Understanding "Gold Farming" and Real-Money Trading as the Intersection of Real and Virtual Economies

Abstract

This paper has three purposes. First, it extends the range of economic ideas that have been applied to massively-multiplayer online games (MMOGs), drawing on scale economies, exchange rates, and information failure. It does this, as its second purpose, by deepening the analysis of one relatively-neglected aspect of virtual economies—gold farming (the production of MMOG virtual currencies, items, and services for financial gain) and trading—in order to understand in-game, out-game, and hybrid aspects of this activity. Third, the paper draws conclusions about two key real/virtual issues on which earlier literature has disagreed. One is the extent to which standard/real-world economic models are applicable to virtual economies. The paper argues a strong fit of standard models for analysis of gold farming and trading with little need for modification, but that MMOGs may be better understood through the lens of development economics rather than mainstream economics. The other issue discussed is the nature of the relation between the realand the virtual. On this, the paper concludes that gold farming is part of a dynamic that has eroded the real/virtual dichotomy. At the least, gold farming and trading represents the intersection and blurring of the real and the virtual. At most, it reflects their indistinguishability. Finally, the paper ends by identifying alternative systemic models for understanding gold farming specifically, and MMOGs more generally.