Gameworld:Virtual economies in video games used as case studies

As more people join massively multiplayer online (MMO) video game worlds like Activision Blizzard's (ATVI.O) "World of Warcraft," NCsoft's (036570.KS) "Aion" and Atari's (ATAR.PA)"Champions Online," real money is being used to purchase virtual items through micro-transactions.

As a result, game worlds are creating virtual economies.

With the global recession impacting consumer spending -- and the sales of video games -- a research group is using Sony Online Entertainment's (6758.T) "EverQuest II" as a case study to explore how virtual economies mirror real-world economies.

Researcher Edward Castronova, professor of telecommunications at Indiana University, said researchers can learn almost anything about human society in games as they really are human societies.

However unlike real society they can be observed and tweaked.

"We can do controlled experiments in virtual worlds, but we can't do that in reality," said Castronova.

"Controlled experimentation is the very best way to learn about cause and effect. We are on the verge of developing that capacity for human society as a whole."

Researchers found the average age of "EverQuest II" players is 31 compared to 35 for the general population. Eighty percent of players are male versus 50 percent for the general population and they skew more white than the overall population.

"Everquest II" players are also wealthier than the general population with an average mean household income of $84,000 versus $57,000 for the general population.

After studying 314 million transactions within the fantasy world of Norrath in "EverQuest II," including trading in-game goods like armor, shields, leather, herbs and food, the researchers were able to calculate the GDP of one of the game servers (the back-end computer that hosts thousands of players in one world).

As more people opened accounts and flocked to Norrath, spending money on new items, researchers saw inflation spike more than 50 percent in five months.

Fellow researcher Dmitri Williams, assistant professor at the USC Annenberg School for Communication, said the rapid economic changes may not be due to the economy being virtual but as it has volatile elements.

"We have seen that kind of volatility during times of war and in developing nations in the real world," said Williams. "Our own economy has turned out to be less stable than we'd all assumed."

The real-world recession has also sparked a rise in the number of gamers going to free-to-play MMO games like Nexon's "Maple Story," NHN Games' "Soldier Front," and Sony Online Entertainment's "Free Realms."

Rather than charging players to buy the game and pay a subscription, revenue is generated through the purchase of in-game items.

"I think as the economy has experienced its ups and downs, we're seeing business models reflect those changes giving people more choices, and that's a good thing," said John Smedley, president of Sony Online Entertainment.

"We've gone from box-only products with free play components to monthly subscription models, and now we're seeing an evolution to hybrid models that are very similar to the great number of choices seen in the music industry."

(Editing by Belinda Goldsmith)