Sunday, June 22, 2008

Learning Economics in World of Warcraft

Tony Forster

Licensed Creative Commons, share alike, non commercial, by attribution

Abstract

World of Warcraft is an online computer game with 10 million subscribers (as at June 08). It has an ingame free market economy which allows for market research and the teaching of economic theory by hands on activities. This paper describes how the ingame auction house could be used to teach economic theory with hands on activities to explore the relationship between supply, demand and price.


About the game

World of Warcraft (commonly known as WoW) is a massively multiplayer online role-playing game (MMORPG). People control a character avatar within a persistent game world, exploring the landscape, fighting monsters, performing quests, building skills, and interacting with NPCs, as well as other players. The game rewards success with in-game money, items, experience and reputation, all of which in turn allow players to improve their skill and power. Players can level up their characters from level one to the next.


World of Warcraft uses server clusters (known as "realms") to allow players to choose their preferred gameplay type and to allow the game to support as many subscribers as it does. There are four types of realms: Normal (also known as PvE or player versus environment), PvP (player versus player), RP (a roleplaying Normal/PvE server) and RP-PvP (roleplaying PvP server):


When creating a character in World of Warcraft, the player can choose from ten different races in two factions: Alliance and Horde. Race determines the character's appearance, starting location, and initial skill set, called "racial traits".


* The Alliance currently consists of Humans, Night Elves, Dwarfs, Gnomes and Draenei.
* The Horde currently consists of Orcs, Tauren, Undead, Trolls and Blood Elves.


The game has nine character classes that a player can choose from, though not all classes are available for each race. During the course of playing the game, players may choose to develop side skills for their character(s). These non-combat skills are called professions.


To play, there is an initial purchase price and a monthly fee as shown below


Suggested Retail Price Monthly Fee

Europe E14.99 E11-E13

United Kingdom £9.99 £7.70-£9

North America/Oceania US$20 $13-$15


Video game stores commonly stock the trial version of World of Warcraft in DVD form priced at A$2 or \2 including VAT, which include the game and 14 days of gameplay.


Derived from http://en.wikipedia.org/wiki/World_of_warcraft (retrieved 30/4/08)


About in game trading

To be able to trade effectively, it is estimated that the character would need to be levelled up to level 10. The trial version may not allow enough time for this, it is also uncertain whether the trial version has the full functionality including the ability to use the auction house.


Estimated playing time to reach various levels is shown below.

Level 10, 4 hours playing time

Level 25, 25 hours playing time

Level 55 200 hours playing time


WoW has 10 million subscribers and has a market economy where in game items can be traded for in game currency. There are approximately 150 independent servers or realms, so within one realm there is a market economy of approximately 70,000 players. Goods are traded at an auction house with market forces determining prices. This makes WoW an ideal testbed for testing economic theories of free market behaviour.


Tradeable goods are best achieved through the professions. For example, with professions of herbalism and alchemy, the trader can collect herbs (known as materials or mats) and transform them into potions (pots). There is a market for both the materials and the potions. For example, the player could search for Mageroyal and Stranglekelp and either transform them into Lesser Mana Potion which could be traded or just trade the materials direct. You will find the online database www.thottbot.com invaluable in helping level up and finding materials.


Alternative professions such as mining and engineering may be better, players suggest that mining ores such as copper give easy access to tradeable commodities


The player is able to test theories of supply and demand and influence market prices by trading on the open market.


Activities:

  • Discuss, how well does the market mirror the real world?

  • What determines the supply of money?

  • Is there any equivalent to monetary and fiscal interventions which are practised in real economies?

  • If you were Blizzard (the makers of WoW) what market interventions might you do?


  • Observe long term price trends e.g. at http://www.wowecon.com

  • Is there any long term inflationary or deflationary trend?

  • Observe the trading history of some commodity which you could trade. Can you estimate the elasticity of supply and demand.

  • Having estimated market elasticity, predict the effect of your trade on the market.

  • Do a large amount of trading of one commodity. Are the price effects what you predicted? If not, why?

  • Classic market theory works on the assumption that the market is perfectly informed. How well informed is the market?

  • How is the market informed?

  • Are there delayed effects as the market adjusts? What do you think the mechanism is?


Useful references

www.thottbot.com invaluable in helping level up and finding materials

http://www.wowecon.com/ market information and statistics

http://www.warcraftriches.com/ Derek's Gold Mastery Guide

http://www.youtube.com/watch?v=peR8Hs9s_wY

http://www.youtube.com/watch?v=6PDRLnmCLyQ World of Warcraft Gold Farm be Rich (auction house)

http://www.youtube.com/watch?v=d2jDVsFVXE0 World of Warcraft auction house


Sample trades

I am told that for most items, they are sold at the buyout price, rather than the auction price. The item chosen for trade was Stranglekelp. It was commanding a good price at auction.

Typical WoW wide prices were listed at www.wowecon.com at 20s to 30 s. (100 copper = 1 silver, 100 silver = 1 gold)



The auction house listed 19 units for sale at 21s to 173s I had no information as to whether it was actually selling at these prices or in what volumes. I listed at a number of units at a range of prices.


Date

Bought

Sold

20 May


3 @ 16s



3 @ 30



3 @ 33



6 @ 40



5 @ 51



10 @ 52



5 @ 54

21 May


25 @ 53



10 @ 80



10 @ 100s


At this stage I realised that Stranglekelp was selling as high as 153s for a patient seller and my cheaper sales were being bought and immediately relisted at a higher price.


Date

Bought

Sold

22 May

11 @ 11s

90 @ 100

23 May

6 @ 80

40 @ 100


20 @ 21

60 @ 100


12 @ 91



20 @ 95



4 @ 60

4 @ 125

26 May


100 @ 1.00

29 May

74 @ 40

148 @ 100

2 June

19 @ 75

20 @ 100


95 @ 50



I adopted this strategy and was able to maintain a market price of 100s per Stranglekelp and sell most if not all the market volume. The volume was approximately 460 units in 11 days or 40 units a day. The market seemed to be unresponsive to price. Purchasers would buy at any price so that high priced stock would eventually clear when no cheaper stock was available. Sellers would sell much more cheaply than the market could support.

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10 Comments:

Blogger Karlie said...

Hi Tony,
I didn't know if your still using your Monash blog, so I'm posting here because it was updated last.
Interesting post by the way. I don't play WOW myself, but my husband does. I prefer Guild Wars because there are no subsciption fees and I don't have to invest as much time into the game. I wonder if you could do a similar anaylsis of that with students. Like have options that they can analyse those questions from a selection of games which they might play but have similar in-game markets.

I find the stuff you post about computers interesting. While I use mine often (and my husband is a software/web monkey) I don't really utalise applications for classroom enviroments. (Or think about how I can use them.)

I definately enjoy reading about this stuff. (Even if I still prefer the hands-on-approach of experiments.) But that's me. I think I could aim for a mix of the two. Because I take your point that it allows greater time to think about what's going on. But I also agree with Greg that students need some realism about experiments taking time, and it helps to lenghten their attention spans. (plus on the oval with fruit boxs may be the only sunshine some of those students might get :D )

Look forward to an interesting semester.

Saturday, July 19, 2008 12:05:00 PM  
Blogger Karlie said...

Hi,
I'll put this here because I don't know if you'd see a reply on my blog.

Hopefully you understood that deep thinking was my intention. We had an interesting debate in class about the possibility of marking something non-traditional (ie not a test but rather a creative writing piece).
I believed that you should do things like this because the object was to get students to think more about the topic and not just have basic recall, which is all that a test usually calls for.

The video concept (no sound, or no visual) really gets students thinking about the video and translating it between different styles (ie video to written). It is also a lot more powerful that just a worksheet on a video.

I can see how this all relates to physics as well, which I hope I can capture on rounds.

Also... I can't remember if I mentioned to you. Have you considered that the WOW could also be applied to EVE which releases its own financial guide on the in-game market because it is that advanced.

Wednesday, July 30, 2008 9:30:00 PM  
Blogger Tom Hoffman said...

Have you seen the EVE Quarterly (ok, they aren't actually quarterly) Economic Newsletters?

http://myeve.eve-online.com/devblog.asp?a=blog&bid=518

http://myeve.eve-online.com/devblog.asp?a=blog&bid=542

Wednesday, February 04, 2009 4:52:00 AM  
Blogger Tony Forster said...

Thanks Tom and Karlie for the information on Eve.
The quarterly makes interesting reading, I think that teachers of economics should read and consider using it

Thursday, February 05, 2009 11:36:00 AM  
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Thursday, September 03, 2009 11:42:00 AM  
Anonymous Buy wow gold said...

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Friday, September 11, 2009 8:07:00 PM  
Blogger Mystified said...

I also have to add an EvE comment. In terms of a complicated economy that follows principles that apply to the real world EvE is it.

One thing I remembered was when default (non-player made) shuttle prices were changed by CCP. Shuttles used to be an easy and clear sink to get rid of a certain type of ore. With the change in the shuttle prices the value of this ore plumetted overnight, which led to a cascade of other price fixes which happened incredibly fast.

EvE is unique also because there are players who play simply to manipulate the economy, not like gold farmers do, but like a real trader would. Its really fascinating.

Tuesday, November 10, 2009 10:27:00 AM  
Blogger Tony Forster said...

thanks mystified for your observations

Tuesday, November 10, 2009 12:45:00 PM  
Blogger Tony Forster said...

See also
http://thejournal.com/articles/2009/11/09/virtual-communities.aspx?sc_lang=en

Wednesday, July 21, 2010 10:22:00 AM  
Blogger Tony Forster said...

thanks Maria for this link on gear optimisation
http://elitistjerks.com/f73/t101212-wotlk_4_0_cats/p12/#post1767952

Monday, December 13, 2010 7:45:00 AM  

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