This chapter will focus on how financial economic systems are structured in games and how market, trade, and resource allocation are handled within these systems.
This chapter will offer a general understanding of how entities interact with each other in a virtual economy and explain the differences between the economic systems in real life compared to how most games handle their financial economies. This chapter will also explain why the virtual market has different limitations compared to its real-world counterpart and what problems and solutions can be applied in virtual economies.
This chapter will reference games that utilize commonly used approaches for handling market, trade and resource allocation in games, to showcase how these systems work.
This chapter will be used in later chapters to determine the difference between real-world and virtual economies.
2.1. Goals of economies in games
Economies in games serve as ways to allow visualization of progress to the player by showcasing amongst other things how much money or experience was generated during the last play session. But even more so they are a way of giving the player interesting choices about what they want and can acquire. In the case of experience, this could be the decision between different skills the player has to choose from at each level up and in the case of money, this translates into what items the player can choose from at a merchant. This makes economies resource allocation systems, in which the player has to decide how to acquire more resources and how to spend them. Therefore the first questions that must be answered when thinking about game economies are how a currency can be earned and how the earned currency can be spent. (Schell, 2015, pp. 234-235)
Considering this the similarities between the economy in games and the economy within the real world become apparent. Both concern themselves with how resources are acquired, both strive to perfectly manage the allocation of given resources and both offer incentives to do something based on the current way of how resources are acquired, in the case of the real world this could be the current market situation in a game that could be the currently active quest. But there are also a large number of differences. Ignoring that economic games and the real world have different limitations, which will be covered later in this chapter, the fundamental goal of them is completely different. The real world is concerned with the creation of a system that allows different economic entities to interact profitably with each other to the means supplying all consumers with the goods and services they need or want. Game economies don’t care about any entities other than the players and the economy is not centred on productivity or effectiveness but rather a means of handing interesting choices to the player and therefore delivering fun.
To manage this there are a few goals that should be considered by designing an economy for a game:
- Fairness: Is it possible to buy items that allow for unfair advantages or make ways of experiencing the game undesirable? Are there ways of obtaining currency in an unfair way?
- Challenge: Is it possible to buy items that result in a too-low level of difficulty? Is it too hard or too easy to earn currency?
- Choices: Are there enough desirable ways to spend and earn currency?
- Chance: Is chance or skill the determining factor of how to obtain currency?
- Cooperation: In what ways can players work together to buy something in the game or earn currency and what effect does this have on the overall economy?
- Time: Does earning currency take too much or not enough time?
- Rewards: How does it feel to earn or to spend currency?
- Punishment: How do mistakes or setbacks affect the players’ ability to earn or spend currency?
- Freedom: Can the player buy what they want and earn currency in the way they want?
(Schell, 2015, p. 235)
This makes the objective of a virtual economy in games achieve all of the formerly listed goals for the complete duration of the game. So different from real-world economies full employment, efficiency and equity can be completely ignored and instead a game economy focuses on controlling economic growth depending on the player’s level of progression, which means allowing the player to experience economic growth through amongst other things a level up since it is now possible to challenge stronger enemies the player is able to obtain more currency since these enemies have more valuable items. To combat this the player will need to buy more expensive items to fight against these enemies. Because of this income as well as spending of the player are increased. The challenge is to maintain stability for all of the previously mentioned goals since they should all be achieved for each level of economic growth the player can have.
2.2. The form of economy that is used in games
Financial game economies are carefully crafted systems that are created by the Game Designer or even a whole team of Game Designers. This places the economic system of most games like the Borderlands (Gearbox Software) series, The Elder Scrolls V: Skyrim (Bethesda Game Studios, The Elder Scrolls V: Skyrim, 2011) or Divinity: Original Sin 2 (Larina Studios, 2017) in the area of planned-economies or command-economies. The whole system is predicted and evaluated by the design team, which then adds fixed prices and rewards to the goods and services of a game. This system appears to be a proper way of handling economies in games since by determining how much currency a player is supposed to have at a certain point during the game prices and rewards can be placed at a meaningful level to allow for interesting choices, but this system also harbours many of the limitations and problems that usually come with command-economies.
Relevant limitations of this system are, that this only works as long as the player is either following a linear game flow that allows the designer to accurately predict the amount of currency the player has at a certain point of the playthrough or the limitation that the overall value of goods and services the whole game world offers must be consistent, meaning that the game features different tier layers of goods and services that decide the position of the player progression rather than location-based item additions. This results in merchants offering a large variety of items at once, for the different progression levels a player can achieve and therefore allow the design team to give the player realistic access to goods and services based on the current progression level.
But there are also a number of more severe problems with this system. Starting with how complicated it is to predict a player’s behaviour. The player has the option to obtain a lot of currency or a small amount of currency after completing a section of a game, this is heavily dependent on how many goods the player has found during that section. But even if a player has obtained fewer goods during that section it would usually be the best experience for that player if it is still possible to obtain desirable goods from the next merchant in a similar way to the player that has gathered all the goods of the previous game section. But that is not guaranteed by a flat command-based economic system.
There are also a number of games that tried different approaches. An example of this is the approach of Counter Strike: Source (Valve Corporation, 2004) to implement a dynamic weapon price system. Counter Strike: Source (Valve Corporation, 2004) is a first-person shooter in which players play multiple rounds against each other and obtain currency based on the performance of previous rounds. This currency can be spent to buy equipment for the following rounds. The dynamic weapon price systems analyzed how often a piece of equipment was acquired and increased or decreased the price of it accordingly. This resulted in extreme polarities of equipment prices for example 1$ for a Glock and 16.000$ for a Desert Eagle. (Johnson, 2009)
Another approach that is not used as often but should still be mentioned is an economy that allows for unrestricted trade between players, which results in a market-based economy. An example of how such an economy can be structured is the game EVE Online (CCP Games, 2003). A more in-depth explanation of the economic system of this game can be found in the article “How to build a robust game economy: Lessons from one of the world’s longest-running MMOs” (Goh, 2018)
2.3. Currency
Currency in games as in the real world could be anything but is usually chosen based on a number of factors that make it easier to utilize it as a trading tool. The usual approach to determine a good form of currency is to check an object for these qualities:
- It is easily portable
- It has a high-value density
- It is easily divisible
- It is relatively scarce
- It is useful in and of itself beyond facilitating financial transactions
(Azaral, 2012)
After a currency is determined the members of a society accept it for goods and services since they can expect that another person will accept it for their goods and services. This works in games since even if the currency of a game would have no secondary use, the player can always expect an NPC (Non-Player Character) to accept it and can therefore be sure that the lowest amount of value a currency has is equal to the highest value item the player can obtain for that currency from an NPC.
2.4. Are virtual economies in games complete economic systems
To answer this question it is necessary to divide games into two perspectives. The perspective of the player and the perspective of the designer includes the whole economic system covering all aspects of a game.
The perspective of the player is one of an individual economy and based on that a micro-economic system that considers the economic system from the view of the player or the character controlled by the player. Based on that, it is possible to determine if the player has to consider all aspects of an economy within the player’s individual economy.
An economic system is defined as a large set of interrelated production and consumption activities based on which economic entities decide how resources should be allocated. (Andrei, 2013) This means for the players’ individual economy to be considered an economic system, the player must have access to resources that need to be allocated and the player must have the incentive to produce and consume goods or services.
In game titles like the Borderlands (Gearbox Software) series, The Elder Scrolls V: Skyrim (Bethesda Game Studios, The Elder Scrolls V: Skyrim, 2011) or Divinity: Original Sin 2 (Larina Studios, 2017), which all utilize traditional and often used financial economy systems of games it becomes easy to see that the player has the means and the intention of producing goods and to complete services, while producing goods cover everything from crafted products to objects obtained from enemies or found within the game world and services are based on tasks or quests the player obtains and fulfils from NPCs (Non-Player Characters). The services the player completes for the NPCs offer rewards that can be used or sold. The same goes for the goods the player finds or obtains from enemies. This gives the player a number of resources to allocate to specific areas since goods can be used, consumed or sold, which creates currency that can be invested in other goods by buying them from merchants or investing it in services NPCs can offer to the player like repairing equipment, gaining short-term buffs or completing a task within the game world, like distracting a guard.
Based on this it can be said that the player as an individual has all the necessary aspects to be viewed as an economic entity and fulfils therefore all necessary factors that allow viewing the players’ perspective as a micro-economic system.
But if the perspective of the designer and the complete economic system of the game meaning the macro-economic system of the game is tested in the same way, the results are usually different. While the components of the economic system offer the existence of services and goods by NPCs merchants and NPCs that can do tasks for the player as explained before. The economic system has no need to allocate resources since it simply has all the resources it needs (If the design wants it). Merchants can have unlimited or regenerating amounts of money and items and characters in the game can simply have goods. This is valid for games with respawning enemies without respawning the number of goods owned by characters in the game world is fixed and therefore follow the rules of resource allocation.
The result of this is that the economic systems commonly used in games offer a complete economic system for the micro-economic system of the player, but not for the macro-economic system of the whole economic system that covers all aspects of a game.
2.5. Trading with Non-Player Characters
Non-Player Characters or short NPCs are often a component of the trading system of a game. Allowing the player to exchange items found during the play sessions for currency or currency for items the player desires. More often than not this merchant character will have access to an unlimited or regenerating amount of currency and buy everything from the player regardless of its own needs. This in addition to the usual fixed price value of items allows the player to obtain an infinite amount of currency as long as it is possible to obtain an infinite amount of any item. This means that as long as a game allows for example killing a respawning enemy repeatedly, it becomes possible for the player to have a not predictable amount of currency at any point in the game.
2.6. The finite amount of supply in games
At first glance, the previous statements make it appear like games have an infinite amount of supply, which is correct for each individual item since it is possible to create an infinite amount of copies. But supply in games is limited in a different way.
Supply in games is limited by the number of different items a player can and wants to obtain. While in the real world, more desirable goods and services are offered than most consumers are able to obtain, games often have a quite limited amount of choices that they can hand to their customers. Players are usually able to obtain more currency than the number of goods or services offered. If a game intends further development through for example continuous updates or DLC (Downloadable Content) it is possible that some players didn’t have access to desirable items for some time and have therefore acquired large amounts of currency, allowing them to obtain the new content more quickly, which then results in a more extreme case of this situation for the next update or DLC.
