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Anyone know any cases of deflation in an MMORPG economy?

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I have seen a lot of hyperinflation cases, to the point where the in-game currency becomes useless and people trade using items instead. (Diablo 2 for example, where the best ring in the game, SOJ, becomes the currency) Have anyone heard of deflation and the harmful effects? What ills would hyper-deflation brings to the game economy? I guess it is hard for a game to face deflation since money creation continues 24/7 through mobs, quests etc.

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Yeah, I don't think there are any examples of deflation for that reason. Resources are perpetually injected into the economy by the necessity of (a) ensuring newbies have enough resources to play, and (b) to allow other players to generate value via crafting etc, so it's a scenario that doesn't crop up much.

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I have seen occasional temporary deflation (over weeks and months) or deflation specific to certain items or groups of items. I don't think they are significant for the economy, though.

Deflation usually only occurs in presence of
a) exploits, item dups, etc.
b) rare item hype and seasonal lack thereof
c) item nerfs, even insignificant ones (psychology!)
d) increased drop rates of ultra-rare items
e) introducing a new feature which is not properly planned (which indirectly results in point d)

Other than that, you will most likely only ever see inflation, even in games which do a very harsh money drain all the time (those only spoil the fun for beginners, but don't solve the problem).

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There are too many economies to track now, but there are a few interesting reads that you might want to look at:

Here is one on the UO economy
This is one by a university professor on virtual economies

UO's economy is a good one to look at because it is well documented. There are several cases that because of DUP's that deflation occured, so they actually had to find ways to inflate the economy again, rather than wipe stuff. Finding creative ways of adjusting the economic flow in a game is almost always a better alternative than wiping or rolling back. Just like with the cases of deflation, the opposite has occured. MMO economies should never be static, and the devs should always be monitoring things to keep the inflation/deflation occurrances to a minumum, and there are smart ways to do this so it doesn't occur. As they point out with UO, however, a fix takes longer to produce than the exploit, so the best laid plans of mice and man oft times go awry...

Also, check out what Radu has to say on the subject. That is not the only source of information regarding small MMO's and their economic problems, though. Let me know if you want more... I've always got more.

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Final Fantasy XI has been experiencing overall deflation for something like two years now.

The developers constantly shrink the money pool via mass banings and nerfing income sources in an overbearing attempt to drive out RMT. This has combined with a high degree of item persistence (i.e. once created, items tend to stay within the game economy) to drive prices in a downward spiral.

To top it all off, there is still strong RMT activity, because the game's design encourages the market for RMT services. All they've really done is driven up the market price for their in-game currency. (FFXI gil right now sells for about 12 times more than it did in December 2005, at the height of the game's inflationary period.)

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I think many game economies have both inflation and deflation in the case of different items. Rare drops that many players want or items that were issued for a time but no longer are pretty much always have absurdly high prices. Common drops, quest rewards, craftable items, and useless items, and especially items that are resellable after being used, usually plummet in price, although a low cap can be established by the item's npc sell price.

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Can't recall any deflation in any of MMO's I found. That is if your not counting brnad new servers starting out. However I can recall a time when I was playing WoW one guy acquired so much gold he bought out everything on the Auction House and re-sold it for 10 times more. His account was later banned and the Auction House was down for about a day.

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Wurm Online seems to be in a rather deflated state most of the times. I haven't really played lately, but they tend to have their economy go in rather random cycles. The problem is a shortage of coins in the game, and how their cash sinks work. The main use for coins is to pay upkeep for the guards on your deeds, and the idea was that you pay real world money to buy enough silver coins each month to pay for the upkeep, and then any gold you earn in game would be used for trade. While sounding good on paper, it is proving that most people don't really want to pay for a character AND deed upkeep every month, so most of the cash that was suppose to be used for trade gets hoarded away.

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Widespread deflation? Not possible in a MMORPG without some interaction from developers. Temporary? Sure. WoW has had several when I played a couple years ago. The problem just comes from more people in the economy and they have their own resources piled into it, inflation is inevitable without interaction from developers.

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Quote:
Original post by Jerky
There are too many economies to track now, but there are a few interesting reads that you might want to look at:

Here is one on the UO economy
This is one by a university professor on virtual economies

UO's economy is a good one to look at because it is well documented. There are several cases that because of DUP's that deflation occured, so they actually had to find ways to inflate the economy again, rather than wipe stuff. Finding creative ways of adjusting the economic flow in a game is almost always a better alternative than wiping or rolling back. Just like with the cases of deflation, the opposite has occured. MMO economies should never be static, and the devs should always be monitoring things to keep the inflation/deflation occurrances to a minumum, and there are smart ways to do this so it doesn't occur. As they point out with UO, however, a fix takes longer to produce than the exploit, so the best laid plans of mice and man oft times go awry...

Also, check out what Radu has to say on the subject. That is not the only source of information regarding small MMO's and their economic problems, though. Let me know if you want more... I've always got more.


WOW these are GREAT links! Will keep me occupied for a while, THANKS! :)

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Quote:
Original post by Kylotan
Yeah, I don't think there are any examples of deflation for that reason. Resources are perpetually injected into the economy by the necessity of (a) ensuring newbies have enough resources to play, and (b) to allow other players to generate value via crafting etc, so it's a scenario that doesn't crop up much.


Shortly after WWI the german govt printed extra notes, and a direct side effect was hyperINflation. So, the counter to deflation would be to "add" money lying around, would it not?

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Certain items are bound to go up and down in price but the total cost of a basket of goods is unlikely to go down in an MMO unless there is a change in that typical basket of goods or a change in the money supply relative to the supply of goods.

An example of a change in the basket of goods would be if an expansion added housing. Such an addition could potentially lead ot deflation as players have more things to spend their money on but the same amount of money.

This is different than going from Tier 1 items to Tier 2 items where the prices of the Tier 1 items go down because there are now Tier 2 items that are better. This is replacing an old basket of goods with a new basket of goods.

One interesting factor in determining the effective money supplied in an MMO is the frequency in which it is traded. An economy that has simple and quick trading will have a larger effective money supply than an economy that has relatively large barriers to trading.

In addition to the relatively well know process of money sinks, there can also be money pools. A money pool is where the economy is set up where players start to accumulate large amounts of in game wealth but don't know what to do with it. The actions of these players can then drastically change the prices in an economy as their participation in the economy can drastically change the effective money supply, or the amount of active currency in the game.

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Quote:
Original post by Sephyx
Widespread deflation? Not possible in a MMORPG without some interaction from developers. Temporary? Sure. WoW has had several when I played a couple years ago. The problem just comes from more people in the economy and they have their own resources piled into it, inflation is inevitable without interaction from developers.


That's not as true as you might think. If you take a look at how it could happen, its happened more often than most people know. However, if what you meant by widespread is "capable of taking the entire economy down", then you are probably right. Deflation certainly does occur, but not nearly as often as inflation, which is due to the devs endlessly dumping goods and money into the economy without enough sinks.

A simple Google search should reveal plenty on the specific topic.

A couple of notables are:
Nick Yee finding deflation in WoW
Sam Lewis' paper on MMO Economies/Money supply - with deflation covered at the bottom
Tobold's analysis on deflation - this is actually very interesting as he points out that the real currency in MMO's is time. You can do, buy, achieve anything with the right amount of time.

I said I had more on MMO economies, so I'll post a few more:
Advanced MMOG Economies - Also by Sam Lewis
All of Radu's post-mortem articles mention some economy aspects
Some notes Raph Koster took when discussing MMO economies at a conference
An older thread here on Economies
We can't leave out what Mu has to say on the subject either.
Forum thread discussing MMO economies

I can always dig deep for more if you like.

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I know histories about some UO servers where massive deflations ocurred after the AOS launch.

AOS introduced the "artifact" items.

These items were the best items around, and quickly they inflated while everything else deflated.

Suddenly there was so much players collecting artifacts around that after a time there was too much artifacts, so their price started to deflate too, since all other items (now useless) were still deflating, everything was deflating.

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The blog about time as currency gets a lot of things right but doesn't really understand what currency is IMO. Time is a critical thing being traded by the player initially in an MMO and is a factor for all value in game, but it is not currency. Money or currency or any means of trade(gold, vodka, SOJ, whatever) are used as currency because they can keep their value as time passes. Inflation is the measure of this currency losing value over time. So an in game currency that is suffering from inflation loses it's value as a currency because someone can not trade it for something else the next day or the next month.

The act of people getting more for their time happens in the real world and leads to inflation in the real world too.

Part of something I wrote awhile back about time and MMO economies.

Any MMORPG design team faces the task of creating a healthy player economy. To help create better MMORPG economies I thought it would be helpful to better understand how these economies work and have a way of talking about the behavior of players within the MMORPG economy. What I came up with is a basic economic principle of treating time as a commodity the player supplies and is then used to attain value. The total value a player gets out of a play session is a function of time.

Time = Total Value

This value can be broken down between two sets of ideas; 1) tangible value and intangible value and 2) purposeful value and nonpurposeful value. These two concepts combine to form four different areas of value; 1) tangible and purposeful (TP), 2) tangible and non-purposeful (TN), 3) intangible and purposeful (IP), and 4) intangible and non-purposeful (IN).

Time = Total Value = f(TP, TN, IP, IN)

Of these 4; Value that is both Tangible and Purposeful ends up being the most important value as it is the most obvious and the most universal. All other areas of value are personal and relative to the player. This results in their value being diminished greatly from the point of view of the player population as a whole.

Along with the 4 values I talk about, time is also a thing of value for all players. When considering how a player determines value all five of these factors may come into play. (What this means is if I can spend 5 minutes to save 20 I will, this time saved is TimeS).

Time = Total Value = f(-TimeS, TP, TN, IP, IN)

This equation comes into play with every decision a player makes from deciding to do a quest to trading something at the Auction House. What this means is that every players supply and demand schedules are made up of their own personal calculation of this equation.

While this way of thinking helps a designer formulate theories on supply and demand it is also important to consider when dealing with the MMORPG value added cycle.

Over any given period of time, I will call it a month, players will spend their time within a game and gain value. As players attain value they accumulate more and more tangible value resulting in each cycle starting off with more starting value than the previous cycle.

One of the characteristics of all tangible value is that it accumulates within the game world unless there is a method of having it leave the game world. I will call this consumption of Tangible Value (CTV). In many MMORPGs their economy is based around the players exchange of this accumulated tangible value. Not all tangible value is able to be exchanged so a distinction has to be made between liquid assets and non liquid assests.

Now that the player has accumulated some in game value they not only supply time but also their liquid tangible value (LTV) which was a product of time spent.

One of the major concerns for any designer is the accumulation of tangible value within the game economy. When using my formula above to calculate how players spend their time you can consider the following. (I replace Time with Total Value as it is what the player supplies to get value.)

[Edited by - Stangler on March 6, 2008 8:15:04 AM]

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Another area of confusion is when certain goods see a reduction in price or certain items see an increase in price. This is not always inflation or deflation of a currency.

Inflation or deflation is typically measured based on the value of a basket of goods as opposed to any 5 items someone picks out to measure. In MMOs you may have this basket of goods changing a lot as new items are introduced and players change(level up).

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Eve-Online has seen price deflation (at least in the bits my friend trades Zealots and lens crystals).

The main problem for a lot of MMORPGs is that things don't wear out and are repaired as good as new. That means that new goods are always additional, and only an expanding player base can absorb this.

Incidentally you can have monetary deflation and price inflation at the same time. Just look at the US dollar currently.

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Quote:
Original post by Stangler
The blog about time as currency gets a lot of things right but doesn't really understand what currency is IMO. Time is a critical thing being traded by the player initially in an MMO and is a factor for all value in game, but it is not currency. Money or currency or any means of trade(gold, vodka, SOJ, whatever) are used as currency because they can keep their value as time passes. Inflation is the measure of this currency losing value over time. So an in game currency that is suffering from inflation loses it's value as a currency because someone can not trade it for something else the next day or the next month. ...


Once again, Sam Lewis also mentioned time as currency, and made an equation, not that dissimilar from yours, about something he calls The Hierarchy of Pain. It's worth a read. Thanks for the insights. I wasn't suggesting that Time is currency because it actually is, but because it sort of is, and because it doesn't come immediately to mind when thinking about MMO economies.

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I should explain my point a bit better and my specific problem with the blog and how he related the act of trading time for in game value to inflation.

"A currency is a unit of exchange, facilitating the transfer of goods and/or services. It is one form of money, where money is anything that serves as a medium of exchange, a STORE OF VALUE, and a standard of value."--Wiki

http://en.wikipedia.org/wiki/Currency

The blog describes a situation where someone's currency loses their store of value but says it isn't inflation because they can spend new time and earn value at a higher rate while some prices remain the same. That act of the currency, or store of value, losing value is EXACTLY what inflation is. Yes, sometimes a person’s income can increase at an equal or greater pace but that is still inflation. Yes sometimes certain things do not change value.

In game currency would be considered a tangible value a player can attain in game. The intended purpose of the game currency would be to “serve as a medium of exchange, a store of value, and a standard of value.” The currency ends up falling under the category of being tangible and purposeful (TP).

Time = Total Value = f (TP, TN, IP, IN)

(More explination of what I am talking about)

Tangible versus intangible

Tangible in game value consists of all things gained by the player within the game that are recorded. This includes any and all progression that is recognized in game including money, or skills, or experience, or items. Basically if there is something in the code of the game that recognizes that a player has it than it is tangible. TV is something that MMORPGs tend to offer more so than other games as a product of their persistence.

Intangible value is the exact opposite of tangible value in that it is not coded in the game at all. IV includes things like having fun and getting better at controling your character. The ability for a player to get better are more common in FPS games where the players skill comes into play.
Purposeful and Non-Purposeful

The second differentiation I make between various forms of value is between; 1) purposeful value and 2) not purposeful value. In this case there is an asumption of a purpose. This purpose can include many different things including combat, or crafting, or city building, or whatever the designer chooses.

Purposeful Value (PV) consists of anything of value the player can get in return for their investment that has a purpose in the game. This includes getting that new sword that helps you kill the dragon, or improving your ability to aim as a player (not just an avatar).
Non purposeful (NV) consists of anything that the player considers valuable but has no purpose in the game. This can include silly things like collecting rare trinkets to decorate your house with, or simply having fun.

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Thanks for adding the details and clarifying. I am sure it will benefit those who want to do some designing of economies.

Not to beat a dead horse, but the Economist of Eve says they experience deflation:
MMO Economy Interview with Eyjolfur Gudmundsson, Lead Economist, CCP

Check the beginning of part 2 where he starts talking about deflation.

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Quote:
Original post by Jerky
Quote:
Original post by Sephyx
Widespread deflation? Not possible in a MMORPG without some interaction from developers. Temporary? Sure. WoW has had several when I played a couple years ago. The problem just comes from more people in the economy and they have their own resources piled into it, inflation is inevitable without interaction from developers.


That's not as true as you might think. If you take a look at how it could happen, its happened more often than most people know. However, if what you meant by widespread is "capable of taking the entire economy down", then you are probably right. Deflation certainly does occur, but not nearly as often as inflation, which is due to the devs endlessly dumping goods and money into the economy without enough sinks.



That's pretty much what I was getting at, I consider widespread economy changes as threats to the economy's infrastructure, and temporary as such.

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