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Norrath Economic Report Now Available
Edward Castronova writes "Some months ago, Slashdot posted a note about on a survey I was doing for a report on the economy of EverQuest. The report is done and can be downloaded (Scroll down for the Document Download button). Tidbits: Norrath's GDP per capita is higher than that of China and India; its currency sells for about a penny per platinum piece, which makes it more valuable in $US than the yen; a typical person can make about US$3.50 an hour working there by farming the bots and selling the loot; the deflation rate is almost 30 percent annually. There's also some microeconomic analysis and an overview of the MMORPG market. Comments and reactions appreciated. Thanks, Edward Castronova, Associate Professor of Economics, Cal State Fullerton."
Simple:
Tradeable items do not decay, and their appearance rate is either constant, or increasing as avatars gain in average level, therefore the offering grows while the market is roughly constant.
Secondly, new items are being discovered as avatars gain in level or as the world is expanded, reducing the value of older items.
Excellent!
We have an analysis of the (broken) economy in Ultima Online @ The In-game Economics of Ultima Online
And this story describes EQ. We just need a paper discribing the history of D2's economy (i.e. the ramifications of the massive dupes this last weekend will have, the SOJ gamble trick in the early versions, etc.)
Okay, this seems to be a point of confusion from the comments I have read.
30% deflation means that the currency of EverQuest can buy more EverQuest stuff every year.
30% inflation would imply that your same amount of EverQuest money would buy you less EverQuest stuff.
Thus, the value of items in EverQuest depreciate drastically over time, in opposition to the real world. As many people have pointed it, this is because items in EverQuest that were once scarce become phased out by new items that are better and replace the old high value items.
Thus, if you hold large quanitities of money in EverQuest, its better to hang onto it for awhile before making a purchase, because you will be able to buy more later. However, if you hold large quantities of valuable items, you'd better sell them fast, because they are only going to lose value over time.
This is exactly correct. A great example is the Wurmslayer. This is a weapon that used to be one of the very best in the game. Ignoring the fact that that is no longer the case, let's look at how it came to be valuable in the first place:
It requires a quest which involves killing a fairly tough dragon. So, only people who are high level and can call on a few other high-level folks to help will have the item. Also, the dragon only shows up ("spawns", in the lingo) infrequently, so this further restricts supply.
Ok, so you have very few of these, and they're hotly contested. This jacks up the price and people who do the quest get well rewarded.
After a few months, however you start to get secondary sales. People get better weapons (their "epics") or they decide to stop playing a class that can use such a weapon, so they decide to sell it. This creates a second wave of availability from folks who expect to take a little bit of a loss from what they paid (sellers rarely expect to make more money than what they paid in EQ).
So, now the price bumps down a notch, but it's still fairly high, and rewards those who do the quest well. However, as time goes by and more people do the quest, you begin to reach an equilibrium where there are more folks selling Wurmslayers second-hand than there are doing the quest. Now, the price can drop BELOW the level where it's worth doing the quest at all!
In the end, an item that started selling around 5-10k is now down to about 2k after just 2 years since the expansion's release.
More dramatic drops happen when items first come out in an expansion though. The recent release of Shadow of Luclin created a flood of neat new items people were willing to pay a great deal for until they realized that they were relatively common.