«

»

Where Real World Economics Meet World of Warcraft (and then abruptly crash and burn)

Something I’ve noticed from my time crawling the gold blog-o-sphere is that so many ideas and discussions spawn from correlations people make between the ingame World of Warcraft economy and the economy of the real world. And you can’t blame them, so many theories, principles, tactics etc. from real world economics work perfectly, and sometimes better, with the ingame economy. There comes a point though were real world meets fantasy and the rules of the economic world as “professionals” know it disintegrate, because frankly, we’re dealing with an almost entirely different beast here:

  • There’s No Room for Innovation – Unlike the real world there is a fixed amount of items available for you to craft, you can’t invent new items, and you’re dependant on Blizzard to release new designs to you, and every single one of your competitors.
  • Absolute Income Control – Blizzard has absolute control over the gold that flows in and out of an economy via loot, vendor items, rewards, repairs, reforge costs, flight path costs etc. Blizzard can also just print gold or take it away, countries run into big problems if they just print money.
  • No Brand Names – Every single item created looks and functions exactly the same as any other copy, there are no brands and certain crafters don’t produce better or worse quality items.
  • One Man Businesses – No need to worry about staff, or operating hours WoW economics centre around thousands of one man teams, much different than traditional business models.
  • Majority of Trade is Through Auction House – All the game’s trade focused through the auction house on each server as opposed to focused around face to face business deals and contracts dominate in the real world.
  • Everything is digital – There are no physical goods, just bits of data flying around.

These differences create several unique circumstances in the game’s economy, some of them good, some of them bad. Lets focus on the good first shall we?

  • Near Perfect Supply and Demand – With only one central trading service, and face to face trades low and slower, the supply and demand system works perfectly, and near instantly.
  • One Stop Shop – Once you find an auction house nearly every item is available at your finger tips, you can get gems, enchants, potions, and nearly anything else in the game with one stop to the auction house.
  • One Size Fits All – No matter what the size of the item, be it a chopper or a necklace, every item fits at least one a slot. This lets you, for the most part, buy, sell, and store with no care for size.
  • Storage is Cheap – You can easily add more space by adding new characters to your server. A few bank slots, a few bags and boom, instant storage. Guild banks are a bit more expensive and harder to get, but it’s much easier than finding a warehouse near your factory would be
  • Long Tail Sales – The digital nature of the game makes targeting the long tail of the markets real easy (i.e. glyphs)
  • Restock in Minutes – Out of cut gems? Log over to your Jewelcrafter, cut some gems, mail them over, and post. Not waiting 2 weeks for orders to come through (you still have to worry about supplies though)
  • Post in Minutes, Sell While You’re Away – Most people have their repost schedule down to minutes, sometimes replacing and reposting thousands of goods within 15 minutes. And then you go off on your usual business while the buyers come to you, and you don’t even need to stay in the shop!
  • Universal Quality – Everyone from the freshest goblin to the most experienced auctioneer produces the same quality item, no one can tell the difference. This removes a huge barrier to entry.

Clearly the game’s economy has a lot of things going for it, especially for sellers, but these advantages trickle down to the buyers as well. All of the advantages are mostly from a logistical standpoint, making things easier for buyer and seller, let’s see what disadvantages the World of Warcraft economy brings:

  • No Convenience Factor – Yesterday on the train back from the big smoke I blew $4 on a cup of tea and a chocolate bar. Why did I pay such an outrageous price? Because when you’re doing 120 km/h down the rails, you don’t have much choice unless you bring your own food. Same with vending machines, gas stations etc. Sure you can buy them cheaper elsewhere, but that requires forethought, and besides, that chocolate bar is right there! In World of Warcraft this isn’t the case, sure you can sometimes sell directly to people out in the world, but with instance raids it gets difficult, and most people would go to the auction house on the first thought, plus you have to set yourself up as a well known supplier, so all kinds of hurdles for the seller, and no real reasons for the buyer.
  • Universal Quality – Some of these things work both ways; While the lack of item quality (not talking rare vs. epic here) helps enter the market, it prevents old hands from distinguishing themselves with top notch items.
  • Few Regulations – While some claim Blizzard rules the game with an iron hand, there are really few regulations in terms of ethics in the game. Laws that allow contracts, banking services, and customer service business simply don’t exist properly in World of Warcraft. This is why customer centric gold-making is near impossible in the game because the confidence that the supplier will follow through and can be force to, or at least compensate them, simply isn’t there. The general player integrity certainly doesn’t help the cause.
  • Low Barriers to Entry – Everyone has professions. All you need is some gold and some time (interchanging one for the other depending on what you have more of) and you have a new profession at your finger tips. Since professions also give stat bonus most players will already have two maxed professions, whether or not they play the market. And when they want to make the jump, they already have the professions to do so, mats at their fingertips via the auction house, and a plethora of resources that will hold their hand through setting up their business.
  • Blizzard Holds All the Stats – In the real world there is a lot more transparency in the day to day functions of businesses. Businesses have to report to the government, and in the case of a publicly traded company, to their stock holders (pretty much the public). Governments release all kinds of stats to the public every year as well, adding to the every increasing stream of information being released into the public. With all this data we can calculate things like GDP, wealth distribution, how are markets are doing, currency exchange etc. Since Blizzard never releases statistics, all our available statistics are player gained, subject to great error, and can’t even scratch the surface of the data Blizzard has access too.

We are clearly dealing with a vastly different mechanic here in our ingame economy than what the business world deals with every day. While applying real world theories and principles to the World of Warcraft, we clearly can’t rely on them as our sole interaction with the Auction House and our theory crafting tools. A new brand of principles and theories must be developed, and are indeed being developed every day. Who knows, maybe one day they will study the Warcraft economy for real world applications.

On that note I would like to ask all readers that have not already done so to take my World of Warcraft Wealth Survey, it’s a quick 4 question survey to help ascertain wealth distribution, wealth demographics etc. I’d also like to ask your help in getting the survey to people, specifically those who don’t normally visit WoW sites or take these types of surveys. The wider the array of data the better and more accurate the results will be.

About the author

Eric Dekker

Gamer. Student. Nerd. Author of The Golden Crusade. Find him on + and Twitter.

8 comments

Skip to comment form

  1. Leonard

    Currently studying economics at university and completely agree with the points you’ve made. All too often gold blogs liken the WoW economy to the real world economy, something I’ve never really bought into. Thank you for an insightful and informed post.

  2. Critical Goblin

    Yes very good insights. I had penciled down in my Good Ideas Notebook almost half of the topics you’ve mentioned and was going to discuss them one topic at a time, but you’ve done too good a job there’s no way I can top your analyses!

  3. Eric Dekker

    Thanks Leonard, I have no background in economics so all I know about the economy has really been gleaned through World of Warcraft ironically. That and some wikipedia research :P

    Thanks Critical!

  4. Mahbub

    Great points. I’m looking forward to seeing the data from your survey

  5. Verelyse

    Interesting list; I’d disagree slightly on two of them, however. I think it is possible to create a brand image through your own name, which several bloggers have demonstrated when it comes to personal charisma and fortune cookie sales.

    The second would be the no convenience factor in being able to charge higher prices to certain people at specific times, for that just look at the price spikes in raid supplies and sales in the 1-hour time block before most of your server’s guilds start raiding, many of them log in and bolt to the AH to restock on potions, and then after the raid go back for enchants and gems.

    So while you don’t have a trapped consumer bloc, like you would in a train in your example, you do have specific times where you can capitalize on predictable demand spikes.

    Either way though nice post! Looking forward to exploring the rest of your blog.

  6. Eric Dekker

    Excellent points Verelyse. While yes I suppose you can create a name for yourself ingame I still don’t believe it can positively effect you, and it certainly doesn’t make your products more reliable.

    I’d personally chalk your second point up to spike’s in supply and demand, not necessarily a convenience factor. Time targeting is nearly worthy of a while blog post itself, but yes while you can draw parallels, it doesn’t really exists in the way it does in the real world.

    @Mahbub The data’s coming along swimingly, I expect to do the write-up this weekend

  7. Dann

    I seriously knew about many of this, but that being said, I still considered it was useful. Sweet post!

  8. Reed

    It sounds like you’re creating problems yourself by trying to solve this issue instead of looking at why their is a problem in the first place

Comments have been disabled.