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Despite primarily dealing with in-game currencies, this term also encompasses the selling of virtual currency for real money. The largest virtual economies are found in MMORPGs. Virtual economies also exist in life simulation games which may have taken the most radical steps toward linking a virtual economy with the real world. Virtual property is a label that can refer to any resource that is controlled by the powers-that-be, including virtual objects, avatars, or user accounts.
The following characteristics may be found in virtual resources in mimicry of tangible property. Rivalry: Possession of a resource is limited to one person or a small number of persons within the virtual world’s game mechanics. Persistence: Virtual resources persist across user sessions. In some cases, the resource exists for public view even when its owner is not logged into the virtual world. Interconnectivity: Resources may affect or be affected by other people and other objects. The value of a resource varies according to a person’s ability to use it for creating or experiencing some effect.
Secondary markets: Virtual resources may be created, traded, bought, and sold. Value added by users: Users may enhance the value of virtual resources by customizing and improving upon the resource. The existence of these conditions create an economic system with properties similar to those seen in contemporary economies. Therefore, economic theory can often be used to study these virtual worlds. Within the virtual worlds they inhabit, synthetic economies allow in-game items to be priced according to supply and demand rather than by the developer’s estimate of the item’s utility. These emergent economies are considered by most players to be an asset of the game, giving an extra dimension of reality to play.
In classical synthetic economies, these goods were charged only for in-game currencies. The release of Blizzard Entertainment’s World of Warcraft in 2004 and its subsequent huge success across the globe has forced both MMORPGs and their secondary markets into mainstream consciousness, and many new market places have opened up during this time. Hundreds of companies are enormously successful in this new found market, with some virtual items being sold for hundreds or even thousands of dollars. Some of these companies sell multiple virtual goods for multiple games, and others sell services for single games. Although virtual markets may represent a growth area, it is unclear to what extent they can scale to supporting large numbers of businesses, due to the inherent substitutability of goods on these markets plus the lack of factors such as location to dispense demand.
The global secondary market – defined as real money trading between players – turnover was estimated at 880 million dollars in 2005 by the president of the, at the time, market leading company IGE. However, the secondary market is unlikely to have followed the growth of the primary market since 2007 seeing as game companies have become better at monetizing on their games with microtransactions and many popular games such as World of Warcraft are sporting increased measures against player to player real money trading. As for an actual economic model, secondary market turnover in popular player vs player oriented MMORPGs without trade restrictions such as Runescape, EVE Online and Ultima Online has been estimated at around 1. 1 dollar per concurrent player and day. An example of a much more controlled market is World of Tanks’ “gold”, a virtual currency which is only available from the vendor itself and typically only for cash payment. This has become a model for other freemium games.
They can gift gold to each other but cannot solicit or ask for it. Gold sharing among game guilds is common and encouraged, but not among players who don’t know each other for specific benefits. Information brokerages and other tools that aid in the valuation of virtual items on secondary markets have increased in number. This has occurred as a response to alleviate the labor involved in leveling that requires hours, days or weeks to achieve.
Being able to exchange real money for virtual currency provides the player purchasing power for virtual commodities. Most scholars agree that the sale of virtual property for real currency or assets is taxable. In addition to taxing income from transactions involving real currency or assets, there has been considerable discussion involving the taxation of transactions that take place entirely within a virtual economy. Theoretically, virtual world transactions could be treated as a form of barter, thus generating taxable income. Conversion between in-game and real-world currency has led to direct comparisons with other online games of chance as ‘virtual winnings’. This is why gamers and companies engaged in this conversion, where it is permitted by a game, may fall under gambling legislation. When queried about games where real-world transactions for in-game assets are not permitted, but there is an ‘unofficial secondary market’, Chapman responded: “Ultimately the point is whether the thing that you win has value in money or money’s worth.
If it does have value, it could be gambling. Monetary issues can give a virtual world problems similar to those in the real world. In South Korea, where the number of video game players is massive, some have reported the emergence of gangs and mafia, where powerful players would threaten beginners to give money for their “protection”, and actually steal and rob. Other similar problems arise in other virtual economies. In the game The Sims Online, a 17-year-old boy going by the in-game name “Evangeline” was discovered to have built a cyber-brothel, where customers would pay sim-money for minutes of cybersex. This heist left investors feeling outraged and vulnerable. In EVE Online however, theft and scamming other players is perfectly allowed within the game’s framework as long as no real world trading is committed.