Abstract
We use a 575,000-subject, 28-day experiment to investigate monetary policy in a virtual setting. The experiment tests the effect of virtual currency endowments on player retention and virtual currency demand. An increase in endowments of a virtual currency should lower the demand for the currency in the short run. However, in the long run, we would expect money demand to rise in response to inflation in the virtual world. We test for this behavior in a virtual field experiment in the football management game Top11. 575,000 players were selected at random and allocated to different “shards” or versions of the world. The shards differed only in terms of the initial money endowment offered to new players. Money demand was observed for 28 days as players used real money to purchase additional virtual currency. The results indicate that player money purchases were significantly higher in the shards where higher endowments were given. This suggests that a positive change in the money supply in a virtual context leads to inflation and increased money demand, and does so much more quickly than in real-world economies. Differences between virtual and real currency behavior will become more interesting as virtual currency becomes a bigger part of the real economy.
Highlights
In recent years the research value of large-scale online environments has become more apparent. [1,2,3] Online communities can contain hundreds of thousands of users for long periods of time
Policymakers will want to remain alert to the possibility that realworld intuitions about money may, in the virtual setting, be false. [4,5,6]
In order to test for the possibility that an increase in the money supply might increase money demand, We report on an experiment in the game Top Eleven
Summary
In recent years the research value of large-scale online environments has become more apparent. [1,2,3] Online communities can contain hundreds of thousands (if not millions) of users for long periods of time. Players can later purchase more game money at a fixed price in terms of real-world currency (with quantity discounts). Companies use a two-currency model: real-world currency is used to buy an in-game virtual currency, Massive virtual money experiment which in turn is used to buy virtual items.
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