Market Interventions in a Large-Scale Virtual Economy

TL;DR

This study investigates how specific market interventions, like taxes and item sinks, impact virtual economies in an online game, providing insights relevant to real-world economic policies.

Contribution

It offers the first causal analysis of market interventions in a large-scale virtual economy, revealing their effects on trade volume and prices.

Findings

Tax did not significantly change trading volume.

Item sink contributed to luxury good inflation.

Illicit gold trading was unaffected by interventions.

Abstract

Massively multiplayer online role-playing games often contain sophisticated in-game economies. Many important real-world economic phenomena, such as inflation, economic growth, and business cycles, are also present in these virtual economies. One major difference between real-world and virtual economies is the ease and frequency by which a policymaker, in this case, a game developer, can introduce economic shocks. These economic shocks, typically implemented with game updates or signaled through community channels, provide fertile ground to study the effects of economic interventions on markets. In this work, we study the effect of in-game economic market interventions, namely, a transaction tax and an item sink, in Old School RuneScape. Using causal inference methods, we find that the tax did not meaningfully affect the trading volume of items at the tax boundaries and that the item sink contributed to the inflation of luxury good prices, without reducing trade volume. Furthermore, we find evidence that the illicit gold trading market was relatively unaffected by the implemented market interventions. Our findings yield useful insights not only into the effect of market interventions in virtual economies but also for real-world markets.