Sanctioned RMT in WoW - Blizzard's new vanity pets

This just in from Blizzard: Players will soon be able to purchase a Bind on Equip companion pet for $10. In the FAQ, the company specifically states that

[W]e’re ok with it if some players choose to use the Guardian Cub as a safe and secure way to try to acquire a little extra in-game gold without turning to third-party gold-selling services.

Blizzard has been offering mounts and companions for real-world cash for some time now, and entrepreneurial players have found some clever ways of turning real-world money into gold by gifting virtual items and game time to one another. This is the first time, however, that the company has explicitly sanctioned the trade of real-world money for in-game gold.

In years past, the argument against RMT has come down to its effects on the virtual economy and the violation of the now-out-of-vogue magic circle. Blizzard certainly appears confident that the former will not be an issue. At first glance, that analysis seems correct. But let's consider the consequences of the change.

  1. Presumably, those who sell the pets will be cash-rich and time-poor. They plan on spending the money they earn through the sale of pets.
  2. Presumably, those who buy the pets are cash-poor and time-rich: They have gold to spare that sits in their characters' wallets and does nothing.
  3. As a consequence, potentially millions of gold pieces will go from being low-power to high-power money.

The increase in the effective money supply could be enormous, and with that you will see a large but temporary rise in the price level. All that gold will eventually settle back down again in someone's wallet, reducing the money supply, so this alone can not cause inflation. If Blizzard started to regularly release tradeable virtual goods, then the money supply change could become permanent. It would give Blizzard a new and incredibly powerful tool to increase the money-supply, what is effectively control over reserves. However, Blizzard could have a very hard time getting that money to settle back down again without stopping the sale of these items. This would mean a permanent increase in the price level.

That means all the money sinks would have to get bigger and/or all the money faucets would have to get stingier. The end result: Players will end up paying a relatively higher price for goods than they did before pets could be traded. The countervailing effect of this change is that prices of all the goods and services sold will go up, so if you're  a net supplier to the market, you stand to come out ok. However, individuals who do not do much selling are prone to suffer a permanent decrease in welfare (fun?) as a result of the change. They will face increased prices for money sinks like mounts and/or smaller loot drops.

I've yet to ascertain the extent to which players engage in buying and selling on the auction house (an upcoming post on this is in the offing), so the total welfare effect is anyone's guess. There is, however, one very important indirect effect. If I can get gold by selling pets, then I won't buy gold from third-party suppliers, and that could substantially reduce the profits of companies that engage in account theft to acquire gold. Its clear that the expected result from this change for Blizzard is a permanent increase in revenues and a permanent drop in costs. We can expect to see a lot more of these virtual goods for sale in the future.

As a final note, let's come back to those reserves I was talking about. Blizzard has tapped into a part of its game's economy that no player has been able to effectively exploit: the low-power money sitting in people's accounts that, in the real-world, people would instead use to make loans to one another. Think of the millions of player-hours that have gone into building up those surpluses! Blizzard is getting all that money into the hands of players who will use it, and is taking a little off the top by serving as a clearinghouse for the transactions. The lines separating game economic policies from real-world finance are getting fuzzier and fuzzier.

 

Sanctioned RMT in WoW - Blizzard's new vanity pets by Isaac Knowles, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.

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