
Arbitrage And Equilibrium In The Team Fortress 2 Economy - ekosz
http://blogs.valvesoftware.com/economics/arbitrage-and-equilibrium-in-the-team-fortress-2-economy/
======
Negitivefrags
When we were designing Path of Exile ( <http://www.pathofexile.com> ) we had
an explicit design goal to create a complex barter economy. To that end we
decided to remove gold (quite strange for an Online RPG).

We added what we call internally "currency items" which are homogeneous items
that have an inherent use. For example, an item that rerolls the magic
properties on another item. There are 22 of these types of items of increasing
rarity.

Because they all have an inherent use, there is demand for almost all of them.
Because there are so many, few people have a true understanding of what the
current exchange rates are.

The rest of the items in the game are randomly generated, and are hard to pin
down accurate prices on, especially with so many competing currencies. Experts
can take advantage of the uninformed to trade up in value and frequently do.

You might ask why do we want to have an economy like that?

There is a large class of players for whom trading becomes a kind of end game.
If your economy is complicated and interesting there is room for a huge range
of skill levels, room for true expertise in the economy. The feeling of making
a trade in which you gained advantage over another player is addictive and
really fun.

~~~
intended
Wait - so by creating the currency item as something that gets used, as
opposed to stones of jordans, are you trying to do an end run around
inflation?

Also - loved the beta weekend.

(niggle - mage power charges were hard to understand and a terrible ability to
rush. Which I did. When it worked it was fun)

Edit: Will you now have treasure goblins? Also, how has your take on the RMAH
changed now that its starting to open up and feel its way around?

------
physcab
My notes below (disclaimer- never took econ, took very few stats classes):

\- Barter still exists even though players are more sophisticated. Author
expected to find one item becoming defacto currency, but that does not happen.

\- Because barter exists, you can express the price of items relative to other
items in the game, ie 1 lazer gun = 2 hats. It is theoretically possible to
start with 2 hats and end up with 6 through multiple trades of items.

\- Author then extrapolates a model for an economy like TF2 that has 35k items
and 600M relative prices.

\- TF2 is not in equilibrium, meaning lots of opportunity for arbitrage.
Arbitrage opportunities are greatest when new items and sales are introduced.

\- Assuming this "dis-equilibrium", author adjusts the model by accounting for
frequency of trades, ie 1 lazer gun = 2 hats but may only be traded a few
times, but lets say a new item, earmuffs, are added to the game and conversion
rate is 3 earmuffs = 2 hats. This might be traded many times by players due to
its introduction and inherent value to them.

\- You can graph the value of these items over time to see if they can be
arbitraged.

\- My knowledge of statistics is rather weak, but it looks like if you compute
the error rate, ie square root of the differences between normal model and
adjusted model, you can monitor with real time data when arbitrage
opportunities arise.

Grand summary: Gaming companies produce a ton of real time transaction data,
and with this data it is possible to monitor economy dynamics in new ways that
economists have previously been unable to do. If players had access to this
data they can arbitrage more effectively, but more importantly for game
designers it might be worthwhile to be knowledgeable about these effects so
they can keep players engaged in the long term.

~~~
intended
It surprises me that more experiments run on game data don't seem to hit the
mainstream. Perhaps I am looking in the wrong places, but I've seen only a few
research reports based on ingame data and those are hard to scrounge up
themselves.

Video games are one of the great crucibles where everyone is born equal by
default - and yet we have massive variance in wealth distribution by the end
of it. You always have a select few who end up with enough power and own all
the wealth.

------
sirclueless
I think it would be even more interesting to examine trade strategies in a
game like Eve online. There's a giant simplification that occurs in games like
World of Warcraft and now Team Fortress 2, where the only cost of arbitrage is
the cost of finding out where opportunities exist. There are still interesting
things to examine in games where transactions are instantaneous and safe, like
how much risk people are willing to float by holding stock in intermediate
goods, but the _really_ interesting thing to me is examining communities where
moving items around has real costs associated.

I would expect that the TF2 economy tends towards an equilibrium that is as
simple as Yanis describes. This is probably not true in a game such as Eve. If
one item is cheap to produce in on sector of space, and expensive in another,
the equilibrium will reflect this fact: "arbitrage" opportunities will exist,
and be stable, and be known by another name, "trade routes". There are real
costs in transporting goods in Eve, for example the time cost of having a
human pilot navigate a freighter, and the risk of being attacked by pirates.

In Eve you can have perfect information on the price and volume of
transactions that occur, the movement of goods, the sovereignty of territory
in which there are markets, the corporate affiliations of the people who
operate firms and trade routes, and the wars and conflicts that arise between
individuals and sovereign states. That sounds like an amazing playground for
someone who is interested in liberal international relations, free trade and
pacification, and any number of things that go beyond pure economics.

~~~
ben0x539
If the CCP economist had any grasp on their economy at al, we probably
wouldn't have gotten <http://news.ycombinator.com/item?id=4146298>

~~~
hobin
EVE Online actually has a very well-working economy. Regardless of whether
such an approach would work be optimal in real life, it very closely resembles
what a free-market economy is _supposed_ to look like.

The news item you linked to isn't a problem of someone misunderstanding
economic principles, but of a simple mistake and the resulting bug - there
shouldn't have been an additional reward for surviving cargo.

~~~
ben0x539
Yeah, no argument there, the EVE economy feels a lot more solid than other
videogame economies.

But I don't think the surviving cargo thing was a required factor for the LP
loop, it only sped up their initial gains. When they figured out how to
manipulate the game's idea of prices upward, they basically were able to
exploit infinite arbitrage that resulted from the bits of hardwired game logic
that made up part of the market without being subject to/responding to market
forces.

------
vailripper
These posts are fascinating. In college I minor'd in econ, and I always had
this feeling that economics grossly simplifies things, so it's fascinating
seeing how economic principles play out in a world where there is such control
over all the factors.

~~~
seanalltogether
I really wish Blizzard offered up the same sort of analysis of WoW and
eventually Diablo. WoW must be a treasure trove of data for an economist and
Blizzard has had to work very hard to control things like inflation.

~~~
intended
Well seeing as the data can be mined straight through their APIs, (most of the
data), its not really that hard to at least get started.

IIRC there was a website, the _____ goblin or so, which monitored every
commodity on the auction house of each shard/battlegroup.

Heck, the Poster above saying that the wow economy is simpler than EVE may not
be accounting for things like cross server arbitrage, which bring the
complexity levels a bit higher.

------
danso
That there is a this kind of economy in TF2 is amazing to me. TF2 is the last
great game I've ever played, but it's old in terms of video game lifespan and
I feel that it's kind of a niche among shooters; you always hear of people
playing Call of Duty/Halo...I can't think of a single friend or acquaintance
who has ever mentioned TF2 in passing.

It's such a great, nuanced game that I thought it would attract the kind of
players who would frown upon ingame purchases...and the fact that it's free
also made me assume that most players would be the non-paying type. Glad to
see that Valve's dedication to the game has some payoff to them.

~~~
benihana
Saying TF2 is old in terms of lifespan is a joke, particularly when comparing
it another well-known Valve title, Counter-Strike, which has been continuously
played and updated since about 1999-2000. It doesn't matter how old it is,
it's still attracting players and making money for Valve. And it's still fun
to play.

~~~
danso
Don't know if you're agreeing with me or misreading me. TF2 is five years old.
There have been (at least) 2 full games in between Halo 3 and 4 in the same
time span and probably five in the Call of Duty series. So TF2 is
exceptionally long in the tooth for a money-making shooter. Which is great.

Counterstrike is also another anomaly...but is it a game that Valve is putting
in real resources to update? Maybe I should've said, TF2 is a relatively old
for a first-person shooter that is still being actively supported.

Hell, they're letting their in-house economist study it. That's pretty good
support in itself.

~~~
trafficlight
But the TF2 of 2012 is nowhere near the game that TF2 2006 was. Valve has
poured a ton of time and money into continual development of the game and
content.

------
engtech
It wasn't until he added his picture to the sidebar that I realized the
author, Yanis Varoufakis, was the basis for the Heavy in Team Fortress 2.

~~~
wtracy
TF2, including the Heavy character, was released long before this guy joined
Valve. I doubt he was the inspiration for Heavy.

