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Abstract: 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.
Information and Internet Services, Computer Software
Abstract: Several million people currently have accounts in massively multi-player online games, places in cyberspace that are effectively large-scale shared virtual reality environments. The population of these virtual worlds has grown rapidly since their inception in 1996; significantly, each world also seems to grow its own economy, with production, assets, and trade with Earth economies. This paper explores two questions about these developments. First, will these economies grow in importance? Second, if they do grow, how will that affect real-world economies and governments? To shed light on the first question, the paper presents a brief history of these games along with a simple choice model of the demand for game time. The history suggests that the desire to live in a game world is deep-rooted and driven by game technology. The model reveals a certain puzzle about puzzles and games: in the demand for these kinds of interactive entertainment goods, people reveal that they are willing to pay money to be constrained. Still, the nature of games as a produced good suggests that technological advances, and heavy competition, will drive the future development of virtual worlds. If virtual worlds do become a large part of the daily life of humans, their development may have an impact on the macroeconomies of Earth. It will also raise certain constitutional issues, since it is not clear, today, exactly who has jurisdiction over these new economies.
Abstract: This paper explores a unique new source of social valuation: a market for bodies. The internet hosts a number of large synthetic worlds which users can visit by piloting a computer-generated body, known as an avatar. Avatars can have an asset value, in that users can spend time to increase their skills; these asset values can be directly observed in online markets. Auction data for avatars from the synthetic fantasy world of EverQuest are used here to explore a number of questions, especially those involving the relative value of male and female avatars. In EverQuest, about 20 percent of the avatar population is female, and there are no sex-based differences in avatar capabilities. Many avatars (about one-fourth to one-fifth of the population) are cross-gendered, being piloted by a person of the opposite sex. Nonetheless, relations between avatars are gender-based, and include chivalry, dating, and sex. Female avatars tend to be concentrated in highly sexualized Human and Elven races, with very few being present among such aesthetically-challenged races as Ogres and Trolls. Hedonic analysis of the auction price data suggests that gender labels are a less important determinant of avatar values than the "level," a game-design metric that indicates the overall capabilities of the avatar. Thus, ability seems more important than sex in determining the value of a body. Nonetheless, among comparable avatars, females do sell at a significant price discount. The average avatar price is 333 dollar; the price discount for females is 40 to 55 dollar, depending on methods. The discount may stem from a number of causes, including discrimination in Earth society, the maleness of the EverQuest player base, or differences in well-being related to male and female courtship roles. We do know, however, that these differences cannot be caused by sex-based differences in the abilities of the body, since in the fantasy world of Norrath there are none.
Synthetic Worlds, Internet Auctions Avatar Attributes, Sexual Discrimination
Abstract: The internet has given birth to an expanding number of shared virtual reality spaces, with a collective population well into the millions. These virtual worlds exhibit most of the traits we associate with the Earth world: economic transactions, interpersonal relationships, organic political institutions, and so on. A human being experiences these worlds through an avatar, which is the representation of the self in a given physical medium. Most worlds allow an agent to choose what kind of avatar she or he will inhabit, allowing a person with any kind of Earth body to inhabit a completely different body in the virtual world. The emergence of avatar-mediated living raises both positive and normative questions. This paper explores several choice models involving avatars. Analysis of these models suggests that the emergence of avatar-mediated life may increase aggregate human well-being, while decreasing its cross-sectional variance. These efficiency and equity effects are contingent on the maintenance and protection of certain rights, however, including the right of agents to free movement, unbiased information, and political participation.
Information and Internet Services, Computer Software, Equity, Justice, Inequality
Abstract: Synthetic worlds offer marketers an attractive new hunting ground. This very brief essay discusses the prospects and pitfalls of in-world advertising.
Synthetic worlds, marketing, advertising, internet
Abstract: A corporation is a fantasy, a fictional person created by law and endowed with certain rights and responsibilities. We create these fictional people because we've learned it is useful and sensible to do so. As we enter an age of ubiquitous make-believe systems, it will useful and sensible to create fictional countries in cyberspace, fantasy lands that have certain rights and responsibilities. This paper argues for a law of interration, parallel to the law of incorporation, that instantiates and, more importantly, protects the fantasy environments we create. They need protection because the encroachments of daily life - taxes, regulations, torts - will surely drain them of any sense of Otherness. And without the sense of Otherness, synthetic worlds will have lost a great deal of what makes them precious and valuable to us.
Synthetic worlds, law, play
Abstract: This piece briefly describes the self-enforcing and non-pecuniary resource allocation system used by players in virtual worlds to allocate goods produced by a combination of player effort (the effort required to organize a group and overcome challenges) and the game itself (which "generates the good" - the input here is the time of the design staff). For historical reasons, these systems are commonly called DKP - Dragon Kill Points. The following is an attempt at a fun, not a thorough, discussion of the subject and some of the puzzles it raises.
Dragon Kill Points, Rational Models Seminar, Virtual World, World of Warcraft, Law and Economics, Edward Castronova, Online community
Abstract: This paper describes a basic supply-demand model for real-money trade (RMT) in the goods produced within synthetic economies, and then applies welfare analysis to the external effects of that trade. The trade has emerged to the level of hundreds of millions of dollars in the past few years, mostly because of the rapid growth in the number of users of synthetic worlds. The externality that results is the disruption of ordinary game play for others: when some players use real money to buy game assets, the game itself is damaged in much the same way that the experience of playing Monopoly would be damaged if some players traded properties for real US dollars. Given the current amount of trade, the damages of RMT may be substantial, and the object of the paper is to provide a plausible range of estimates for the damage under reasonable assumptions about the market for synthetic goods and its effect on game-access subscriptions. The intended readership of the paper is a hybrid consisting of economists potentially interested in new markets in cyberspace, and game industry experts interested in the economic analysis of RMT. Since the expertise of these two groups does not overlap very much, the paper contains much material that is at an introductory level for one or the other. The objective is to provide a final analysis and set of estimates that appear to be reasonable to both groups from the standpoint of their respective expertise areas.
Synthetic Economies, RMT, Cost-Benefit Analysis
Abstract: This short article discusses ways that game development and social science can help each other. Games are increasingly social; even single-player titles spawn communities of interest. These communities cannot be ignored and, like all other human communities, they spawn emergent markets and politics that are tough to manage. While these are design problems, they directly replicate policy issues that social scientists have studied for centuries. At the same time, the academic community ought to start taking advantage of the amazing power of games as research tools. Social scientists and game designers have much to gain, and while they are professionally distant now, they should start working together more often.
Game design, research methods
Abstract: Games like EverQuest and Dark Age of Camelot occasionally produce natural experiments in social science: situations that, through no intent of the designer, offer controlled variations on a phenomenon of theoretical interest. This paper examines two examples, both of which involve the theory of coordination games: 1) the location of markets inside EverQuest, and 2) the selection of battlefields inside Dark Age of Camelot. Coordination game theory is quite important to a number of literatures in political science, economics, sociology, and anthropology, but has had very few direct empirical tests because that would require experimental participation by large numbers of people. The paper argues that games, unlike any other social science research technology, provide for both sufficient participation numbers and careful control of experimental conditions. Games are so well-suited to the latter that, in the two cases we examine, the natural experiments that happened were, in fact, perfectly controlled on every relevant factor, without any intention of the designer. This suggests that large games should be thought of as, in effect, social science research tools on the scale of the supercolliders used by physicists: expensive, but extremely fruitful.
Abstract: Imagine we met only in cyberspace. Among the many things that would change are our wages and incomes and wealth. This paper argues that economies in today's synthetic worlds point with some accuracy to a future in which mental constructs dominate physical ones in the calculus of value. In that future economy, the pattern of human material inequality will be radically different. Not only will the body become less important as a predictor of wealth, but the entire income allocation system will change. Indeed, there is some hope that our singular, dominant income allocation system will be replaced by a menu of wildly different systems among which people can choose as they like. Thus there are two reasons to believe that the advent of avatar-mediated commerce will significantly reduce the ages-old tension around income distribution polices. First, sources of inequality that seem patently unfair (height among CEOs) will be removed, and second, people will be able to sort themselves according to their notions of social and economic justice. The Social Question that has bedeviled incomes policy experts since von Schmoller may be about to find its answer: in the avatar.
Synthetic worlds, inequality, social policy
Abstract: We report results of an experiment on prices and demand in a fantasy-based virtual world. A virtual world is a persistent, synthetic, online environment that can be accessed by many users at the same time. Because most virtual worlds are built around a fantasy theme, complete with magic, monsters, and treasure, there is considerable skepticism that human behavior in such environments is in any way "normal". Our world, "Arden", was designed to test whether players in a typical fantasy environment were economically "normal." Specifically, we tested whether fantasy gamers conform to the Law of Demand, which states that increasing the price of a good, all else equal, will reduce the quantity demanded. We created two exactly equivalent worlds, and randomly assigned players to one or the other. The only difference in the two worlds was that the price of a single good, a health potion, was twice as high in the experimental world than in the control. We allowed players (N = 43) to enter and play the environment for a month. We found that players in the experimental condition purchased 43.1 percent fewer of the potions, implying a demand elasticity of -0.431. This finding is well within the range one expects for normal economic agents. We take this as evidence that the Law of Demand holds in fantasy environments, which suggests in turn that fantasy gamers may well be economically normal. If so, it may be worthwhile to conduct controlled economic and social experiments in virtual worlds at greater scales of both population (thousands of users) and time (many months).
virtual worlds, experimental methods
Abstract: Changes in communication technology have allowed for the expansion of data collection modes in survey research. The proliferation of the computer has allowed the creation of web and computer assisted auto-interview data collection modes. Virtual worlds are a new application of computer technology that once again expands the data collection modes by VASI (Virtual Assisted Self Interviewing). The Virtual Data Collection Interface (VDCI) developed at Indiana University in collaboration with the German Socio-Economic Panel Study (SOEP) allows survey researchers access to the population of virtual worlds in fully immersive Heads-up Display (HUD)-based survey instruments. This expansion needs careful consideration for its applicability to the researcher’s question but offers a high level of data integrity and expanded survey availability and automation. Current open questions of the VASI method are an optimal sampling frame and sampling procedures within e. g. a virtual world like Second Life (SL). Further multimodal studies are proposed to aid in evaluating the VDCI and placing it in context of other data collection modes.
Interviewing Mode, PAPI, CAPI, CASI, VASI, VDCI, Second Life
Abstract: Changes in communication technology have allowed for the expansion of data collection modes in survey research. The proliferation of the computer has allowed the creation of web and computer assisted auto-interview data collection modes. Virtual worlds are a new application of computer technology that once again expands the data collection modes by VASI (Virtual Assisted Self Interviewing). The Virtual Data Collection Interface (VDCI) developed at Indiana University in collaboration with the German Socio-Economic Panel Study (SOEP) allows survey researchers access to the population of virtual worlds in fully immersive Heads-up Display (HUD)-based survey instruments. This expansion needs careful consideration for its applicability to the researcher’s question but offers a high level of data integrity and expanded survey availability and automation. Current open questions on the VASI method concern the optimal sampling frame and sampling procedures within a virtual world like Second Life (SL). Further multimodal studies are proposed to aid in evaluating the VDCI and placing it in the context of other data collection modes.
Abstract: Technology has always introduced changes in the way researchers administer surveys. A new technology known as virtual worlds has now emerged that promises to change data collection once again. Virtual worlds are persistent, online, computer-rendered spaces populated by hundreds, thousands, or even millions of people at a time. Previously, this population has only been surveyed in ways that required respondents to exit the virtual world before giving their answers. No survey method has existed whereby they could be surveyed while remaining present in the virtual space. Needless to say, this is less than ideal for any survey about the respondent’s attitudes, perceptions, and behavior within the virtual world itself. This study introduces a method for solving this problem and a tool that allows surveys entirely within a virtual environment. The method is introduced as Virtual Assisted Self Interview (VASI), and the tool for implementing it, the Virtual Data Collection Interface (VDCI). The tool was created and deployed in the virtual world Second Life (SL), where users were asked questions about demographics and quality of life. The valid response numbers for the survey (N=2094) make it the largest in-virtual-world data collection seen so far. This paper discusses the VDCI and describes several different sampling methods, as well as results that provide unique, new insights into virtual world populations. It is found, for example, that the demographic make-up of SL is unlike that of other virtual worlds. Moreover, the SL population is unlike that of other worlds in its approach to gender-switching. The limitations and new hazards of virtual world survey research are also discussed, especially survey "hacking" by individuals hoping to exploit the survey for financial gain. Despite the challenges, the results generally suggest that the VDCI is a valuable new research tool for obtaining representative data on virtual world population.
VASI, VDCI, Second Life, Survey Plan, Fieldwork
Abstract: The next tool for social science experimentation should allow for macro level, generalizable, scientific research. In the past devices such as rat mazes, Petri dishes and supercolliders have been developed when scientists needed new tools to do research. We believe that Virtual Worlds are the modern equivalent to supercolliders for social scientists, and feel they should be the next area to receive significant attention and funding. The advantages provided by virtual worlds research outweigh the costs. Virtual worlds allow for societal level research with no harm to humans, large numbers of experiments and participants, and make long term and panel studies possible. Virtual worlds do have some drawbacks, in that they are expensive and time consuming to build. These obstacles can be overcome, however, by adopting the models of revenue and maintenance practiced by the current game industry. The returns from virtual worlds being used as scientific tools could reach levels that would self fund future research for decades to come. However, at the beginning an investment of funding agencies seems to be necessary.
Virtual Worlds, Macro Level Experiments, Research Infrastructure
Abstract: This paper explores a unique new source of social valuation: a market for bodies. The internet hosts a number of large synthetic worlds which users can visit by piloting a computer-generated body, known as an avatar. Avatars can have an asset value, in that users can spend time to increase their skills; these asset values can be directly observed in online markets. Auction data for avatars from the synthetic fantasy world of EverQuest are used here to explore a number of questions involving the relative value of different body characteristics. Hedonic analysis of the auction price data suggests that the 'level', a game-design metric that indicates the overall functionality or power of the avatar, is by far the most important attribute of the body. Other attributes that show significant price effects include: sex and class (i.e. being a wizard rather than warrior type of character). The male-female price difference is interesting because there are actually no sex-based differences in the abilities of the avatar bodies, by design. Price differences here must be caused by some other aspect of buyer preferences, ones unrelated to power or functionality of the avatar itself.
Abstract: Technology has always introduced changes in the way researchers administer surveys. A new technology known as virtual worlds has now emerged that promises to change data collection once again. Virtual worlds are persistent, online, computer-rendered spaces populated by hundreds, thousands, or even millions of people at a time. Previously, this population has only been surveyed in ways that required respondents to exit the virtual world before giving their answers. No survey method has existed whereby they could be surveyed while remaining present in the virtual space. Needless to say, this is less than ideal for any survey about the respondent’s attitudes, perceptions, and behavior within the virtual world itself. This study introduces a method for solving this problem and a tool that allows surveys entirely within a virtual environment. The method is introduced as Virtual Assisted Self Interview (VASI), and the tool for implementing it, the Virtual Data Collection Interface (VDCI). The tool was created and deployed in the virtual world Second Life (SL), where users were asked questions about demographics and quality of life. The valid response numbers for the survey (N=2094) make it the largest in-virtualworld data collection seen so far. This paper discusses the VDCI and describes several different sampling methods, as well as results that provide unique, new insights into virtual world populations. It is found, for example, that the demographic make-up of SL is unlike that of other virtual worlds. Moreover, the SL population is unlike that of other worlds in its approach to gender-switching. The limitations and new hazards of virtual world survey research are also discussed, especially survey "hacking" by individuals hoping to exploit the survey for financial gain. Despite the challenges, the results generally suggest that the VDCI is a valuable new research tool for obtaining representative data on virtual world population.
Abstract: This paper estimates models of social spending, income risk, and per capita income levels using data from a post-war panel of OECD countries. The objective is to test two theories about the pathway from inequality to per capita income. According to one theory, inequality reduces incomes because it induces social spending, which acts as a drag on the economy. The results here suggest, however, that inequality does not seem to induce social spending, and social spending does not seem to lower per capita incomes. According to a second theory, inequality causes upheaval which adds to the volatility of per capita income, which may reduce the level of per capita income. The results suggest, however, that volatility, measured here as the standard deviation of per capita income, has little measurable impact on either per capita income or social spending. The mainsprings of per capita income are more likely to be the traditional factors: the work force, human capital, and physical capital.
income, inequality, social spending, risk
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