Virtual Market Behaviour

Slate has an interesting article on a paper written by Cal State Fullerton economist Edward Castronova about the burgeoning economy in the MMRPG Everquest. Here is the abstract of the article:

In March 1999, a small number of Californians discovered a new world called "Norrath", populated by an exotic but industrious people. About 12,000 people call this place their permanent home, although some 60,000 are present there at any given time. The nominal hourly wage is about USD 3.42 per hour, and the labors of the people produce a GNP per capita somewhere between that of Russia and Bulgaria. A unit of Norrath's currency is traded on exchange markets at USD 0.0107, higher than the Yen and the Lira. The economy is characterized by extreme inequality, yet life there is quite attractive to many. The population is growing rapidly, swollen each each day by hundreds of emigres from various places around the globe, but especially the United States. Perhaps the most interesting thing about the new world is its location. Norrath is a virtual world that exists entirely on 40 computers in San Diego. Unlike many internet ventures, virtual worlds are making money — with annual revenues expected to top USD 1.5 billion by 2004 — and if network effects are as powerful here as they have been with other internet innovations, virtual worlds may soon become the primary venue for all online activity.


Castronova, E. (2001, December). Virtual worlds: A first-hand account of market and society on the cyberian frontier. CESifo Working Paper No. 618. (Munich: Center for Economic Studies & Ifo Institute for Economic Research).


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