GD Column 3: Game Economics

The following was published in the September 2008 issue of Game Developer magazine…

Game design and economics have a spotty history. Designing a fun and functional economy is no easy task as many design assumptions tend to backfire when they come in contact with the player. For example, the early days of Ultima Online were infamous for the game’s wild and chaotic economy. Zachary Booth Simpson wrote a classic analysis of UO in 1999, detailing some of the more notable problems experienced at launch:

  • the crafting system encouraged massive over-production by rewarding players for each item produced
  • this over-production led to hyper-inflation as NPC shopkeepers printed money on demand to buy the worthless items
  • players used vendors as unlimited safety deposit boxes by setting the prices for their own goods far above market value
  • item hoarding by players forced the team to abandon the closed-loop economy as the world began to empty out of goods
  • player cartels (including one from a rival game company!) cornered the market on magical Reagents, preventing average users from casting spells

MMO economies have come a long way since then; World of Warcraft‘s auction house is now a vibrant part of the game’s economy and overall world, with many players spending much of their time “playing the market” to good effect. CCP, developers of EVE Online, even hired an academic economist to analyze the flow of resources and the fluctuation of prices within their game world. Indeed, understanding the potential effect of market forces on gameplay is an important ability for designers to develop.

Can the Market Balance the Game?

Many designers have used economic game mechanics as a tool for balancing their games. For example, in Rise of Nations, every time a unit – such as a Knight or Archer – is purchased, the cost of future units of the same type goes up, simulating the pressure of demand upon price. This design encouraged players to diversify their armed forces, in order to maximize their civilization’s buying power. By allowing the “values” of different paths and options to float during a game, designers present players with a constantly shifting landscape, extending replayability by guaranteeing no perfect path to victory.

However, if taken too far, efforts to auto-balance by tweaking the economy can destroy a game. In 2006, Valve conducted an interesting economic experiment within Counter-Strike: Source, implementing a “Dynamic Weapon Pricing” algorithm. According to the developers, “the prices of weapons and equipment will be updated each week based on the global market demand for each item. As more people purchase a certain weapon, the price for that weapon will rise and other weapons will become less expensive.”

Unfortunately, the overwhelming popularity of certain weapons trumped the ability of the algorithm to balance the game. For example, while the very effective Desert Eagle skyrocketed to $16,000, the less useful Glock flatlined at $1, leading to some extreme edge cases (such as the pictured “Glock bomb”). A game economy is not a real economy; not everything can be balanced simply by altering its price. Gamers just want to have fun, and if the cost of the option considered the most fun is constantly tuned higher and higher until the price becomes prohibitive, players may not just alter their strategy – they may simply go play another game. The current price of gas may be making our real lives “unfun”, but only one real-world economy exists, leaving us no choice. Gamers are not in the same situation.

Ultimately, designers should remember that achieving perfect balance is a dubious goal. Players are not looking for another game like rock/paper/scissors, in which every choice is guaranteed to be valid, essentially encouraging random strategies. Players are motivated by reasons beyond purely economic ones when playing games. Raising the cost of a player’s favorite weapon is simply going to feel like a penalty and should only be done if the imbalance is actually ruining the core game.

Glock Bomb

Putting the Market Inside the Game

Perhaps a more appropriate use of economic dynamics is as a transparent mechanic within the game itself. The board game world provides some great examples of such free market mechanics at work. German-style games Puerto Rico and Vinci both use increasing subsidies to improve the appeal of unpopular roles and technologies, respectively. In the case of the former, every turn no player decides to be the Craftsman, one gold piece is added as a “reward” for choosing that role. As the gold increases slowly, few players will be able to resist such a bounty, which nicely solves the problem of making sure all roles are eventually chosen.

Puerto Rico
still has some clearly better and clearly worse options – they just change from turn to turn based on the current reward. In this case, auto-balancing actually keeps the game fun because players are rewarded for choosing less common strategies, instead of being penalized for sticking to their favorites. Perhaps more importantly, the effects of the market are spelled out clearly for the players ahead of time, so that no one feels the game is biased against them.

Perhaps the most elegant example of a pure free market mechanic based around actual resources and prices can be found in Power Grid, another German-style board game. In this case, players supply their power plants with a variety of resources (oil, coal, uranium, and garbage), all of which are purchased from a central market. Resource pieces are arranged on a linear track of escalating prices. Every turn, X new pieces of each resource are added to the market, and players take Y pieces away as purchases. As the supply goes up and down, the price correspondingly goes up and down, depending on where the next available piece is on the market track.

By making the supply-demand mechanic so explicit and transparent to the players, the market becomes its own battlefield, as much as the hex grid of a wargame might be. By buying up as much coal as possible, one player might drive the price out of the range of the player in the next seat, causing her to be unable to supply all her plants at the end of the turn, a disastrous event in Power Grid. Thus, with a true open market, price can be used as a weapon just as much as an arrow or a sword might be in a military game.

Power Grid

The Benefits of Free Trade

Similarly, a number of modern strategy games, including Sins of a Solar Empire and the Age of Empires series, have included free markets in which players could buy and sell resources, influencing global prices with their actions. These markets serve as interesting “greed tests” in that players are often tempted to sell when they need cash or to buy when they are short on a specific resource, but they know in the back of their minds that each time they use the market, they are potentially giving an advantage to another player. Buy too much wood in Age of Kings, and your opponents can make all the gold they need selling off their excess supply.

Unfortunately, the market dynamics of these games tend to repeat themselves, with prices usually bottoming out once the players’ total production overwhelms their needs. This effect stems from the fact that the game maps emphasize economic fairness – in AoK, each player is guaranteed a decent supply of gold, stone, and wood within a short distance of their starting location. Spreading resources randomly around the map could lead a much more dynamic and interesting market mechanic but at the cost of overall play balance for a game with a core military mechanic. If your opponents attack with horsemen, what if there is no wood with which to build spearmen, the appropriate counter unit?

However, a game with a core economic mechanic does not suffer from such limitations. In most business-based games, specializing in a specific resource is a basic part of the gameplay. Thus, a free market mechanic can become a compelling part of a competitive game. The ultimate example of such a game is the ’80s classic M.U.L.E., in which four players vie for economic dominance on a newly-settled world. Although only four resources exist (food, energy, smithore, and crystite), economies-of-scale encourage players to specialize. More importantly, players can rarely produce all the resources they need on their own, requiring them to buy directly from other players.

The game has a brilliant interface for facilitating this trade between players. Buyers are arranged along the bottom edge of the screen, with sellers on the top. As buyers move up, their asking price goes up accordingly. As sellers descend, their offer price decreases as well. When the two meet in the middle, a transaction occurs. Once again, the mechanic is explicit and transparent – player inventories and market prices are all clearly visible to everyone. Players understand that they either have to adjust their own prices to make a deal happen or hope that their rivals cave. Knowing how desperate another player might be to acquire the energy needed to power his buildings or the food needed to feed his labor, the temptation to pull ever last penny from him is strong. In such a case, prices tend to fall only if the player is afraid someone else might sweep in to reap the profits! The game mechanic mined here by M.U.L.E. is deep and rich. Impoverishing one’s enemies can be just as much fun as destroying them.

15 thoughts on “GD Column 3: Game Economics

  1. Excellent article, my friend.

    I would love to see a little more economic game theory (e.g. Nash) in appropriate games. I will be facing this problem soon in my own simulation-based game where pricing IS a good chunk of the decision space. However, as you pointed out, trapping for all the potential caveats is rough. *sigh*

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  3. Very nice article, but I would like to remark one thing (as an Eve player). It’s true that CCP has spend a lot of time saying everywhere their economy is so complex they have hired an economist to study it, but things aren’t just so simple.

    Some months ago it was discovered that some players were abusing one bug to produce one type of mineral that comes from very limited sources and that nearly 1/3 of all the universe production of that mineral was “bugged”. Given that CCP has the ability to know how much of that mineral could be legally produced (it comes from a fixed number of moons in a fixed amount), it’s a wonder how they and their economist failed to catch this earlier.

    So yes, Eve has an economist, but the utility he is apporting the game remains to be seen… (and it’s going to be interesting to see how CCP and their economist try to stabilize the market on Eve now).

  4. Great read. Some quick comments:

    The real world contains some economically unviable things (as I’m sure we’re all too aware these days). I guess it’s appropriate to place similarly unviable things in a game, except that it might be considered a waste of developer resources (and perhaps player time). That is, why would a player use something that is strictly worse than something else?

    So on that point of scrictly better or worse, there are many tradeoffs that can be used to alter the quality of an in-game item, things like accessibility or timeliness or potential for future improvement/upgrade.

    Speaking of tradeoffs, one of my favorite cost models is Advance Wars, where having a light tank now might be better than having a medium tank in two turns. That is, the real value of a unit isn’t its direct cost, but its situational use.

    The other weird cost example I like is the Age of Empires pikemen vs. knights problem; a knight still beats a pikeman, but not a knight-equivalent-cost number of pikemen.

    Oh, and this discussion reminded me of your post from late 2007:

  5. Would you recommend a recent game with a core economic mechanic? M.U.L.E. is a bit old 🙂

  6. I am currently quite fascinated about how global economy and markets work so I found this article very very interesting.

    However, you mention very little about how in-game economics may be used to encourage the players to diversify in strategies. I wonder if it is possible to study that diversity that is generated inside the game dynamics from an economics point of view, i.e. as another resource to be maximized like profit is in a market. Maybe players work much more like the agents in the theory of a free market, since the can focus on maximizing (fun through achievements) without considering most of the emotional or irrational behaviors that take place in the real world. Somehow the equilibrium of diversity, fun, level of difficulty, etc is an emergent property of the game dynamics.

    It is just something I am thinking right now, maybe it does not make much sense. Do you have any recommendations on related articles?

  7. The economics of a game must follow and submit to the the known economic laws of the real world. We know the law of supply, and the law of demand. It does not matter if they are in a game or not; these laws are simply fact: when private items have value, offer utility, and they have a private cost, a market will provide the most efficient outcome.

    As for how a game market should be setup I believe the guild/crafting system in place in most games is best; with an auction house for the materials and the final product. This allows for the best flow of information between both producers and consumers. The best example I know of this was ffxi. However it also has its problems, items that were player specific jumbled the market every time one was released. But the market was successful and did work. On the weekends demand went up and the price of most finished goods went up.

    What was most interesting about the market in ffxi is how it transitioned. When the game was first developed there were a ton of low players farming for their money. This led to the crafters, the industrialists, making most of the profit on a good. However as the market transitioned and everyone (more people) began crafting the value of production went down, and the profit transitioned into the initial mining, the farming, the initial production of raw goods. As a crafter this sucked for me, but it just meant I had to watch the auction house and crunch the numbers more often (which I actually enjoyed). What finally put the nail in crafting though was a website that listed every production recipe with the current cost of the materials and the price history of the finished good. With this information released all, for example, gold or blacksmithers could simply go down the list and see where the profit was in making an item, there was no number crunching, just reading. The website helped most people Im sure, because they were spending their money on goods that were now lower in price. For me it wasn’t fun though, because half of my fun in the game came from crafting and the auction house.

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  9. One game series I find has a very strong economic model is the ‘Supreme Ruler’ series by BattleGoat Studios. Since it’s an RTS/simulation based on the modern world, I suppose that makes it’s economic model that much more important. The first title, ‘Supreme Ruler 2010’, had a market where players could buy and sell at prices of their own choosing, and if their selling price was too high then the goods would stay ‘on the market’. This created a ‘buyers have to pay more/sellers have to sell for less’ approach to balance supply and demand, but there was an artificial ‘world market’ that could bring in goods from off-map, so the system lacked the ability to be ‘manipulated’ by buyers or sellers.

    The sequel title ‘Supreme Ruler 2020’ simulates the entire world at once, so the commodity system is closed. If most of the Uranium or Oil exporters turn off the pumps, then the availability of those commodities becomes limited and the prices go through the roof. This version uses more of a central ‘futures market’ approach (meaning that each day has a set buy/sell price that changes according to market conditions), though players can buypass the markets and make deals with individual countries directly. The whole system works great and is really cool to play on. Since the game has 11 commodities and there are some subtle commodity relationships, it adds a whole new element. (For example, electricity can be produced by hydro dams, or oil fired power plants, or nuclear plants using uranium, etc. Finished good like Consumer goods require a number of raw material inputs, but they allow producers to make a profit selling those goods if the markets are strong for them, etc).

    I think these games get the closest to ‘real world’ economics of anything I’ve seen.

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  11. The game Atlantica Online is young enough to have an emerging economy – with people still working out the best strategies. It has a couple of interesting features – fixed prices (the game will sell the players an unlimited quantity of items at a fixed price) and boxes (a random amount of a material from a known list is generated). The crafting system seems fairly standard, but there is no specific resource generation.

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  13. This is indeed an interesting summary of the role of the economic system in video games historically, and thank you for writing and publishing it. 🙂

    To add to the EVE comment above, it’s interesting that what you describe in terms of resource allocation across the world-space is exactly what drives much of the gameplay in EVE. According to Dr. Gundmunsson they deliberately distributed resources needed for various crafting systems across the world, such that the creation of X specific item requires resources from vastly separated regions of the galaxy — stimulating trade.

    What Vicente’s point above illustrates is the need for a strong metrics system (a technology tool) in conjunction with the steady economics hand on the design wheel.

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