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It all began with a strange email (valvesoftware.com)
874 points by julioc 1175 days ago | 124 comments



Among virtual economies, EVE Online's economy is the real deal. The EVE game economy is I dare say more developed and complex than nearly any other games' - it has many kinds of input factors and stages of production, and many of the production facilities/resources are player-controlled and their fate determines on political maneuvering, war and sabotage between player corporations (guilds). The price of most items in EVE (ships, weapons, components, structures) is determined by the state of production and speculation in the economy, so CCP has to consider the economic impact of nearly every single change they make to the game world. (They hired their in-house economist in 2008 IIRC.)

If any of you folks are interested in reading about a truly fascinating, active digital economy, you have to read the EVE economic reports and other investigations of EVE. It's like reading about mining, manufacturing and stock markets - against a background of eternal war between corporations - in far-future space.

EVE Quarterly Economic News, by CCP's economist Eyjólfur Guðmundsson (link courtesy of xb95): http://cdn1.eveonline.com/community/QEN/QEN_Q3-2010.pdf

edit: links to additional content ----- http://pc.gamespy.com/pc/eve-online/855380p1.html

>>> EVE Online was developed to have a very dynamic economy from the very beginning. It was decided that "time" would be treated as a valuable player resource: for that reason, raw materials were spread all over the galaxy map, which takes hours to traverse. This created regional pricing. Interestingly, there were no trade hubs built into the core game design -- players gradually settled into certain areas and made their own pockets of population where trade thrived.

>>> Gudmundsson had some fun examples of how intelligent virtual economies can be. He showed a graph displaying the prices of a mineral in the game known as Zydrine. Zydrine is hard to find in the EVE universe, but players had discovered that killing a certain class of drone often leaves behind Zydrine in the wreckage. This hole in the market led to lots of drone-farming, and subsequently the price started to drop. Drastically.

The developers decided to tweak the drop rate and this change rolled out onto the test server, unannounced, and mixed in with all sorts of other tweaks. Still, clever players noticed the change. Word got out. And suddenly, even though nothing had yet been done on the live server, prices for Zydrine spiked dramatically. Markets make for great predictors of future events!

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http://blogs.wsj.com/economics/2010/06/21/real-economist-tak....

>>> One of his team’s first big findings is somewhat sensitive. Confirming decades of gender research by economists, sociologists and anthropologists, Mr. Turpeinen’s group found that the same biases that have historically favored men in the real world exist in a virtual economy. Their research demonstrates that both women subscribers and female avatar characters operated by male subscribers in EVE are biased toward a slightly lower chance of success in competition with their male counterparts.

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[The linking of EVE Online and Dust 514]

I wasn't intending to mention this, but I might as well since people are looking at EVE:

http://ps3.ign.com/articles/122/1221463p1.html

CCP has built a PS3 MMOFPS game called Dust 514. Players play mercenaries battling on planets. The utterly amazing thing is, this game is actually integrated into the EVE universe. Dust players are actually mercenaries being hired and fighting in real time on the planets in the EVE galaxy. EVE players will be able to put up contracts for Dust mercenaries to assault other corporations' facilities, and Dust mercs will be paid by the EVE pilots for their services. What's more, Dust mercs can request live orbital strikes from EVE pilots who are above the planet -- this was demonstrated in March this year and blew the crowd's minds. And surface artillery can hit EVE pilots.

There's even economic integration. The weapons, tanks, equipment used by Dust mercs will be bought from markets supplied by EVE players' production facilities. It's not fixed prices and unlimited item spawning here: mostly everything can be manufactured. And the facilities Dust mercs fight over may include actual factories and labs -- meaning that they will indirectly influence the prices of things and the fates of corporations in the game. Heck, I'm expecting cross-game corporations to form - elite mercs partnering elite pilots to dominate swathes of star systems.

It's literally two games with completely different playstyles built in the same universe, and I haven't heard of anyone pulling this off before. I'm terribly excited to see what the future holds for EVE, Dust, and multiplayer gaming.

----Further reading----

http://massively.joystiq.com/2012/03/24/dust-514-presented-a...

>>> During the DUST 514 keynote speech, developers demonstrated orbital bombardment of a DUST match by EVE players in realtime. We saw the orbital command center and surface command centers that enable communication between the two games; we also saw the orbital artillery that let DUST players retaliate against players in orbit.

>>> In addition to PvP matches organised by NPC corporations, there will be co-op PvE survival missions in which players fight off hordes of rogue drones -- living machines with a collective consciousness. The PvE mode will be released in 2012, and there are some exciting plans for expansions scheduled for the year after.

>>> 2013 will bring in e-sports and competitive gaming, with gladiator arenas in which players compete in capture the flag, deathmatch and custom game modes. The matches will be a true spectator sport, with live viewing from both the EVE and DUST game client and even betting on matches. Battles on hostile worlds are also due for release in 2013, with tactically different terrain that may require vehicles to get around. CCP confirmed that the highly requested MTACs (mechs) will also be introduced in 2013.

[Spectator bloodsports, with betting? Crazy!]

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I tried EVE once for a trial, but due to time constraints wasn't able to continue. But it was exactly the reasons cousing this time constraint that are making EVE such a brilliantly stuning game. And this real time inclusion is just marvelous! To bad I don't have a PS3...

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I'd be worried either about games of Dust being one-sided due to events in the EVE world, or to advantages in EVE becoming meaningless in order to ensure that individual games of dust are competitive.

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That could definitely be an issue. Balancing dynamic systems is hard, especially when you bring an entire new section online and connect it with the existing structure.

The EVE universe is imbalanced by nature and by design, but hopefully Dust's mechanics will make the actual gaming experience for Dust mercs fun nonetheless. I'd expect an equilibrium to eventually emerge where warring parties employ mercs of matched number, armament and skill, and no one can gain an upper hand. That's what tends to happen in EVE anyway -- the starmap reaches an equilibrium of victors and losers, and borders are quiet for some time until a large disruptive event occurs, upon which alliances go to war, conquer or collapse, and the starmap changes and resettles again. So I'm hopeful that the micro-experience will still be fun during these transitions, even if the odds are clearly against one side.

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[Market PvP and Cartelization]

An interesting quote from the EVE Economic News report jumped out at me:

----

>>> The most interesting high-end mineral this quarter was Nocxium. It was the only mineral that rose in price in June, despite the insurance changes, and continued to rise in July and August. The most drastic increase came in September, though, when Nocxium prices jumped by 52%. The changes made to drone compounds in June reduced the supply of Nocxium, which naturally raised its price.

>>> Realizing that a long-term price increase was taking place, one which would likely create a short term shortage of Nocxium, some enterprising traders played a clever market manipulation. By buying up large parts of the Nocxium available they ensured that a serious shortage of Nocxium was created – or, rather, that the foreseeable shortage was greatly amplified. This took much of the market by surprise, with many a lamentation heard from manufacturers of Tech I goods. This is market PvP at its finest. (emphasis added)

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While I wouldn't necessarily agree the move was especially clever or unexpected, I think it's interesting that EVE is probably the only game where the term "market PvP" has come to exist. PvP is "player-versus-player", as opposed to PvE ("player-versus-environment"), and normally refers to players engaging each other in combat (duels, raids, etc.). In EVE the concept has been extended to players exploiting arbitrage opportunities in the marketplace and depriving other players of profit.

I think markets have generally been are too large for any group of producers to collude to push up prices, but the domination of certain regions of mineral-rich space has recently resulted in an attempt to game the market and form a cartel: the Organization of Technetium Exporting Corporations, or OTEC. [ the following quote is from http://www.tentonhammer.com/node/230860/page/2 ]

>>> "Technetium, the fabled conflict diamond of the North ... only comes from the northwest regions of the galaxy, and the brutal defenestration of Raidendot from Tenal and Vale finally has brought about something that savvy market-watchers have dreaded since the Technetium bottleneck was first created - a cartel. This OTEC - the Organization of Technetium Exporting Corporations - comprises representatives from the CFC, NCdot, Ev0ke, and PL, the four nullsec entities that control 90% of the Technetium moons in the galaxy. Rather than trying to restrict supply, OTEC has coordinated price-fixing, jacking the price of Tech past 200k per unit - and in doing so driving up the price of every T2 ship and module on the market. ... the nexus of incentives from Escalation, Hulkageddon, and OTEC, macroeconomic extortion of Empire for profit will rapidly transform from a gleam in a nullsec financier’s eye to a brutal fact of economic life in New Eden."

This isn't your typical micro-market-PvP, but an outright exploitation of a privileged position by entrenched corporations. One could argue this is game PvP extended to a new arena (the market) on a macroeconomic level, or one could view it simply as the natural dynamics of an unfettered market economy that is real in all aspects except the virtual nature of its commodities.

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It would be fun to see someone do a blog on "Lessons from Eve that can be applied to entrepreneurship."

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I think EVE is the ultimate lesson in sandbox gamification. Many MMOs have successfully plunged their players into alternate worlds and kept them addicted, but almost every one offers a pre-defined carnival-type experience rather than a sandbox. The chief reason why EVE and Minecraft are so popular is the freedom they offer to create entirely new things.

EVE, however, goes a step further in allowing players to organise themselves and engage in projects of even greater scale. The sandbox becomes a sort of construction workshop, where players are given tools to deploy their real-life knowledge and skills to build ever more complicated structures. Furthermore, EVE's rules encourage trade and competition - key aspects that keep players engaged and spur them to build, plan, organise, act.

The more EVE comes to resemble Real Life, the more it turns into a reasonable alternative to the latter (and you can even earn real-world money from EVE). This is the ultimate immersion, and if it became possible one day to support yourself from playing EVE, I have no doubt people would start doing it.

Maybe one conclusion for entrepreneurs to draw is that the combination of freedom + tools + competition on web services helps evolve them into true platforms, in which people 1) invest their egos, 2) build social networks that keep them coming back, and 3) organise and engineer to far greater extents. APIs and open interfaces amplify the impact of platforms - a principle wisely perceived by Facebook and many other platforms. EVE is just another example of the same.

There are also lessons to be drawn directly from experiences running corporations in EVE. I've read posts by people who started and ran small corporations and also those who ran megacorps/alliances, and they describe experiences rich in management and strategic principles. Strategy underpins the success of all but the least amibitious corps. Everyone has to plan how to deal with their ever-shifting, aggressive neighbours and protect their own holdings and profits (or expand their turf). Further, corp leaders have to learn to work with their growing membership and build HR/resource-planning systems to support them.

Playing EVE as a corporation manager/founder is definitely an educational experience for young people who eventually intend to manage teams in the future.

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Has anyone here played EVE online? I keep hearing about how intricate and rich it is, but I've never met anyone who played it. Is the complexity interesting? Or is it 'time-sink' complexity in the vein of Diablo 3 -- as in rather mindless optima-seeking?

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I've played off and on since 2003. The corporation I'm part of now has built an ERP and manages a trillion ISK (which at the legal rate is $35,000 USD in assets).

We have production facilities -- several of them. We have distribution facilities. Transportation units (local and long-haul). We have combat pilots to protect the transportation. And we have the final delivery points where we actually sell goods -- both retail (on the market) and bulk (contracts to buyers).

To manage all of this, we have built an ERP system. It tracks our inputs, outputs, and processes. It makes procurement decisions (build vs. buy) and submits orders to the various groups of people who actually make things happen -- the producers, researchers, haulers, marketers, etc. The game is very manual on that front, but we use an automated system to actually submit very small, easy to understand orders that people can do in a few minutes usually. In aggregate, it powers a rather complicated machine.

As an example... let's say somebody places an order for 10 Widgets out in the edge of space. We live out near the edge -- actually, look at this map:

http://go-dl1.eve-files.com/media/corp/Verite/influence.png

That's the sovereignty map. It's updated daily. My alliance is Intrepid Crossing in the top right in green. That's 0.0 space (null-security aka no police and lawless -- players own and control everything). Now, let's go through that example of a user ordering 10 widgets.

* Delivery order is submitted if we have it in stock. If so, someone will deliver it via contract. Done. * If not in stock, start the decision tree for this item. * Do we have this in stock in production/stock facilities? If so, submit a transportation order. When it gets transported, the system detects this and submits a delivery order. * If we don't have it in stock, check the market prices for the goods required to build this item as well as the cost to purchase it from a reseller. * If it's cheaper to buy, we submit an order to our procurement team. (Automatic, still.) Once they procure it, the order goes to transportation and then finally delivery. * If it needs building, we do another process of seeing if we have what we need -- or if we have to buy minerals, blueprints, etc. * If we had to buy things, those orders are submitted to procurement and transportation. * If we have it (or the minerals arrive), the production order is submitted. * When we finally have the good, then transportation and delivery happen.

The entire thing is mostly automatic. We carry out the whims of this machine and we supply (rather efficiently) a pretty large alliance. It's a really impressive system.

Yeah, it's a video game. Sort of.

I love it.

And I haven't even touched on the politics, wars, and everything else. It's a beautiful, wonderful, maddening thing.

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For those who find the map interesting, I recommend a time lapse from 2007.08.09 to 2012.04.12:

http://www.youtube.com/watch?v=to7CHVR-Mxk

There is an appeal for UNICEF donations in the beginning, so the video pauses long enough for you to read and close it.

And when you see drastic changes in color/influence? Serious crap just went down. Those are likely the events that even non-gamers read about on news sites.

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One cool thing is that even the map linked in the post was auto-generated by a player's program, and populated I believe by API data. The color hulls/bubbles are all algorithmically drawn, and this was done back in '06 or so before the popularization of visualisation libraries. That's the level of innovation made possible by open APIs and a very dedicated and skilled playerbase (average age is apparently way above 20, unlike virtually every other MMO).

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I think it would be interesting to build a game like EVE which maps the management of spaceships and cargo to the management of real world businesses like a toilet seat manufacturer in Iowa.

While users of the game are creating distribution networks and building custom ERP solutions they would really be managing businesses (without their direct knowledge). If you were really successful in the game then you would find yourself managing the logistics of a much larger real world company.

I guess the challenge would be to create game mechanics that mapped in a way to real world business constraints that made sense.

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Sounds a lot like Ender's Game to me, except you are tricked into managing a business instead of wiping out an alien species.

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This was actually touched on in Neal Stephenson's novel REAMDE.

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May I ask what platform/language your ERP is coded in? Is there a sufficiently well-evolved in-game development environment for such things, or is it just your corporation membership have hacked something together in ruby or .. ?

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EVE Online has always had what we call the "in-game browser". It used to be this rather terrible system that was a custom built environment that had maybe 15 HTML tags supported. It was not a very good system.

Eventually, CCP made a deal with someone (I forget which framework they went with, I want to say it's webkit based?) and they embedded a modern browser with JavaScript support.

They've also done some modifications of the system -- when you are in-game, you can instruct your browser to "trust" the remote web site. If you do that, the browser starts sending along headers that include information like your location in-game, your character name/ID, what corporation you're in, etc. It's a rather abysmal system of authentication, but it works OK for basic things.

They also added some JavaScript APIS so you can do some things in-game from the browser. I.e., display "show info" windows, do some UI stuff, etc. This makes you able to build web sites that are slightly more interactive and useful and actually connect with the game you're playing.

The ERP we've built is, unfortunately for me, in .NET. It's an ASP.NET system (maybe C#?) and so I can't really work on it. (I'm a Perl/Python/Go guy mostly.) I have built some other systems that my corporation and alliance uses, though, that are not part of our ERP or EMC (corporation management application).

A screenshot of the production view of our ERP:

http://xb95.com/pics/eve-erp.png

Note that it has order priority, build location, item, quantity. The icons on the right allow the producer to handle the order -- "resources ordered" (turns out we didn't have it, so I had to order stuff), "build started" (it's in build, wait for it to finish), "buy instead" (turns out it's better to buy it, resubmit this to procurement), and cancel, comments, info, etc.

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Wow, that is really fascinating. Thanks for explaining it to me - its a very interesting thing to see a whole sub-internet exposed in such a fashion, predicated around a virtualization of galactic trading/warfare. Of all places to observe a sub-/-sub-internet ..

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WebKit is open-source and yes, that's what the IGB is run off now.

http://wiki.eveonline.com/en/wiki/IGB_Development

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I see that reddit no longer dominates to anywhere near the same extent.

(Reddit is "test alliance please ignore." Also, "goonswarm federation" is the Something Awful forums. They used to absolutely run the show as well IIRC.)

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One fun note on Test is that they initially tried to find space as far away from goonswarm as possible, but had the map upside down, so ended up very close by. However, they ended up as close allies, so all's well that ends well.

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Awesome, you guys have taken it to the next level. I played a bit over 2006-2008, but was only ever a grunt. I do know the logistics guys in big corps/alliances have to do a ton of work. It sounds like you put IT properly to work for yourselves, as proper hackers would.

For those observing: There's an in-game internet of sorts, but the real-life Internet plays the same role in EVE as it does in Real Life: it lets players chat, trash-talk, coordinate activities, steal information (hacking and "social engineering"), maintain databases and wikis, write web apps to organize their businesses and optimize their ship fit-outs, and keep track of all the info in the game through APIs (yes, APIs).

For many serious players, EVE is a huuuuuuge time-sink. It's mind-numbing at the micro-level but engaging on the macro-level, and crazy fun/euphoric at the peaks. Some people put more effort into running and expanding their corporations than they do into their real-life jobs.

It's a second job and a second social circle. Essentially a second life. I'm not saying that's a good thing, not at all - it consumes many players' lives and well-being - but the results of all this human labor unleashed in an unfettered free market are fascinating to watch.

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I believe it would be interesting to use EVE as the front-end for real management. If we get robotic space-probes off in the near asteroid fields in the next few decades, and little doubt EVE will still be around by then, well .. maybe a robotic-space explorer plugin to EVE will result in something even more awesome.

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Re: map

Why center is not occupied? What do long red lines represent?

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The lines on the map represent stargates which link between systems. systems are organised into constellations, constellations into regions. blue lines are intra-constallation, red are inter-constallation, and magenta are inter-region (and often the longest ones).

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The vast majority of the unoccupied systems are unclaimable space - they're owned by non-player (NPC) factions and are effectively a 'neutral zone' that any player (with a few exceptions) can visit. The center area is all NPC space and there are a few patches of it in other places.

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I played it for a year or so, starting near the bottom of the complexity rung (flying around in ships with a USD value of something like 1 cent, shooting AI-driven space pirates) and moving up to piloting one of the largest available ships in the game (A 'Supercarrier', which essentially acts as a huge mobile support vessel with the ability to deploy fighters - with a real-world USD value of probably around $500). I was playing in one of the largest player-run alliances in the game at the time - we had a section of space carved out that we shared with various allies and fought regularly to defend.

The game is definitely full of time-sink complexity: Resources used for construction in EVE only come from a few sources, all of which are directly or indirectly player-driven - if you want to get raw materials to manufacture things, you have to either get them by mining asteroids (manually), killing AI-driven pirates and melting their wreckage down for scrap (manually) or by maintaining a setup of 'planetary interaction' stations that harvest resources from in-game planets.

On the other hand, the actual space combat - which is still a cornerstone of the game even if it's very abstract and strange to the casual observer - is often extremely engaging, has lots of room for high level tactics and coordination, and can actually handle groups of thousands of players all competing for control over a single star system. There's nothing else like it.

The best way to describe it is sort of like playing chess in outer space: Every action you decide on needs to try to anticipate your opponents' reactions and you need to apply that level of tactical thinking a few steps out. Likewise, in general fleets and vessels in EVE cannot move very quickly and battles can often become very drawn out, with much of the actual victories and losses occurring in a purely tactical sense (poor decisionmaking, incorrect information from your scouts, poorly chosen positions for your fleet, etc).

One of the other interesting things about EVE is that at a high level, the design team tries to make it a game full of balances and counterbalances. Even once you've 'made it' and acquired one of the biggest, most powerful vessels in the game, you have dramatic weaknesses - a pilot in a supercarrier worth $500 USD can, despite his mighty defenses and arsenal of fighters and point-defense weapons, be undone by a single opposing player in a ship that is literally worth nothing. The way it essentially works is that the smallest, weakest vessels are dramatically more agile, which (as an extension of the game's physics model) makes it impossible for huge, slow-moving, heavy-hitting vessels and weapons to cope with them. The end result is that a viable fleet for combat in EVE needs to contain a mix of cheap, disposable vessels (to confront and 'tackle' the opposing fleet's big supercarriers and other heavy-hitters) along with a mix of larger, more expensive vessels to do the work of actually dealing damage to opponents and providing logistics support (scanning, repairs, etc) to the rest of the fleet. It creates a really nice equilibrium where, when the game is working right, new players end up being just as important as veteran players.

On the other hand, arguably EVE's biggest problem is that it is 'appointment gaming' at its worst. As an active player, you will spend probably close to 95% of your in-game time waiting for something interesting to happen. There are lots of things to do to fill that time, but none of them are particularly interesting; they're all preludes to that huge, pitched space battle that (if you're lucky) might happen every few days, if you're awake and around to participate. For people with flexible schedules it ends up being a great fit, but for me, it was hard to fit into my schedule and I ended up with few opportunities to participate in the 'fun stuff', so I ended up giving my accounts and ships away to other people who would actively use them.

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I don't personally but I have close friends who are or have been very heavy players. To me it definitely seems to have an interesting level of complexity, Eve seems to generate more unique and epic stories of gameplay than other MMOs, for example. You can basically decide what sorts of gameplay you want to engage in. If you want to work cooperatively with a bunch of friends and build cool stuff you can do that. If you want to be a soldier in a war you can do that. If you want to be a spy or a pirate or a fraudster you can do all of that too. And if you get tired of one you can switch.

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I have played EVE for some time as a rather unimportant pilot battling in a big corp in a huge alliance that was fighting the back-then biggest alliance in the game.

EVE is nothing short of amazing in terms of what CCP is doing. They are one of the few companies actually evolving gaming and technologies involved. It is one of the very few "role playing games" where you instantly and automatically take on a role and play it both in and outside of the game - you decide to be a warrior, you play, act and talk like a warrior; if you want to produce or be a freighter pilot, you can also do that at just as much depth. There are no quirky flame-wars over what is "in character" or not, like in WoW on RP servers. In EVE, anything you do is automatically in character and perfectly suitable, at least to some degree. You can actually play a freighter pilot or a producer or miner/gatherer and nothing but that and be just as successful as a fighter, if not more! EVE really offers a lot and each route offers a lot of depth especially when compared to market-leaders like WoW. WoW's economy and crafting is quite frankly kindergarten compared to EVE's economy. Even the first, lowest items you craft in EVE have a purpose and will make you money while in WoW, you are actually just crafting to make it to the top-items and anything below is by and large useless. The battles you can find yourself in can be wild, imagine flying with a few hundred or thousand people from all over the world!

There are downsides to EVE, for me: it can be too much and get too real quickly. It has a LOT of depth and a LOT of that is happening outside of the game, so you will definitely have to invest more thought and reflection on what's going on, it can take time to learn just one thing. This outside-of-the-game is an integral part of EVE and one of the reasons it can offer so much. This can also make it very frustrating as a beginner while people in good corps and alliances have mentors or require you to spend a lot of time reading online. At the same time, anything you do is "real" and has actual consequences. Yes, you can loose days or weeks of progress if you do something very stupid. Yes, players have lost what can be estimated to be four digit real-world USD values. To really get full access to what EVE is really all about, you pretty much have to play in a corp and then special rules will apply of what you are and are not allowed to do. If you are a fighter, there will be a military-style drill of some sort. On this level, your actions can easily have even more consequences on a larger scale. To sum it up: EVE is no idle pastime and you do not just log into EVE and "zerg" through a few battleground inebriated without any consequences or danger. But if you like that, it is pretty much the best game around! Don't let the strange UI scare you off at first. Another downside might be that you will be very unimportant and expendable for quite some time; unlike in e.g. WoW where you get that satisfaction of really having killed some mob or a player, in EVE battles can be frustrating and drawn out, often without a clear 100% winner and seldomly do you get that same satisfaction of really having killed that one important enemy... you will be much more of an unimportant zerg; later on you can develop into a very highly trained and knowledgeable commando or a very well geared but strictly regulated and commanded fighting force. This might not be "fun" for everybody but it definitely offers you a lot of things that no other game can offer.

On the upside, a lot of that outside-of-EVE gaming gives TONS of fantastic opportunities for little software projects! A lot of EVE players with programming skills are developing something somewhere for themselves or their corp/alliance and CCP created a few APIs and services to openly interface with some of the game's information!

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I worked at CCP when they hired Eyjólfur. He came in without really knowing a lot about the game world and made it his first job to learn as much as he could about how the world actually worked.

Given that I was a foreigner who was working and living in Iceland, I didn't have much of an evening social life. I was also one of the relatively few employees (sadly) that were really active in the game in the advanced levels of play -- 0.0, empire wars, etc.

Eyjólfur spent a bunch of evenings sitting with me while I played internet spaceships. He asked tons of questions and really got to learn the universe, or at least my corner of it. It was really interesting to work with him and hear him talk about his thoughts as he was putting them together.

CCP used to publish the Quarterly Economic Newsletter, like this:

http://cdn1.eveonline.com/community/QEN/QEN_Q3-2010.pdf

They've since stopped doing that, but you can see from that example that it used to be a fantastic resource. If you wanted to know the nitty-gritty details about the universe of EVE Online, the QEN was hard to beat.

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[edit: reposted as top-level comment; I apologize for the repetition]

CCP's economist's reports are the real deal. The EVE game economy is I dare say more developed and complex than most other games' - it has many kinds of input factors and stages of production, and many of the production facilities/resources are player-controlled and their fate determines on political maneuvering, war and sabotage between player corporations (guilds). The price of most items in EVE (ships, weapons, components, structures) is determined by the state of production and speculation in the economy, so CCP has to consider the economic impact of nearly every single change they make to the game world.

If any of you folks are interested in reading about a truly fascinating, active digital economy, you have to read the EVE economic reports and other investigations of EVE. It's like reading about mining, manufacturing and stock markets - against a background of eternal war between corporations - in far-future space.

edit: links to additional content ----- http://pc.gamespy.com/pc/eve-online/855380p1.html

>>> EVE Online was developed to have a very dynamic economy from the very beginning. It was decided that "time" would be treated as a valuable player resource: for that reason, raw materials were spread all over the galaxy map, which takes hours to traverse. This created regional pricing. Interestingly, there were no trade hubs built into the core game design -- players gradually settled into certain areas and made their own pockets of population where trade thrived.

>>> Gudmundsson had some fun examples of how intelligent virtual economies can be. He showed a graph displaying the prices of a mineral in the game known as Zydrine. Zydrine is hard to find in the EVE universe, but players had discovered that killing a certain class of drone often leaves behind Zydrine in the wreckage. This hole in the market led to lots of drone-farming, and subsequently the price started to drop. Drastically.

The developers decided to tweak the drop rate and this change rolled out onto the test server, unannounced, and mixed in with all sorts of other tweaks. Still, clever players noticed the change. Word got out. And suddenly, even though nothing had yet been done on the live server, prices for Zydrine spiked dramatically. Markets make for great predictors of future events!

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http://blogs.wsj.com/economics/2010/06/21/real-economist-tak...

>>> One of his team’s first big findings is somewhat sensitive. Confirming decades of gender research by economists, sociologists and anthropologists, Mr. Turpeinen’s group found that the same biases that have historically favored men in the real world exist in a virtual economy. Their research demonstrates that both women subscribers and female avatar characters operated by male subscribers in EVE are biased toward a slightly lower chance of success in competition with their male counterparts.

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A bit of a background: Varoufakis is something of a celebrity in Greece for being one of the first and the most vocal economists to speak out against the European strategy for resolving the Greek sovereign debt crisis. His predictions have proven to be tragically spot on so far, although it remains to be seen whether his proposal for renegotiating the European bailouts, a proposal that the left-wing SYRIZA political party (which has about 50% chance of winning in the Sunday elections and has allegedly asked Varoufakis to be its economic advisor) has stood behind, is actually a realistic one. He fled to the US and Valve after the doctoral program in Economics he had built in the University of Athens was dismantled during the crisis and after he started receiving death threats by people who weren't particularly thrilled with his opinions.

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You seem to know a little bit about this gentleman than I (and the rest of HN probably) know, could you tell us more about his (correct) predictions ?

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I found this snippet from 24 May on BusinessWeek:

http://www.businessweek.com/articles/2012-05-24/greeces-brai...

> By the end of 2011, Yanis Varoufakis was a celebrity. The director of the Ph.D. program in economics at the University of Athens, Varoufakis had been arguing for two years that Greece was insolvent and the country should default while staying in the euro region ... In 2006, Varoufakis gave a talk in Athens predicting a financial crisis that would start in U.S. real estate, move through Wall Street, and on to Greece.

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I have attended one lecture-seminar-debate for economists. He was a spokesman and his ideas can be summarized in 2010 here [1].

His work regarding european crisis [2]

[1]:http://yanisvaroufakis.eu/2010/12/17/the-modest-proposal-in-... [2]:http://yanisvaroufakis.eu/euro-crisis/

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A little late, but thanks!

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This is truly fascinating.

I remember hearing about virtual economies where money can be injected at any time through gold mining, etc, and that they were inherently unstable. Once you got the gold farming schemes that sold gold on e-bay, it created massive hyperinflation.

And it totally made sense that hyperinflation would occur since the creation of virtual gold was limitless and effortless, so the gold farmers didn't care how much gold they sold it for as long as they got real money. That rendered the price of gold worthless, and it drove up the prices of virtual goods across the board.

I would love to see how these problems are tackled in the virtual world.

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Valve's games put a cap on real prices by selling the items through Valve's store. You can buy a new gun for $2, so the price of the gun in "ebay gold" will never rise above $2.

(Big simplification for TF2 players follows) Also, in TeamFortress 2 (Valve's biggest virtual economy), it's difficult to farm gold. Logged in players receive 1 gold/hr, capped at a max of 10 gold/week. It's possible to create new accounts, and run all of them concurrently, but the expected gain is fairly low, and you have to pay Valve real money for the privilege of having extra accounts.

The exchange rates are also totally asymmetric. The exchange rate for money into gold is approximately $1 => 81 gold. The exchange rate for gold back into real money is ambiguous. There isn't a liquid market here. It involves finding rare in-game hats that aren't sold in the valve store, and selling them on e-bay for $100-$400.

The hypothetical gun might cost $2 on the valve store, but 1 gold in game (i.e less than 1% of the store price). This strongly incentivizes players to trade in-game.

It's possible to make a profit by trading with humans, but that's labor intensive (because you have to find the player and haggle), and probably seen as a positive for Valve, because the traders are providing liquidity.

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But not every item is available in the store. The ones that aren't - unusual hats, super-rare "glitch" items, community weapons - sell for hundreds and hundreds of dollars.

One such "glitch" is known as a "vintage scrap metal" which only a few exist in the game. They popped up when a user would delete their metal and ask valve to put it back, when they did, it showed up as "vintage scrap metal" with blue text. Such metal has sold for over $1,000.

I feel much of the TF2 economy (these items that can't be bought in a store) is simply players holding onto the weapons and working together to sky-rocket the price. Now, people refer to a "spreadsheet" which is set by a group of individuals. Everyone follows this spreadsheet religiously.

For small items, I think the TF2 economy is very neat. But for rare items? A mess.

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After I wrote this last night, I'm now leaning towards the idea that the "rare item" economy is intentional, and working as designed.

In effect, by making it difficult to turn virtual gold into money, and allowing rare items to sell on EBay, Valve is paying a small number of traders to provide a liquid market.

I'm aware of the spreadsheet, but I think you overstate its importance. Sure, people are aware of the book value, but just like real life, people pay more or less than the book value according to their desire.

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Many games add "Gold sinks" to tackle this. Just ways for players to use gold that completely removes it from the economy. I believe the trick of this is to scale it with the amount of gold in the system.

Complete conjecture, but I suspect this is related to things like the increased price to craft gems in Diablo II (bigger gems are more expensive) which was a stark contract to Diablo 2's simple method of "3 small gems make a big gem".

Diablo 2 felt like it had an economy that happened almost by accident whereas DiabloIII feels like they put a lot of effort into the economy and trying to have enough ways to remove gold from the economy.

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Adding to gold sinks -

WoW I think had some of the most visible impacts in terms of gold sinks (some I am sure were pioneered by other games and MMOs)

They brought about the concepts of vanity items, which were absurdly expensive and went from there.

Whats even more interesting is seeing the progression and evolution of these economies.

Wow 1.0 auction houses and others barely had the concepts of gold sinks, nor any of the finer tuned economic catches that blizzard introduced by the time it reached its 3rd expansion - Wrath of the Lich King.

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Diablo's largest gold sink is the Auction house has a 15% transaction fee. If 1100 DPS 1h becomes worth more because people spend more time farming gold vs items then the auction house will just eat a ever larger share of created gold so eventually people spend more time farming items so there are more 1100DPS weapons and the price drops.

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> I believe the trick of this is to scale it with the amount of gold in the system.

That would make the items too expensive for normal players - only the gold farmers and their customers would be able to afford it. Tricky business.

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Blizzard sure could use someone like him right about now.

Diablo 3 has crazy gold hyperinflation due to bots and the real money auction is causing further havoc. It is pretty obvious that this was not well thought out prior to release.

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I disagree. I think it was well thought out, I just think it's hard to know what will happen until afterward. As for some of the values of items in Diablo III currently... I think there will be a settling period before prices reflect their true value. Supply will increase until some equilibrium is reached. When we hit some equilibrium we'll know if Blizz needs to tweak things. The gold AH, for instance, has had the overall item price tank pretty quickly over the last few weeks reaching what is now much more sane numbers IMO.

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I don't think they took into account the bot farming which causes a huge disparity between normal users farming and them getting 6mil gold/hr.

There is also evidence of duping on the Asia servers already requiring a rollback so. So people are actively trying to exploit the system and there are not enough checks in place.

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Blizzard is well familiar with bots and virtual economies, they do still run multi-million subscriber behemoth World Of Warcraft after all.

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Just to clarify the item dupe was caught quickly and no rollback was needed, they were able to track the item that was the basis for the dupe and all the clones and remove them.

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What's the equivalent of this in the real world? Forgeries? Fraud? Owning something without a license? Or is it not comparible?

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Isn't valve's store idea a pretty trivial way to anchor the price of items though? It seems blizzard chose the path of ambiguity, rather than using a proven off the shelf method for controlling price.

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I can't dig up a source, but Blizzard representatives have confirmed in the past that they hired economists to work on Diablo III -- this isn't something unique to Valve.

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Thats a job I would love to have. Datamining and seeing the patterns, figuring out the tweaks, and seeing it affect the economy as it propogates out.

That would be one fun thing to test - and better yet, contrast with real world examples.

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> And it totally made sense that hyperinflation would occur since the creation of virtual gold was limitless and effortless

The creation of the US dollar is also limitless and effortless.

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Only for the Federal Reserve, who has a mandate to manage for a stable economy--so they are careful with their currency creation.

If every U.S. citizen could create dollars, we would indeed have hyperinflation.

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Even though I had no clue about actual economics at the time, this is what I saw as so screwy in runescape. A lot of the ingame money came from alchemy. A few clever people had figured out that the two of the highest tier bows were easy to produce en masse and so created a market for their components. Since runescape does not have a shard system like WoW or other MMOs, this particular market was huge. RMT (real money traders) came in and automated the gathering of these components. Jagex tried numerous methods of eliminating RMT from the game, including fixing ingame prices to within a certain amount. Not sure what happened then, but I still can't figure out why they didn't simply fix the mechanic at the heart of it.

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Jagex eventually reversed it's decision on the fixing of prices and returned free trade. This had the effect of bringing back a large number of bots, causing huge inflation of certain items and a large devaluation of item which bots can produce easily.

The economy is now hugely imbalanced, so performing common actions such as crafting a sword from metal will cause you to lose a fair amount of money. There is also no real item sink because the consequence of death from npcs has been reduced (keeping most of the item you where holding when you died) and PvP (player versus player) has been neglected to the point where few players engage in the activity.

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That's disappointing.

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>If every U.S. citizen could create dollars, we would indeed have hyperinflation.

For that same reason we don't give the power to create dollars to Congress.

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When Congress signs off on deficit spending, you are giving them the power to create dollars.

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From a legal standpoint, "every U.S. citizen" is, in fact, "Congress". That's what the whole "Representative" thing is supposed to mean.

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The simplest form is what happens in games like Mafia wars. The standard tecnhiques are to introduce sinks everywhere and to inflate prices in an illogical way (e.g. the price of buying n+1 weapons is larger than the price for n). This is a weird form of "personalized inflation" but it seems to stabilize the game.

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If anyone from valve is listening, would really appreciate it if you added commenting support to your blog, I am looking forward to this series of articles, it is a very interesting and unique space.

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Have you ever read the WoW forums (or any other official game forum)? The signal to noise ratio is absolute crap. The first few pages would be people saying "first!" and it goes downhill & off-topic from there. We're talking about a site with 10M subscribers, all of them focused on a single piece of official correspondence, wanting their chance to get attention.

It would be absolutely useless & provide zero opportunity for intelligent dialog. If anyone from Valve is listening and wants to open discussion, they would do better to interact with 'higher quality' communities directly.

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Intensely interesting. I'm looking forward to more blog entries. Though not an economist, I've always lamented the way econometrics was starved of opportunities, and the way competing ideas could both thrive with no real hope of resolution.

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an economy where we do not need statistics since we have all the data!

I simultaneously feel his elation and am mystified. If you have such a quantity of data that you must relate to it via statistics, how is that better than only having the statistics? Is it because you can define and calculate your own creative statistics, or...?

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Off the top of my head: you no longer need to sample to obtain your statistics, and you can obtain good statistics on virtually everything and every sub-component of the economy, sliced every which way, as many times as you like -- which is much harder in the real world. You can't just go out and gather information on sales of all red, oblong widgets in shops owned by couples aged 50-60 with one dog and one cat -- but you can in a game economy.

Basically it's a huge data laboratory where you are able to record every transaction in the world, and work from there. That's massively useful to economists, because they can now test a far wider range of hypotheses and, furthermore, eliminate them much more quickly.

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Even the real data should contain noise, compared to a true hypothesis. For example, you could predict that a certain (for the purpose of the example, small) percentage of all players will buy a certain ship. But many of them just stop playing by chance, then your prediction fails even if the underlying theory is correct. [1] I believe the main advantage is, that you can get rid of sampling bias. So you can look at the entire economy, not only on the part which is willing to answer a poll. For a nice real world example see [2].

[1] https://en.wikipedia.org/wiki/False_negatives#Type_I_error

[2] http://neuroanthropology.net/2010/07/10/we-agree-its-weird-b...

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> "But many of them just stop playing by chance"

I suspect this will be one of the significant weaknesses in trying to translate anything learned in a game economy into real economies. You have much better data in a game economy, but people do grow bored or decide they're just not good enough, and move on. Or people decide they've taken a stupid path and reset their account, and build from scratch. In real life, most people try to keep living even if they're at the bottom end of the economy and don't have the means to change that. This strikes me as a fundamental difference between the virtual and the real.

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Great, I learn by being misunderstood :) I did think about people who stop playing because of outside events, like a new season of "Game of thrones" or a girl, not about ingame events.

However, there is of course a fundamental bias in game economies. Another example would be, that in game economies people use unethical tactics, like simply killing competition. ( I did not hear of Bing-hordes raiding the Google HQ.)

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This type of 'noise' is easy to weed out. Its not really even noise--its just a question of how he wants to define his population.

With a good team of people who know SQL, he can pull data from any population he chooses, and can make any statement about that population he has data on, and if his arithmetic is valid, those facts are without any sort of 'noise'.

On the other hand, this is economics, and if he ever wants to make a valid prediction, he's going to have to use forecasting. Forecasting intentionally adds noise, so in that sense, have the population doesn't eliminate the existence of noise in his work.

But I really don't see what you mean by 'noise' in this case. He literally has all of the facts. There is nothing fuzzy about the data, as long as he has the data.

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The discipline of statistics can be defined as the set of techniques used to draw inferences and conclusions from a sample--an incomplete set of data. When you have all of the data, playing with it ceases to be statistics and instead becomes data analysis.

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>how is that better than only having the statistics?

Its the quality of the stats that is the difference. e.g. When economists work out the GDP its a case of thumb-sucking a number based on a few factors which in turn are also educated guesses. With a digital economy you can just throw it in an Excel sheet and get a perfectly accurate answer. Thats what he means with "having the data".

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A statistic estimates a parameter of a population. If you have the population, you don't need statistics because you already know the parameters.

Having 'all the data' sidesteps any possible need to use statistics outside of forecasting, which he doesn't seem too fond of anyways.

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I guess I would be interested in a truly economics oriented game that modeled nations without it being about wars, raids, guilds, spells etc. Not sure if something like that exists though.

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I've heard EVE online described as such.

Well, not so much spells, since it's space oriented rather than fantasy, but it does have a complicated, realistic economy with corporations, wars, and economic exploitation.

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A Tale in the Desert is probably the closest I know of.

Its player base is limited compared to most MMOs (around 1000-2000ish, last I looked), but it's a combat free game centered around economic production.

It's also a bit unusual in that it has no in game currency. The last time I played (a bit more than 5 years ago), it was largely a barter economy. However, there was a player run item exchange whose credit functioned as a defacto currency.

I have no idea what the current state of the game is, but if you're curious about a non-combat economic MMO, it's worth taking a look at.

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That's a good description of the current state of the game.

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It seems like the game would need some sort of non-utopian conflict-driven backdrop to create enough desire for whatever products for there to be an interesting economy.

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That's an interesting observation. I wonder if that's true of normal economies as well and that final agents of economy, people, would ideally want in-game/in-life situations in which they can "win" for value to be produced.

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Second life doesn't fit the bill?

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Fascinating read, just like many of the other Valve blogs.

Though, I do wish this guy could explain why real-world money Steam games in the US are often half the price of those in Australia/Europe.

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Pricing isn't about fairness, it's about maximising surplus for the seller. Businesses aren't a public service, they're in it to make money.

Valve will have pricing analysts that have studied the demand curve and concluded the higher price point may reduce demand but is nonetheless the point where marginal revenue from that geographical segment approaches some notion of marginal cost, thus maximising returns. With such a varied range of content and the ability to vary pricing dynamically through specials and discounts and bundles, they'll have collected a wealth of data about game price elasticity in different market segments.

As anyone who's studied economics 101 would say, it's all about willingness-to-pay and how that translates into price elasticity.

In a similar vein, it is 80% more expensive to prebook an Avis rental car at Melbourne airport (MEL) if you declare US residence vs EU residence. Yes, really, 80% more, try it.

This is explained by expectation, which translates directly into willingness-to-pay: US visitors are so used to renting a car that they don't explore the alternatives. European visitors on the other hand are astounded that there is no rail link into the city, and renting a car is at the bottom of the alternatives list.

In the game distribution world, it's likely that the US has more volume, more alternatives and more domestic competition, hence greater price elasticity, hence more aggressive pricing. Steam has strong differentiation and provides global access to products not otherwise marketed outside the US, and Valve are typical of a leading oligopolist, exploiting this position in their pricing strategy.

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Thank you for your explanation.

I guess it just frustrates me because I can't get around it.

With physical goods, if I don't like the AU price, I can easily shop online on another countries website and get the goods shipped. No problems.

With digital goods, there's mostly no way to legitimately purchase them from overseas. You can use a VPN and a fake address, but that breaks the terms & conditions.

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Of course. Copyright is essentially a right to a monopoly, how can you expect competition offering the same product?

(I'm not being factitious, it's exactly what it is)

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Advertised prices in $ exclude sales tax, because for most states it isn't levied on digital downloads.

However, VAT in EU countries (don't know about Australia) is included in the price. This causes a fairly substantial discrepancy, as VAT can be rather high (in the UK, 20%). Other discrepancies can usually be put down to exchange rate fluctuations, which with the recent financial issues in Europe have been somewhat unstable.

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Regarding Australia, our GST is a flat 10%, and the AUD is near parity with the USD (and has been above parity for most of the last 12 months). The price discrepancy is far greater than it should be if those were the only factors.

The Australian Competition and Consumer Commission, an independant regulatory body in Australia that oversees the Trade Practices Act (among other things), is in the process of inquiring into the so-called "Australia Tax" to find out why companies like Apple and Valve charge far more for software sold in Australia than in other countries despite the low true cost difference.

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The ACCC is pissing in the wind. It's just a matter of geographic price segmentation to maximise revenue. End of story.

Also, end of legal challenge:

* there's no violation of free trade agreements, which are about governments dropping barriers like tariffs and quotas and confer neither rights to individuals nor obligations on businesses, and

* there's no violation of individual rights, because country-of-residence is not a protected class, unlike gender/orientation/skin colour/race/disability.

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Prices for non-Valve developed and published games are also determined by the individual publishers.

Unfortunately, that means that the real reason is "Because they can".

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Are there more Valve blogs besides Michael Abrash's?

http://blogs.valvesoftware.com/ just redirects to http://blogs.valvesoftware.com/category/abrash/ and I can't find any way to find a listing of all categories/blogs. The RSS feed only contains this entry and abrash's.

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An economist finally admits it why they fail so much.

"let’s face it: Econometrics is a travesty! While its heavy reliance on statistics often confuses us into believing that it is a form of applied statistics, in reality it resembles computerized astrology"

"the reason for this unavoidable failure? None other than our inability to run experiments on a macroeconomy"

The theories are never tested. They just get implemented. A thousand other things are happening at the same time and its impossible to get anything approaching the clarity of a double blind experiment. But the adherents act as if they've got exactly that.

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>"An economist finally admits it why they fail so much."

What do you mean by "so much"? Because they can't accurately, regularly predict the future?

I think you'll find that, in reality, economists know their fallibility and limitations. It's the proletariat that doesn't understand the under-pinnings and assume economists should be 100% accurate when they make predictions, and are upset when they are not.

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We're not in the current crisis because the people expect 100% accuracy from economists. Its that economists have bad theories.

Most economists fail to offer theories that accurately describe reality. Keynesian is the current disaster.

And politicians can only pick from the available theories and tend to pick the most shortsighted of policies, as they are trying to get re-elected.

Its not that a bunch of unforeseen events have occurred. Its that theories being followed are bad. They ignore many very real things. And the consequences that most economists have been denying all along are happening.

For example, they analyze the multiplier effect government spending but ignore the effects of removing those resources from other parts of the economy. They don't analyze what happens where the resources are being taken away. But those resources are real things that people no longer have and cannot use.

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Which two economies were being merged?

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I'm guessing TF2 and Dota 2?

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Looking forward to these posts. I've remember being completely fascinated by Diablo 2's virtual economy, and saddened that I could find so little articles about it.

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I went to GDC this year and saw a talk by a PHD Economist who does work on video game economies and releases reports about them. It was one of the coolest talks I attended, and I spoke with him afterwards. In his talk he mentioned Habbo Hotel a lot and spoke about a few other economies and how they came to settle on some sort of currency. I just had to bring up how I first noticed a form of virtual currency in Diablo 2 as he didn't seem to mention it. I do recall that SOJ's were like the defacto unit of pricing other items. Apparently he had actually never heard about that, which surprised me greatly (perhaps because Diablo 2 was so huge, and because it was one of the only examples I personally had). Here's hoping he looks into it and writes a report about it!

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Complete tangent, but I noticed that on Yanis Varoufakis' blog, the current entry is his interview with Max Keiser.

http://yanisvaroufakis.eu/2012/06/15/ponzi-austerity-intervi...

What's the connection? Max Keiser sounds exactly like the defective turrets from Portal 2. Coincidence?!

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What games does Valve have that have virtual economies?

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Team Fortress 2 and DOTA 2 are the ones I know of.

http://en.wikipedia.org/wiki/Team_Fortress_2#Free-to-play

http://en.wikipedia.org/wiki/Dota_2#Free-to-play

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One can exchange items, but not sell them. There is no money account in TF2. So I don't see any relation with a real life economy.

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Four years ago one of my first startup ideas I pursued was setting up an arbitrage between virtual economies. I believed then (and still believe) that it is a huge chunk of the future. Everything that is tangible now will become software and intangible in the future. That means the virtual economy is set to eclipse the current one.

I spoke with some somewhat famous startup-type people; several I met on HN. None of them seemed interested in my pitch (I was looking for a cofounder). One basically said "I've already got my FU money. This just doesn't excite me that much."

I'm looking for some cool things to happen in this space over the next decade. When I was kicking this around we had all sorts of things we wanted to try. It'll be interesting to see if any of them come to fruition. One of the key questions in this space is whether it's even possible to manage virtual economies as this guy wants to do, or it there's always some level of abstraction that's remains out of reach. My money says the thrill of being able to finally experiment will be short-lived. Odds are each economy we create with gaming rules will simply be a small subset of a much larger informal economy. Cool stuff.

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Interesting. I have some questions. (If you don't mind answering.)

> Everything that is tangible now will become software and intangible in the future.

When you say this what exactly do you have in mind? Virtual reality? Living substances made through bio-hacking?

> or it there's always some level of abstraction that's remains out of reach.

What sort of abstraction do you feel would be prohibitive in this environment?

> That means the virtual economy is set to eclipse the current one.

In what capacity? Like bitcoin, or like for the win[0]?

[0]: http://en.wikipedia.org/wiki/For_the_win

Thanks in advance.

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Manufacturing of tangible goods will become a commodity as 3-D printing becomes mainstream. In addition, many services that were verbally or physically contracted will be handled completely in virtual reality. Think home robots cutting hair, or auto-drive cars.

And as you point out, that's not even touching bio-hacking, which is also converging to digital/created lifeforms.

Call me cynical, but this article struck me as nerd candy. It's a totally-awesome idea: we finally get to really measure and experiment with economies! But in my research several years ago I was already uncovering hundreds of millions of dollars in a virtual goods black-market. People will take a character of yours and spend all of their time leveling him up and getting lots of goodies. Then you log in and take over. You pay them through some back channel. Or you leave an item where somebody else can pick it up, etc. No matter how you design a virtual world, there are plenty of ways to make economic transactions outside the walls. The illusion that you somehow have a god-like view and can see and observe everything of important is just that, an illusion. But I'm willing to wait a few decades for the economists to figure that one out :)

The virtual economy will merge along multiple different lines. I don't think there's any one answer here. There's no reason your WoW character can't be traded for BitCoin and used as a downpayment on a VR piece of real-estate that you then later sell at a profit for options on a futures market in some rare item coming out in a game next year. Thinking in a linear fashion can really handicap the possible solution sets out there.

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> arbitrage between virtual economies

Exchange between virtual currencies is discussed somewhat in the 2009 documentary "Another Perfect World"

http://www.youtube.com/watch?v=NxZP_ur_Tvo#t=25m

Near the end they interview the CEO of a South Korean company called ItemBay.com who says it's his dream to setup such a market.

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I'd like to see reputation or karma or achievement based currencies that are convertible between online communities, and a currency exchange that lets me buy and sell equivalent values. I could then take Reddit karma and exchange it for Stack Exchange points and "buy in" to another community at the going exchange rate, transferring the good will or community mindedness I earned on one site into another.

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I would argue that the virtual economy is already eclipsing the material economy, just not in the way you think of it. Compare the trends in value creation and employment between U.S. manufacturing and U.S. financial services.

Modern finance is largely computerized or computer-assisted arbitrage based on asymmetric information...the "objects" being traded are virtual. And over the past 20 years it has greatly outpaced manufacturing in job and value growth.

And this does not even consider the growth in product design and software products and services, which are also virtual.

edit: I a word.

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Given what you've said, what do you think about bitcoin? If you are so interested in virtual economies/currencies, this should be right up your alley.

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An interesting resonance with Charls Stross's Halting State.

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For the sake of Pete, someone remove the parens from this man's keyboard.

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Reminds me of Neal Stephenson's Reamde and the T'Rain geology

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>the notion that a computer game company has surreptitiously and quite spontaneously created virtual economies that it comprehends as ‘economies’ (which deserve study and regulation) was enough to write back instantly

Does this man believe we should have legal regulation of game economies? Oh wow.

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Do you believe we shouldn't?

Assume an economy can be sized... so it's a $100m economy, or a trillion-$ economy, etc.

Connecting economies together obviously causes them to impact each other. So long as games are connected just to the US economy, and it is much, much larger than any game economy, the impact on the "real" economy is nil.

What about a much smaller real economy? Connect an economy the size of Eve or WoW to one the size of Zimbabwe. Suddenly, events in the game can have very real macro-economic effects on the "real economy". For example, uncontrolled creation of "wealth tokens" can lead to inflation, and contaminate the real world just in the same way as currency fluctuations impact the real world.

Banks can create money, and they are regulated. If virtual economies can create money on a scale large enough to disrupt the real economy, shouldn't they be regulated too?

I'm not saying the answer is obviously one way or the other, but to dismiss the question with an "Oh wow" seems very short-sighted.

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That's a good point. I hadn't really thought about virtual economies like WoW or Eve as similar to the Fed in that they can essentially print money.

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Only for their given domain. Blizzard and CCP are free to make as much gold and ISK as they want (and they do; it's a faucet-drain economy, and the faucet does not get shut off). But the quantity and buying power of said currencies change its value in relation to real world money.

So saying they can print money is not really true; they can control the value of a particular good that isn't intended to be a good.

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But if their virtual economy is stabler than a real world economy, this changes, right? I'd rather own ISK than Zimbabwean dollars. Even if it's not strictly stabler, the ISK reflect a certain amount of wealth that's retained in the virtual economy.

Taking another contrived example to make the point obvious, if Eve players basically controlled the equivalent of a trillion dollars, and they all decided to shift half of it to dollars (e.g. Because CCP has decided to print more ISKs), this would have a very real impact on the real economy.

Those are all contrived examples, so regulation shouldn't be based on them, but they show the question is worth considering.

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I think he's referring to the regulatory control Valve exerts over the virtual world.

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i think the gaming sector with its virtual economies is a very good representive for "real" economies. in both economies it's all about feeling, very irrational. many panics and hypes. it's a bold move by valve to hire an economist-in-residence. they are going for the big shot

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Maybe it's getting late, but I think i could really use an upvoted tdlr for this...

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Valve hired a well-known economist. Symbiosis occurred.

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This isn't Reddit, and that sort of behavior here is actively discouraged.

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My comment was sincere and I stand by it. The article was quite long and I've often seen similar summary comments for such articles here on HN. I think for really in depth articles it helps to have a good overview before commiting time and diving in (something more than an obscure title and the valve.com domain). In this case, I was initially under the impression that it was part of an ARG, a topic I am very interested in.

I should also note that I don't see anything in the guidelines about asking for a summary.

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I don't disbelieve your sincerity, but was simply stating that we discourage the notion of of "TL;DR" here, as a community, whether or not it's in the guidelines.

It's also not in the guidelines (as far as I can tell by skimming) that your comments should further the conversation, but that is another ideal to which the community at large has agreed to aspire. We collude to keep comments on topic and interesting, because that's what the community wants and needs.

I wasn't casting judgement on your post but, as I noticed you were new, thought I'd offer it as advice.

On a personal note, especially with articles like this, if you are interested in the topic at hand, read the article. There really isn't any good substitute.

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This is awesome.

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