The Price of Gold in Kargath

I stopped over at eBay the other day to take a look at some of the game currency prices. It seems like WWG is down from $7.00 per 100 in late November of last year to about $6.50 per hundred. This discovery motivated me to think a while on what game-related factors could affect the market price for online currency. Here's what I've come up with so far:

Political Factors
Certainly the game operator can be viewed as a "political" entity regarding the system of production and consumption (supply and demand) of online game items and currency. Policies made by the game operator, through vehicles such as the terms of service, puclic pronouncements on game forums and messages directed at individual players can reduce the supply of gold ("gold" here is used generically for any game's "currency") for sale outside the game by taking a prohibitive position and enforcing the rule by warning and/or punishing offenders. In this climate, sellers will expect more USD for their gold in order to mitigate the risk they are taking (e.g. possible loss of character and account). At the same time, buyers may also be scared off, reducing demand for the scarce and expensive gold. Conversely, actions encouraging outside sales of game gold will create a large number of sellers, each of whom must compete aggressively with their pricing to get you to buy their loot instead of the other guy's.

eBay could also be considered a political factor, acting as the external banking system for the game gold commerce. Their policies can also influence prices up or down. For example, if eBay raises seller's fees at the beginning of the year, the consumer sees a higher price or the sellers shift their business to a different "channel" for unloading their gold. Reducing fees would provide incentive for more sales and increase the supply of gold to buyers as well as creating competition among the new sellers entering the market.

Social Factors
Games are not just for killing and looting - they are social. Each game has formal and informal social structures. The informal structures may even vary among different game worlds operating under the same game title. The behavior of certain individuals, groups, or classes of characters could change the ease at which gold can be acquired within the game, thus affecting how valuable it is fro purchase outside the game. For example, a large clan operating on one world (server) may generously distribute gold among its members and pass down expensive items once a player outgrows them. This reduces the need for lower level players who are members of this clan to worry about how to fund the next level of armor or weapon that they need. These players do not need to purchase gold from eBay to enjoy or even thrive in the game. On the other hand, games or worlds with few clans or many small clans may not have the critical mass to operate under such a patronage system. These players need to advance independently and may seek to fund their efforts through direct purchase of gold.

Likewise, social factors outside the game, such as holidays, can affect the demand - and therefore the price - of gold in USD. This notion was affirmed in the previous post on this blog. Demand and prices go up around Christmas. This is what I think is the best explanation for the drop in WWG at the beginning of this year - prices have returned to "normal" levels after the holiday.

Unfortunately, a social factor that is not new in the real world has crept into online gaming - World of Warcraft specifically - and that is discrimination. As reported in a recent article on PR Web, some groups of players are testing others' ability to type in English before accepting them into their groups for high-level quests. This ends up reducing the earning power of certain segments of the game population, at least until such a time as they reach high enough levels and cooperate among one another to take part in those same quests. This may cause a short term increase in game gold prices because a) the "production" of gold by these players is limited until they can again participate in the higher earning quests, and b) the excluded players may demand more gold to purchase in order to compete in terms of armor and items that will help them reach the levels of the discriminating players.

Examining prices at WOW Treasures shows three tiers of gold prices. The highest tier - selling for $17.15 per 100, is comprised of realms (servers) that have been put into operation less than two weeks ago. My guess is that there is a high cost to produce gold on new servers until players level up and social systems are established to match the production rate of the players on "mature" servers.

Economic Factors
Finally, changes in the game mechanics, rules or content can impact the in-game economy positively or negatively either on the supply side ot the demand side.
Supply is with respect to a player's ability to produce gold. This is affected by the value of gold and items defeated game characters will drop, the amount of gold a player can receive in the game for trading in items to non-player character vendors, and the value of finished crafted items to non-player characters. So a new location to hunt could increase production by providing more gold per time spent than any previous location. A reduction in the percentage of an item's value that a non-player character will pay for an item will reduce the production of gold.

On the demand side, the simplest factor to consider is the number of people playing the game. World of Warcraft is the big dog on the block with 5 million or so subscribers, but for any game, changes in the economics of "player value for time spent" - even non-gold value (e.g. enjoyment) - can cause shift to or from a game. A new expansion may bring players back to a game they have left. Undesireable changes to a game or persistent bugs could drive players to seek a new title to game at.

That's my spiel for today. Let's keep an eye on those prices and watch the game boards for any news that could affect the price of gold in Kargath.