Tuesday, November 13, 2007

The Economic Report of EVE

EVE Online (an MMORPG) hired an economist back in June to better understand how their simulated, primarily player driven economy functioned. Dr. Eyj├│lfur Gu├░mundsson, former dean of business and science at the University of Akureyri, is the first economist to be hired in the gaming industry in this regard.

He released his first quarterly report yesterday, enumerating the challenges, advantages, and conclusion of analyzing a digital universe. The focus of the report concerns inflation and offers yet more evidence that the price level is driven by too many dollars chasing too few goods.

Right now, EVE is experiencing deflation despite the fact that the computer is adding more money than it is taking out. New players are currently out-pacing the growth in the money supply--there are more credits (ISK), but many, many more goods. However, inflation can still crop up in the long run if the supply continues to increase and the player growth stagnates.

Inflation in EVE can be a real problem for the company's bottom line. Rising prices make it harder for new players to join the game and could dissuade them from playing. It makes business sense keep the price level steady. In other words, we will likely see more economics PhDs hired in the future by big gaming companies. I wonder if any of them will be someone I know.

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