May 21, 2008
Are online gamers normal economic agents?
Ed Castronova writes to inform me that:
With generous support from the MacArthur Foundation, we have created a fun game environment and used it to conduct a month-long experiment. Our experimental question (kept secret up to now) was: Are fantasy game players economically “normal”? Or on the contrary, when they make themselves into elves and dwarves and hobbits, do they stop taking economic decisions seriously? We created two virtual worlds, one an exact copy of the other, except that in the experimental world the price of a simple healing potion was twice as high as in the control. If people are taking prices seriously in this fantasy environment, they should buy fewer of the potions when potions are more expensive.
At stake here is the entire idea of using virtual worlds as a Petri dish. If fantasy gamers behave in ways that violate our most basic assumptions of economic normalcy, then it makes no sense to use virtual worlds to study large-scale economic behavior. If, conversely, fantasy gamers seem to be normal economic agents, then perhaps some of the behavior in virtual worlds does indeed generalize to the real world. If so, then we can consider using virtual worlds to conduct controlled experiments at the macro scale of society, where our most pressing problems seem to live (natural resource management, intercultural mistrust, information security, disease).
The initial findings of the Arden experiment will be released during the International Communications Association meetings in Montreal next weekend. The session we’re part of is this one:
“High Density Session: The Web 1.0, 2.0, and Beyond”
Time: Sat May 24, 3:00 - 4:15pm
Place: Le Centre Sheraton / Drummond WestSee the entire schedule for Saturday here:
http://convention3.allacademic.com/one/ica/ica08/index.php?click_key=3&cmd=Multi+Search+View+Program+Load+Scheduled+Times&schedule_day=2008-05-24+00%3A00%3A00&PHPSESSID=e76b3aa3a0d5c7b574ab10b60c31733e
I would be mightily surprised if the answer is not “yes”, but let’s see. And the question strikes me as foundational. More on Castronova here and here and especially (in this context) here. More information when I know it.
This is presuming that the potions are not a giffen good. It is unlikely but if the potions are an absolutely essential ’staple’ in the game then they could be
Posted by: Rob | May 21st, 2008 at 1:18 pm | Report this commentDo most rational individuals make decisions based on common economic principles? Probably (bouts of irrationality in the financial markets aside). Studying the subset of the population that plays fantasy games is likely to confirm what we already know about human economic behavior.
On the other hand, studying fantasy game players and assuming that they are a random sample of the world’s population is rather questionable. Is the sample of fantasy gamers representative of the world’s population in terms of income, education, and gender? If not, generalizations of fantasy gamer behavior at the macro level may exhibit selection bias.
Posted by: a wizard | May 21st, 2008 at 3:35 pm | Report this commentI agree with “a wizard” that the selection bias plus the semi-hypothetical setup render the MMO economies no better than standard lab experiments, at least to a skeptical eye. I am also shocked that a downward-sloping demand curve (with only two prices) is the chosen litmus test for economic normalcy. Even if players behave randomly (bar very specific kinds of randomness), doubling the potion price will reduce their consumption. Or they might conceivably be a Giffen good as suggested above.
Posted by: dheath | May 21st, 2008 at 5:26 pm | Report this commentOn-line worlds are necessarily different from the real world, because events are shaped by coded rules, governance structures are very different and the participants are not a representative sample. Sounds like research for researchers to me - or maybe wishful thinking?
Posted by: Andrew | May 22nd, 2008 at 11:19 am | Report this commentIt seems unlikely that these potions are going to be a giffen good, I don’t see any reason why they would be. However, the real problem seems to be the assumption that the demand is price-elastic enough for the higher price to make a significant impact. I would expect these potions to work more like a need than a want; like food, water or emergency healthcare. When faced with the choice between death and a reduced disposable income, I would say that the demand for life would be fairly inelastic. This, however, is based on the assumption that there is no comparable substitute that could be used instead of the potion to gain the same effect, or at least not one that is not readily available at all places/times.
Posted by: Chris | May 22nd, 2008 at 9:21 pm | Report this commentOn the third hand, studying subsets of populations is also very useful as long as the conclusions are applied only to the appropriate subset. The subset of the population that plays fantasy games may be an important one as those individuals are likely to be involved in computer programming, networking, and development the software and hardware of the future. Observing the behavior of fantasy gamers may have implications for computer-generated trading in financial markets, computer-aided defense systems and the lack of compatibility in many computer systems and software.
Posted by: a wizard | May 23rd, 2008 at 4:15 pm | Report this comment