The Network Virtual Money Supply Based on Profit Maximization of the Online Game Operator

Abstract

The online virtual money is issued by private-owned game operator, with the goal of profit maximization, which makes a significant difference in the money issuance mechanism between virtual money and real money. This paper focused on studying whether the operator, driven by profit maximization, would over-supply the virtual money and cause inflation in virtual world. Two virtual money supply models based on the short-term and long-term profit maximization of the game operator were developed in this paper, and we found that the game operator will not over-supply the virtual money. When the game operator pursues for long-term profit maximization, the optimal virtual money supply will less than that of short-term profit maximization. Motivated by the profit maximization, the game operator will expand virtual money supply with the growth of total online time in the virtual community to avoiding the inflation and maintaining the stability of the virtual economy. Market force will take effect in constraining the behavior of game operator.