Virtual Economics in Azeroth

It seems there is more and more information about economics in MMORPG’s as they become more and more popular. WOW Insider had an interesting musing about the backwards economies prevalent on many World of Warcraft servers.

Let Mike explain what we mean by backwards:

After playing on a number of different servers of varying types, it’s becoming clear to me that, just as there are two very different factions in WoW, there are also two vastly different economies at work, as well: the Horde economy & the Alliance economy. Any Horde player who has decided to roll an Alliance alt immidiately notices one thing upon his first trip to the auction house: things are far more expensive on the Alliance side.

There is no question that there are typically many more Alliance players than horde players. Hence, there is a bigger virtual marketplace. With a bigger marketplace, one would think there would be more competition, and therefore prices should be LOWER on the Alliance side.

The question is: why the big price hikes? Theoretically, since the Alliance population outnumbers the Horde on basically every server, and, therefore, there are more people buying & selling goods on the Alliance side, prices should actually be cheaper in Ironforge than in Orgrimmar. I mean, think about it: if more people are in need of Oily Blackmouth, then more people are going to be fishing for it, more stacks should show up at the auction house, and the competition should drive prices down. Yet, on most servers, at least, the opposite seems to hold true; so much to the point that it’s become the norm. And now, with the growing abundance of eBayed-gold purched with real-world dollars, the issue will likely only get worse, as a player with 1000 gold purchased online probably won’t think twice about spending a gold or two on a single bolt of woolen cloth that he needs to complete a recipe, whereas a newbie player might have to scrounge & save to buy what should be a cheap, commonplace item.

I think Mike hit on the root cause right there. Unfortunately, there are no numbers to support MY conjecture that more Alliance players buy farmed gold than Horde players. This causes inflation, and inherently devalues the currency. Since WoW gold in circulation is not controlled by a Federal Reserve system, a theoretically limitless influx of gold is possible, because gold is spontaneously generated by killing bad guys, or selling looted items to NPC vendors who also have a never-ending supply of spontaneously generating gold. So, rapid infaltion ensues. Again, I have no numbers to verify that more players buy Alliance gold than Horde gold, but the fact that inflation is a much bigger problem on the Alliance side, despite greater competition, would seem to support that hypothesis.

The solution? I don’t know that there is one.

Theoretically, inflation could become so bad, that the exchange rate of US Dollars to WoW Gold would get so bad, it would no longer be profitable to farm. I imagine the game would stop being fun LONG before that happened. I would think that if Blizzard started tracking the players that had the most amount of gold transferred in a given period, that would go a long way towards stemming the inflationary effect of gold farming. This would likely cause some kind of elaborate gold laundering schemes… but such schemes would require more WoW player accounts, which would increase the cost of gold farming. Hence, gold farming could be made to be unprofitable WITHOUT resorting to drastic measures of any kind.

I dunno… I could just play as Horde.