The Economy of an MMORPG
Written by Simba

Have you ever wondered why the prices of party hats kept increasing before the introduction of the Grand Exchange? Or why people who had 500k back in 2003 were ‘rich’, whereas now almost everyone has that and more? Then read on.

My name is Simba and I’m writing this edition of the MechScape Post to discuss the various aspects of how the economy could be structured in MechScape, and in MMORPGs on the whole. This is a field that interests me greatly as I study mathematics at university, and as such I think it’s very neat how mathematical models can be applied to economic situations – not just in the real world, but also in a plethora of other areas, an obviously relevant one being the economy of an MMORPG. I promise I won’t bore you with any complex mathematics models here - don’t stop reading just yet :P !

A few years ago, an economics graduate I knew who enjoyed RuneScape with me compiled a very detailed, accurate and thorough analysis of the economy of the game. Perhaps one of the most striking conclusions of his research was that the total number of gold coins in RuneScape was only a few billion. Nowadays, many players have over two billion gold. The maximum is 2,147,483,647, which the mathematical ones amongst you may recognise as 2^31 – 1. This is due to the way that the RuneScape code is written.

But where on earth did all the extra money come from that wasn’t present in years gone by? The single most contributing factor to gold being brought into the game in modern day RuneScape is without a doubt Coinshare, even though it has not been released for a particularly long time. The problem lies in that in a matter of a couple of minutes, millions of extra gold can be brought into the game by a very small number of players, for example at the God Wars Dungeon. Factor in the vast number of worlds on which this is happening every hour of every day, and the problem is clear - since so much more gold is being brought into the game, each gold coin is worth comparatively less. I’m sure many economics specialists who play would have been completely shocked and aghast at Jagex’s decision here. But how is this a problem? Well, just think about it like this. Suppose that a chocolate bar costs a dollar from the local store. Now, imagine that everyone has four times the amount of money they had when the chocolate bar was a dollar. Will that chocolate bar still cost a dollar? Will it heck! It will be a lot more ‘expensive’ in an objective sense. The problem lies in that because more currency is available, the currency is devalued. This happens all the time in the real world.

This devaluing affects some players considerably more than others. For some players, perhaps those who mine an ore to sell, the price may go considerably higher; there are more high level players around who wish to level their smithing with all the cash they got from Coinshare. But consider players who are perhaps level 80 or 90, and kill medium level monsters, selling the loot and collecting the coins for money. These players will not be making much, if any, extra, and as a result, they will have a smaller buying power due to the rising prices. This is perhaps a confusing concept, considering that the level 80 or 90 monster killer is still making money. Let me illustrate the problem:

Player A has 1,000,000 coins before Coinshare, and an item he wants costs 100,000 each. He can purchase ten of them.

A while after Coinshare, player A has earnt 200,000 coins from monster killing (he doesn’t do it very often), and the item he wants now costs 150,000 per purchase. He can now only afford eight of them, even though he seems to be richer!

The effect is even more pronounced on players who have quit or gone on holiday for a few months. Suppose a player has 10,000,000 coins after quitting and selling all of her items. She returns six months later and finds she can only afford to buy half of her things back! This is the nightmare that is hyperinflation caused by Coinshare, and the other influxes of money into the game. The frustrating thing is that it is a continuous process; Coinshare appears to be here to stay, and has a greater compound impact each day. The currency is being devalued more and more. Hopefully Jagex will realise their mistake and won’t introduce something analogous in MechScape.

There have been some important updates to counter the gold boom, perhaps the most notable being the introduction of construction. A very good house can cost over 100,000,000 coins, and getting 99 construction can be similarly expensive, with the sawmill taking a lot of the money. However, the sawmill taking 250 gold per oak plank made is hardly anything when it comes to offsetting the tens of millions brought in from Coinshare at the God Wars Dungeon alone. The real drain from construction comes from the marble blocks, gold leaves and magic stones. Another money sink came with the introduction of summoning, due to the high prices of shards.

The second important thing in any MMORPG’s economy is the impact of gold farmers. People who play the game for the sole purpose of selling items for real cash. These people can have an enormous impact on the economy, as was shown dramatically in items such as yew logs and pure essence in RuneScape. There is however a light at the end of the tunnel as far as this is concerned. China outlawed gold farming on the 30th June 2009 (source).

Jagex are well known for taking an extremely hard stand against gold farmers and macroers. This is one strong positive that I sincerely hope they carry over to MechScape. Jagex have mentioned that real world item trading will not be an issue in MechScape; however what precisely they mean by this is yet to be revealed.

As a brief speculation as to what Jagex may be thinking, consider the following. Perhaps there will be no need whatsoever for an economy in MechScape. Maybe trading will be prohibited, or simply largely useless. Jagex have already shown they have no fear in severely hindering trading – just consider the strict trade limits in Runescape. One possible idea Jagex might try out is making it so that money cannot be traded with other players as such, but can be exchanged with vendors for things such as new research and technology. This technology would be perhaps used to create new and interesting units, or upgrade existing ones. Although Jagex seem very confident about having resolved the real world item trading issue, they do not wish to give any exact clues for fear that these clues may help people overcome their preventative measures. This fear suggests that trading will still be possible, perhaps just with some direct limitations that could potentially be overcome.

To conclude, the economy of any system, be it a country or an MMORPG, is very, very fragile. One poorly thought out update or political decision can knock the economy greatly even over the course of a few days. We can only hope that the Jagex staff think very carefully about the virtual economy of MechScape and ensure that nothing like Coinshare impacts so greatly on the game again. A stable or unstable economy can make or break a game, be you a novice player, or an experienced master.

What are your views on Coinshare and the countering money sinks in RuneScape? And how do you think the issue will be dealt with in MechScape?

Thank you very much for reading – may the gold be with you!


MechScape and Community News

Writing Staff Applications
Mechscape World is currently looking for new writers to join our staff; so if you are interested in writing an article like the one above, please send in your application. (Read more)

Badges
We are currently looking for artists to help us create more user badges for the community. (Read more)

Improving MechScape World
Our admins are looking for your views on how to improve Mechscape World. (Read more)

The Name Change System
Jagex hopes to release their name change system by late 2009. (Read more)

Last Warning for Community Quilt
Last warning to all members who haven't made their every own quilt for MechScape World's Community Summer Project. All quits are due the 11th of July which is next Saturday. (Read More)

MechScape Coming 'Soonish'
A report has surfaced of Mod Mark G. making a comment on FunOrb that MechScape will be coming 'soonish'. Join in the discussion on what is meant by 'soonish'. (Read more) This also appears to have been suggested by the CEO Mark Gerhard on his RuneScape clan chat. (Read more)

Previous Issues:
MechScape Post #17: Influences on MechScape
MechScape Post #16: MechScape Moderation
MechScape Post #15: The MechScape Environment II
MechScape Post #14: The Community of MechScape
MechScape Post #13: Codename MechScape
MechScape Post #12: The Importance of Music to MechScape as a Game
MechScape Post #11: How MechScape Will Appeal to an Older Demographic
MechScape Post #10: "Dynamic" Combat in MechScape
MechScape Post #9: Freeplay in MechScape
MechScape Post #8: The Future of MechScape World
MechScape Post #7: Situational Awareness: How the Concept Applies to MechScape
MechScape Post #6: Removing the Need To RWT
MechScape Post #5: The Hype Surrounding the Release Date of MechScape
MechScape Post #4: Gerhard's Influence on MechScape and Jagex
MechScape Post #3: A Great MechScape Flood?
MechScape Post #2: The MechScape Environment and Concepts
MechScape Post #1: MechScape Clan Leadership

Footnotes
Contributors: Brenden, Ed5, Ren (Content Research Team); mike470, Pipinowns, Xela(Writing & Editing Team).
Disclaimer: The views expressed by members of staff do not necessarily represent the view of MechScape World.

This is exactly what happened to me when I quit RS. I had enough money to purchase a Green Mask when I quit and I thought, "Hey! Why not?!". I purchased it, quit and when I came back, unfortunately the price of Green Halloween Masks dropped about 1 Mil and everything else rose greatly in price. I could only get about half of my things back (due to Coinshare etc). You made a good point, I looked at this paragraph and related personally.



You forgot the source here so I added one for you: Source



I enjoy Coinshare personally. It helped me get back from about 8M to around 20M relatively shortly. I'm looking forward to using it more often when I have some more time in the Summer aka when I'm not working so darn much ha.

I personally believe Coinshare shouldn't be implemented in MS, as I don't even see a use for it really at the games early stages. I don't see players getting the expensive items and high enough skills to tackle the Corporal Beasts of Mechscape. So needless to say, I don't think it will be implemented in the game, yet.

Great read, I really enjoyed this one in particular. I've taken about 4 Business Courses in school (Marketing, Entrepreneurship, Personal Finance and Careers, and Sports and Entertainment Marketing), so needless to say when you talk about the economy, I'm all ears. I dabble in the Stock Market at the young age of 18 and my Step father has showed me a lot about speculation and how to buy certain things at certain times etc. Back to the topic however, the economy in this game could very easily be related to that of the one we currently have in real life...I just think that Jagex needs to implement a Government in the game where we the players can vote for 'change' and bring in a Runescape Barack Obama to solve all of our problems. :)

I just wanna say that Mod MarkG isn't Mod MMG, Mod MarkG is an employee at FunOrb.

I just wanna say that Mod MarkG, is an employee at Jagex, that works on the Fun Orb team. Just teasing you
On Topic: Good read!

Nice work, i never even knew there was a mod markg lol!

One issue is that China's law doesn't have jurisdiction over foreign transactions and there is a major loophole that will cause the ban to have absolutly no impact on the gold farmers. Instead it is going to affect game developers because it prevents games based on microtransactions instead of subscriptions from being played in China.

Here is a quote from my (Source)

There is a mod mark h too.

Do not forget the most important Mark before MMG came, "Mod Mark" he is the leader and Senior Game Designer, every quest and update needs his permission before it is released.
Here is a link to him saying that.

May I ask why this hasn't made the front page?

As far as I'm aware the China ban only covers the sale of currency, not items, so even if properly enforced it would be easily circumvented.


Because Mike forgot. I've posted it now.

Ah, ok, glad I found this one, it was an interesting read

I'd personally like to see more and more people post about the article itself rather than a Mod on Jagex. If you take a look at my post I actually quoted aspects of Simba's articles and tried my best to give a detailed response.

It was a flaw on the bottom of the article, people could get really confused since he quoted something which was never said by Mod MMG, and people usually believes Mod MMG.

This story is like what happend to me in RuneScape .

The year was about January 08' and RuneScape was starting to suck real bad , so eventually near February , I quit .

The prices for lets say Full Guthix were about 3-600k back before RSHD and G.E , Now I look back yesterday , and the prices are close to 1.5M and beyond .

RuneScape's Economy = F***ED

MechScape's Economy = ME NO KNOW?

But the bonus to MechScape's release is this .. Remember back to old RS when Santa's and Mask's were like DIRT cheap and were dropping?
Now try to get em , You'll waste your entire stash for a crappy old 2002 mask . So , if these "Happy MechScape Release" or "BETA prizes" start dropping , we could ALL be FRIGGIN rich by lets say 2011 and BEYOND!!


This has been a post from MECHKID!!

No... No.. No.. You don't really know how CoinShare is working. It's preventing inflation. Items dropped through CoinsShare are making less money than if they were sold at Grand Exchange. Example: Item for 100 Mil is dropped through CoinShare for five people. Lowest price is 95 Mil so everyone get's 19 Mil. If one person would get drop then he/she would sell it for about 100 Mil which is medium price. Even if he/she sell it for lowest it will still propably be sold to someone who will pay more than lowest price. And we can't forgot that this item doesn't disappear it gets put on Grand Exchange for medium price. And when someone buy it cash from buyer just disappear. Overall less money is brought into game than it would be without CoinShare.


Source: RuneScape Manual


As we can see all (except for discontinued items) items are going down over time. It's because poeoples getting them from drop, quest, minigame or other activity and those items don't degrede. Players are getting more of those items than losing them so they lose in price.

What about consumables? Sharks for example. They cost about 2k in the past. Now they are about 1k. That's because of players getting higher fishing/cooking levels. The more and more people can fish/cook/produce them. And we must remember that prices can change a lot because of updates, like removal of Wilderness Player Killing.
I think that counsumables have pretty stable prices. Most of them will propablly go down until they can't go lower like High Alchemy value + Nature Rune.


And Jagex is working on making prices more flexible, time based stock and propably others.
In my opinion RuneScape economy is very stable. RuneScape future looks really bright.


Pssst.. Link to "MechScape Post #17" links to #14 one.

well i purches green mask for 21mill and now drop 10mill and i dont cry because of that.
and you crying because of 1mill
that funny for me, how player get upset because of 1 mill...
i was stupid back then but I don't wail like every one. I think player get less upset when they get hacked and loosing a lot more gp then some itam loss its value
and i never was rich

Very interesting read. Never heard a point of view with respects to CoinShare on the market, but you have a very valid point. I'm interested more in the results your friend did. Can you publish some of them?

very good editorial

fits perfectly with todays issues like the economic crisis

i think this is one of the best editorials compared to the other 17

Well they're all good, it's just that this one can be related to something that I'm sure effects us all on some level.

Once MechScape comes out, and we get to know about the gameplay ect. we will get much better and more precise editorials. (Hopefully, also by those who gets chosen in the Writing Staff Vacancies)

Not to mention I'll have a little surprise for the whole community once the game is released. The editorials will increase in size, quantity, not to mention the detail because we'll actually have something solid to work with.

What about there being no "currency"? Simply commodities and goods. Commodities are known in the real world to be impervious to inflation (although subject to many other risks, such as becoming useless.

I don't see Mechscape having no currency, or some time of currency. I can't really recall any MMO right off the bat that doesn't have at least some form of currency.

Well it's going to be a completely different game from any other game, so it could quite possibly not have a currency. It would certainly help curb RWTing.

I Agree about the RWTing, but let's be rational. If you take a look at some of the concept are that we're given, you can draw out a few conclusions. For example (Concept Art), you can see produce in the stall on the top right. Now if this game didn't have currency, commodities and goods that were traded would clearly be displayed and that stall would be a pawn shop in essence. I'm sure there's got to be some form of currency in the game to buy that produce.

Then again you have to realize that this is only concept art. So it's up for interpretation really, that's just my guess.

You say coinshare is preventing inflation because the items are 'sold' on the lowest price, and so less money is brought into the game.

this is not true
the total value of all items in the world has to be equal to the total amount of money in the world. so if you use coinshare (wich brings only extra money in the world) prices will rise. if you just sell the drop on the GE (you bring an item in the world but no money) the prices will drop.

afterall coinshare won't prevent inflation at all.

I'm trying to get my head around this with a simplified model (disclaimer: this isn't one of my areas of expertise)...

Baseline conditions
Total cash in world = 50k
Total worth of all items in world = 50k
Sum = 100k

Coinshare
If you were to coinshare a 10k item for 75% of its value (7.5k) but only get 50% of the profit (5k):
Total cash in world = 47.5k
Total worth of all items in world = 60k
Sum = 107.5k

GE
Whereas if you were to sell a 10,000 GP item for 100% of its value on GE:
Total cash in world = 50k (one player earns 10k, one loses 10k)
Total worth of all items in world = 60k
Sum = 110k

...How does this bring cash into the world?

I think the crux here might be whether items on CoinShare are put onto the GE. If they are then someone has to buy them and for a greater price than what the coinsharers get, thus causing a money sink. However, if the item just gets converted to cash from the ether (as in alchemy) then it'd result in inflation as you have fewer items but more money to spend. According to http://www.runescape.com/viewarticle.ws?ar...6#coinshare_faq they are sold on the GE, so I don't see how it is bringing money into the game (apart from if you mean faster as it is more convenient).

What happens if no one is buying these items? The prices will go down, and so more money is being placed into the economy. Also this isn't the main source of inflation in RuneScape. Other things range from alchemy, to glitches, to people playing a little too much. :o

I'm one of these players that has never really enjoyed god wars so I can relate to your point here. In my opinion, the problem with God Wars isn't that it brings in too much money, it's that it brings in money too fast. If you spend 6 hours at God Wars or 6 hours fighting Dust Devils you are much more likely to get substantially more money from God Wars. When people have lots of extra cash lying around, they don't care so much about whether prices for things they buy are higher because they can afford it. So when they go to buy something like a set of armor, they might offer more than they would have otherwise. This drives up prices. On the same token, prices are driven down by having so many more items from the Coinshare drops being placed into the exchange. Supply and demand still holds true in RuneScape.



Money sinks like construction were skills developed after Jagex had realized they needed more balance in skills. Personally I think they went a little to far with construction as I feel there should always be a way to work on a skill without having to have lots of money even if that cheap way is overly difficult or time consuming. But I do see your point.




Very good point. A good example might be a dragon medium helm. When I started playing they cost around 12 million gold. These days they are almost worthless. Did the item change? No. There are just so many more of them available in the game that they have gotten cheap. This happens to any item over time if it isn't consumed. This is probably what made Jagex decide to start bringing in items that do get used up or have to be recharged.



Overall a very good article. Thanks for writing it Simba!

Honestly, alot of the economic problems Runescape is facing because of Coinshare were around before Coinshare was. Yes, Coinshare was a huge mistake as far as an economic decision, and it brought massive amounts of gold into the game almost instantly, but gold creation and inflation of prices was not new at all. The simple spell of high alchemy used to run the economy. Players would create the resources to make the spell happen, they would cut magics, runecraft natures, pick and spin flax, mine ores, smelt bars, and smith plates, all to allow some guy with about 80 mage to buy their finished product and create gold for them. Its how the economy worked, and gold was entering the game at a very fast pace, enough of a pace for the introduction of construction and later summoning. So yes, you can blame the instability of the Runescape economy on coinshare, but I disagree. I believe the economy was unstable before then, and coinshare only quickened the process of inflation and economic decay. Of course, the guy that did the economic research for Runescape did it after Coinshare, so to a newcomer, it would seem like the most likely cause for inflation, when the problem has actually been around alot longer.

dude i give you major props on this post. Runescape was great until all the new gold was being brought into the game. When they started coming out with like all these 60-100 mil items that could be gathered as quick as flax, it just totally ruined the whole economy of the game and everything went downhill. I believe that this led to even more gold farming and that is why jagex had come out with this cruddy trading system. Overall, very nice post dude.

@Ed5



That's why Jagex allow only powerful/useful items to be CoinShared. There will be always demand for them. Like Armadyl Godsword..

@aron



Read those one more time:





@amersccrdude



They weren't worth that much at the beginning. They rose some much because most of players want them. Because they are powerful/useful. Would you like weaker or stronger weapon? I think that answer is very simple.

I just hope the economy is not like Runescapes.

I think it's possible that some (or a lot) of items on the GE don't get sold. Items like sigils, etc. usually are traded by junk trade. Then, out comes a ton of gp with no money going away.

Nice article, I personally enjoy analysing the economies of many different mmorpg's. While playing orld of Warraft for example, I found that after wrath of the liche king was introduced the price of some herbs went up by a few thousand gold, which is heaps on that game (It was due to the new inscription profession that required herbs, and people were too lazy to go and get the herbs themselves. So, they bought them for ridiculous prices). Just goes to show that things like updates and expansions can severely impact prices of certain items.

Personally, I reckon coinshare is great. But if you look at it from a wider perspective (e.g. over the course of 1-2 years after its implementation) you can see that it wasn't a wise idea. The devaluation of any currency is a bad thing. The Australian dollar plummeted, we were buying nearly a dollar US and now we are buying something like 50-60 cents. Thus, prices for goods went up. Crazy world, eh?

Although the simple supply and demand aspect of the economics of Runescape can be compared to real life, its hard to make comparisons beyond that. We need to remember that the reason for many items to drop in price is because Runescape is a game that has constantly updating market of goods. In real life, we dont experience a magical introduction of new and more useful products. The rune med helm used to be so expensive because it used to be the best helmet in the game. Its stats have been out done by SOO many updates and new items that it has lost all usefulness. It price has dropped not because of any complicated economics or inflation, but rather because its demand has gone WAY done because there are so many better options. Also, Runescape is FAR from a free market and is very very very controlled by Jagex.

We should also keep in mind that the people at Jagex have far more information about the RS economy than we do and also have a better idea of whats causing price changes. Also, Mechscape has so much data to study about MMORG economics and is smart enough to implement that knowledge in their next game.

Also, coinshare definitely does not cause inflation. Coinshare items are sold for less than market value and therefore retards inflation, so lets stop blaming coinshare for the devaluing of items. It's the introduction of new better items that devalues the old and less useful items.

i've also made a model

total cash in world: 50 bilion
total value of items: 50 bilion
value of ONE gp: 1

after bringing 10 bilion in the world with coinshare (so only extra money comes into play) the model would look like this:

total cash in the world: 60 bilion
total value of items: 50 bilion
value of ONE gp: 0.83

now to make sure that the value of one gp returns to 1 the prices will start to rise


the next piece of text is an idea i thought up, it has nothing to do with the model

and if jagex want's to stop the devaluing of cash, they should implement something like a main stock on the GE for all items. (this stock must NOT be unlimited and must have a pretty big total value. All items sold that way must be sold on the highest possible price. And of course, things sold by players get to go first) this will bring in items and will TAKE money out of play. And more items available also means lower prices
i'dd like to hear your opinion on this idea.

How is total cash higher afterwards when someone has to pay more to buy it than the other person receives in payment?

i think i made a big mistake in that model

fixed that now

As has been mentioned previously, Coinshare is actually designed to remove money from the game. Items are split amongst the party for the lowest GE price, but are sold for mid-price on the GE. As long as someone buys the item on the GE, then they are paying more than what the Coinshare party got for the item, meaning the difference is removed from circulation. For example, if a team received a Sara hilt as a drop, they would split 50.6M gp, while the hilt is placed on sale for 53.3M. This means 2.7M gp was removed from the game as soon as somebody buys the hilt.

In my opinion, high alching has been the biggest culprit for steady inflation over the years in Runescape. It is the most common method of converting finished products into gold, and is the most popular method of training Magic in the game. Another reason for steady inflation is simply the increase of players, and the increase in speed and variance of training skills. More players grinding faster churns more product in the game. Since all resources are infinite, the potential is only limited to respawn times and amount of servers.

The recent hyperinflation we've been experiencing is more closely linked to the artifact drops from 26king in PvP worlds. Players are able to make as much as double natcrafters, with less effort and instant gp. I know there was an update this week, but I have no idea what impact it will have on the problem.

Personally, I hope Jagex has learned from their Runescape experience. Since the RWT updates, the economy has grown dysfunctional.