with data from third party websites and personal observations to describe value creation, wealth distribution, microeconomic conditions and macroeconomic indicators in the virtual world of the game. The results are striking: some 93,000 players spend more time in the game than at work, each creating an average of USD 3.42 worth of virtual assets per hour. The virtual assets can be traded for real currency in highly liquid markets. Thus Everquest's GNP per capita exceeds that of e.g. China. The author points out two directions for further research: study of virtual worlds as useful economic simulations; and study of virtual worlds as increasingly important economic and social phenomena in their own right.
Burke, Timothy, "Rubicite Breastplate Priced to Move, Cheap: How Virtual Economies Become Real Simulations" (June 2002).
http://www.swarthmore.edu/SocSci/tburke1/Rubicite%20Breastplate.pdf
Remarks pending
Castronova, Edward, "On Virtual Economies". CESifo Working Paper Series No. 752 (July 2002).
http://ssrn.com/abstract=338500
In this article, the author continues from where his initial study left off: the future of virtual worlds; growth, market structure and economic impact. Using a historical review, the author argues that the demand for avatar based gaming is driven strongly by developments in gaming technology, and is thus poised to grow. In assessing possible market structures, he notes that virtual worlds produce network externalities on the demand side, suggesting a natural monopoly. However, he argues that due to differentiation, switching costs and nonexistent economies of scale on the supply side, the market will tend towards monopolistic competition instead. But recent design innovations such as "instancing" seem to falsify at least the point concerning economies of scale.
To assess the impact of virtual world usage to real economy, the author presents a simple utility function for time spent in virtual worlds. He assumes that player satisfaction is derived from challenge and reward, which ignores the the body of research conducted on this topic. He concludes that game time is a substitute not only for other consumption goods, but also for work time. This emigration may impact macroeconomic aggregates in the future. Virtual assets are currently not included in real GDP.
Taylor, T.L., "Whose game is this anyway? Negotiating corporate ownership in a virtual world". Computer Games and Digital Cultures Conference Proceedings, Ed. Frans Mayra, Tampere University Press (2002), pp. 227-242.
Remarks pending
Castronova, Edward, "Theory of the Avatar". CESifo Working Paper Series No. 863 (February 2003).
http://ssrn.com/abstract=385103
Remarks pending
Bartle, Richard A, "Designing Virtual Worlds". New Riders (July 2003).
The economics chapter of this acclaimed book discusses different types of virtual economies and various design choices available to developers. The author is not an economist and no scholarly analysis is attempted; instead the chapter identifies a great number of practical issues and considerations that spring from the author's long experience with virtual worlds. The examples show how the most carefully planned virtual economies can fail in practice due to numerous unforeseen factors. A particularly interesting observation is that free markets tend to fail because players are unwilling to accept some of their consequences. Unlike the real world, players are free to quit a virtual world and move to another one. To avoid this, operators introduce price controls and other measures in an attempt to make the economy satisfying for those players whose economic activity is not valued by the market.
Another chapter reviews the research on virtual worlds from the point of view of economics. The author divides the research into three categories: using virtual economies as simulations for the purpose of studying real economies; studying virtual economies in their own right; and studying the interaction between real and virtual economies. The focus is on providing design tips for developers.
Bradley, Caroline, and Froomkin, A. Michael, "Virtual Worlds, Real Rules". TPRC Conference Paper (31 August 2003).
http://web.si.umich.edu/tprc/archive-search-abstract.cfm?PaperID=240
Remarks pending
Reynolds, R, "Hands Off My Avatar! Issues With Claims of Virtual Property and Identity". Conference draft (September 2003).
http://www.ren-reynolds.com/downloads/HandsOffMYavatar.htm
Remarks pending
Dibbell, Julian, "Owned!: Intellectual Property in the Age of Dupers, Gold Farmers, eBayers, and Other Enemies of the Virtual State". State of Play Conference Proceedings, New York Law School (2004).
http://www.nyls.edu/pdfs/dibbell.pdf
Remarks pending
Lastowka, F. Gregory and Hunter, Dan, "The Laws of the Virtual Worlds" 92 California Law Review 1 (January 2004).
http://ssrn.com/abstract=402860
Remarks pending
Book, Betsy, "These bodies are FREE, so get one NOW!: Advertising and Branding in Social Virtual Worlds" (April 2004).
http://ssrn.com/abstract=536422
Remarks pending
Nash, Justin and Schneyer, Evan, "Virtual Economies: An In-Depth Look at the Virtual World of Final Fantasy XI: Online" (6 May 2004).
http://lgst.wharton.upenn.edu/hunterd/VirtualEconomies.pdf
Remarks pending
Castronova, Edward, "The Price of Bodies: A Hedonic Pricing Model of Avatar Attributes in a Synthetic World". Kyklos, Vol. 57, No. 2, pp. 173-196 (May 2004)
http://ssrn.com/abstract=546921
Remarks pending
Ondrejka, Cory R, "Living on the Edge: Digital Worlds Which Embrace the Real World" (June 5, 2004).
http://ssrn.com/abstract=555661
The author is an executive manager at Linden Lab, the company behind a virtual world called Second Life. In this article he describes the debate concerning real-life economic and intellectual property links in virtual worlds. His own position is that it is futile to fight against the trade of virtual assets for real currency. Instead, he advocates a creative virtual world where users retain a fair copyright to their creations and are free to trade them -- exactly as in Second Life.
Ondrejka, Cory R, "A Piece of Place: Modeling the Digital on the Real in Second Life" (June 7, 2004).
http://ssrn.com/abstract=555883
Remarks pending
Jenkins, Peter S., "The Virtual World as a Company Town - Freedom of Speech in Massively Multiple Online Role Playing Games". Journal of Internet Law, Vol. 8, No. 1 (July 2004).
http://ssrn.com/abstract=565181
Remarks pending
MacInnes, Ian, "The Implications of Property Rights in Virtual World Business Models". Paper presented at the Americas Conference of Information Systems (AMCIS 2004), New York, NY (August 2004).
http://web.si.umich.edu/tprc/archive-search-abstract.cfm?PaperID=382
The author, an assistant professor at Syracuse University School of Information Studies, applies his previous research on new business models to highlight issues facing VW operators. According to the author, the operators are currently going through a typical stage in business model development where environmental factors such as legal and societal challenges are the main issue. He urges operators to take the challenges seriously: to recognise virtual property rights and to devolve more power to the users. His conclusions are based on the assumption that the EULA will not protect the operators in the future, a point the paper does not attempt to argue.
Whang, Sang-Min, Lee, Hae-Rin and Park, Y.J. "The Emergence of Digital Image Value Property Rights Created by Interactivity between Users and Items in Online Game". Paper presented at the Americas Conference of Information Systems (AMCIS 2004), New York, NY (August 2004).
Remarks pending
Burke, Timothy, "Play of State: Sovereignty and Governance in MMOGs" (August 2004).
http://www.swarthmore.edu/SocSci/tburke1/The%20MMOG%20State.pdf
Remarks pending
Yamaguchi, Hiroshi, "An Analysis of Virtual Currencies in Online Games" (1 September 2004).
http://ssrn.com/abstract=544422
The author builds on Castronova's work in developing a model to explain allocation of time to virtual worlds in terms of utility. He also explains in simple economic terms why some players are motivated to trade virtual assets for real currency and vice versa. The main theme of the short article is, however, virtual currency. The author examines the properties of virtual currencies to establish how they differ from Monopoly money and how they compare to real currency. He concludes that they are similar to the Local Exchange Trading System (LETS) and envisions that the use of such a system could reach beyond the virtual worlds to other domains of the internet where exchange takes place.
Farmer, F. Randall, "KidTrade: A Design for an eBay-resistant Virtual Economy" (20 October 2004).
http://www.fudco.com/habitat/archives/000023.html
Remarks pending
Balkin, Jack M., "Virtual Liberty: Freedom to Design and Freedom to Play in Virtual Worlds". 90 Virginia Law Review 2043 (2004).
http://ssrn.com/abstract=555683
Remarks pending
Bartle, Richard A., "Pitfalls of Virtual Property". The Themis Group (2004).
http://www.themis-group.com/uploads/Pitfalls%20of%20Virtual%20Property.pdf
Remarks pending
MacInnes, Ian, Park, Y.J. and Whang, Sang-Min, "Virtual World Governance: Digital Item Trade and its Consequences in Korea". TPRC Conference Paper (2004).
http://web.si.umich.edu/tprc/archive-search-abstract.cfm?PaperID=382
Remarks pending
Lastowka, F. Gregory and Hunter, Dan, "Virtual Crime". New York Law School Law Review (Forthcoming).
http://ssrn.com/abstract=564801
Remarks pending
Ondrejka, Cory R, "Escaping the Gilded Cage: User Created Content and Building the Metaverse". State of Play Conference Proceedings, New York Law School (2004).
http://ssrn.com/abstract=538362
Remarks pending
Last updated 5 November 2004.