Measuring aggregate production in a virtual economy using log data

Abstract

Virtual worlds typically contain systems of resource allocation, production, and consumption, which are often called virtual economies. The operator of a virtual world clearly has an incentive to monitor the virtual economy, and users and outside observers would benefit from e.g. temporal or cross-economy comparisons. Standard methodology of computing macroeconomic aggregates for virtual economies would allow this kind of analysis, but such method is currently unavailable. This study fills this gap by employing the concepts of national accounting and unique log data from a virtual world. 
 In particular, the focus is on virtual economies where the production of new virtual goods takes place as the users expend inputs to produce predetermined outputs along predetermined production paths. The major MMOGs fall into this category. Previous attempts on measuring the aggregate production of a virtual economy have been based on non-standard method and externally collected data. In virtual economies the operator can collect extensive data automatically, a characteristic feature that should be reflected in any standard accounting scheme.
 Macroeconomic aggregates for a national economy are computed using the UN System of National Accounts (SNA). It is a standard accounting system, and its probably most quoted outcome is the gross domestic product. The most relevant borderline in SNA lies between the national economy and the rest of the world: domestic production is included, whereas foreign production is not.
 SNA cannot be directly used in a virtual economy, as the concepts of “domestic” and “foreign” are not applicable. In this study, the concepts and methods of SNA are transferred to a virtual economy context. The relevant distinction in a virtual economy is made between production by the users and the creation of goods by the virtual world code. Application of the concepts of SNA and flow chart analysis result in an aggregate measure called the Gross User Product (GUP), which measures the value of the aggregate output of production activities – of both goods and services – by the users of a virtual economy.
 In the empirical part of this study, the potential of GUP is demonstrated by measuring it for the virtual economy of EVE Online based on extensive log data collected by the operator. Temporal comparisons are performed after purging the GUP values from the effect of significant deflation using a chained Fischer index. A 50% real growth per user is observed for the first half of the year 2007. The composition of GUP has remained rather stable during this period of significant growth.
 The concept of GUP is general, and it can be used for quantifying virtual economies other than that in EVE Online on the macro level.