Christopher Ryan Armstrong

Different people have different opinions on the effects of botting on the economies of MMOs. Most people are familiar with World of Warcraft (probably due to its 11 million subscribers), so let’s take a look at that. Yesterday (May 20th) hundreds of thousands of accounts were closed by Blizzard due to a new detection update that caught both of the most popular botting utilities, Glider and Inner Space. One of the most interesting things to look at after an event of this magnitude (at least for econ nerds) is the effect on the economy (prices of goods at the auction house) and the real-money value of the in-game currency, gold. First though, we must cover some ground as to what actually happens in a virtual economy.

Botters usually accumulate valuable in-game items which will sell to other players. They trade the items to the other players in exchange for gold, the currency in the economy. They can trade the gold to yet another player in exchange for real-world currency. The problem comes about because there is an endless supply of virtual currency and valuable items in these virtual worlds. As botters hack and slash away at their digital foes all night long, the computer creates more for them to fight. Each of these creatures drops a supply of gold and occasionally a valuable item. In effect, there is a creation of money and value each time a mob is slain. In the real world, money is never created. When the treasury needs to print more money, it slowly injects it into the economy as it destroys the old bills. No extra money is created. When the Federal Reseve wants to stimulate the economy, it buys back Treasury Bonds from citizens and companies. Money is again not created - it just changes hands.

With the constant creation of value in virtual worlds, inflation is inevitable. There is an unlimited supply of valuable items and very few sinks. Sinks are a way for money to be destroyed in an economy. In World of Warcraft, some sinks include mounts and item repairs. These are very effective sinks because they scale as a player levels - a mount is unnecessary at level 1 when it would be way too expensive, but it becomes feasable to purchase as a player levels. Similarly, repairs scale with a character’s level. Virtual economies constantly deal with inflation - dubbed mudflation in virtual economics.

When botters constantly farm gold and items, they contribute to the inflation of the economy. Money is created at a much faster pace than would ordinarily be possible with humans playing the character. Because people have more money, they’re willing to spend more on goods and services. As a result, prices of all goods and services rise. This leads to a demand for more money, which leads to more botters. This again leads to more inflation. It’s a downward spiral that is difficult to stop.

However, botters in WoW also create another good - items. This is very interesting because while more money is being created, there are also many more items being created. The law of supply and demand tells us that a greater supply of items would lead to their average cost lowering. So, what’s the intersection of these two effects? Does the act of botting counter itself?

To be honest, I’m not sure. It’ll be interesting to monitor WoWEcon.com over the coming weeks to see if the price on commonly botted items (Primals mostly) changes. This may tell us what the equilibium price of these goods would be in a market that’s not affected by botters.