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Why inflation really happens
Quizzical
Member LegendaryPosts: 25,509
A colloquial definition of inflation is too much gold chasing too few goods. That causes prices to be bid up, and hence you get inflation.
Some people blame this on too few things to buy with the gold, or perhaps too few gold sinks. Have the same amount of gold chasing a lot more goods and the price per good doesn't go so high. There are some cases where this claim has some merit, but usually it's simply wrong.
Those who blame the "too much gold" side of the equation often think of gold farmers who sell in-game gold for real-life money. Or maybe they think players are spending too much time farming, perhaps because the game encourages it. They're simply wrong, and very rarely do either of those claims have any merit. Farming may make the equilibrium price higher than it would otherwise be, but that doesn't cause prices to rise as time passes, which is the definition of inflation.
So what is the source of inflation? Here's a simple way to demonstrate it for yourself. Pick your favorite game that has an inflation problem. Go kill some level 10ish mobs for a while, to get some gauge on how much a typical level 10 mob drops. Next, go kill some level 20 mobs for a while, to see about how much they typically drop. Repeat with level 30 mobs, then level 40.
See a pattern? You probably don't have to actually run the experiment to recognize what the pattern will be. Higher level mobs drop better loot. And usually it's not just slightly better loot, either.
So how does this cause inflation? Players who just finished character creation are level 1. At the start, everyone has to fight low level mobs, so they get loot slowly. Maybe a few people who have no life hit the level cap within three days, but they're not the norm. A month past launch, most players are still pretty low level. But as time passes, the average player gets higher level. Thus, as time passes, the average player puts gold into the system at a faster and faster rate. Hence, inflation.
And then there is new content. If an expansion raises the level cap, then the reasons why this causes inflation are pretty obvious. It seems to be accepted in most of the industry that new content should give better loot than old content. This seems to be designed to induce players to do the new content. If the new content gave worse loot than the old, then loot-seeking players would ignore it, which defeats the point of the content.
Even games such as Guild Wars that never do increase the cap are likely to suffer from this. Eye of the North gets you gold faster than Nightfall, which is faster than Factions, which is faster than Prophecies. All of those are by an enormous margin, too. Which is disappointing, as on the merits of the quality of the content (ignoring loot), Eye of the North is by far the worst, but ArenaNet pushes players to focus on that to get the best loot.
So again, the as time passes, the average player acquires gold at a faster and faster rate. Even if it were to top out at some point based on the release content, later updates increase the gold farming rate cap a lot, and you still get inflation.
Observe that farming has nothing to do with this analysis. Maybe if you could somehow eliminate all farming entirely, an average player would only create gold half as fast. Of course, this might also mean that goods get created at a slower rate, too, so less gold chasing fewer goods doesn't necessarily make prices uniformly higher or lower. But it wouldn't prevent inflation, nor even change the rate of inflation.
Some people will see this and think that the solution is to make more gold sinks. That is, make more things for high level players to buy. Surely more gold chasing more goods can balance prices out, right? And who doesn't want more goods?
The problem is that the rate of gold increase is simply too fast for new goods to keep up for very long. If the rate of gold generation per player doubles every year, then how do you make twice as many goods useful to players every year? Double the number of armor slots every year? Anything that you might propose is self-evidently absurd to anyone who understands exponential growth.
And even that would do nothing to stop twinks. A really great level 20 item can simultaneously be too expensive for a newbie on his first level 20 character, yet cost only a nominal sum to a player whose main is at the level cap. How do you propose putting so much important stuff that his level cap character needs that it isn't worth spending a nominal sum to twink his alt?
In order to credibly fight inflation, you'd have to make it so that the rate at which players can farm stuff never does increase very much. For starters, high level mobs can't give much better loot than low level mobs. Furthermore, new content can't give much better loot than old content.
Spiral Knights essentially does both of these. But in the process, it illustrates why most games simply choose to have runaway inflation instead.
First, if high level mobs don't drop any better loot than low level mobs, why not just farm low level mobs? You can kill them a lot faster, so the way to farm is then to get high level yourself, while farming low level mobs. You can partially counter this by making higher level players scale down to the content, and Spiral Knights does exactly this. But that doesn't fix the problem unless higher level content isn't harder than lower level content while you're the appropriate level for the content. In Spiral Knights, that would largely defeat the point of the game.
You can also make higher level content give better loot than lower level content, but just not that much better. Spiral Knights also does this. But for players not good enough to solo tier 3 (which is most players), soloing tier 1 sometimes still gives better loot than grouping for tier 3. And even that assumes that you're good enough to clear tier 3 in a group, which you likely aren't if you can't solo it. So quite a few high level players (loosely, players with gear with higher star ratings) do farm the low level content endlessly. That makes the game boring and grindy for them.
There's also the question of how long it takes to catch up. If getting through the low level content doesn't get faster as time progresses, players may be dissuaded from picking up the game at all. More than a few players shy away from EVE upon learning that you can never catch up in skills to players who merely started the game a few years before you did. (I'm not passing judgment on the "more skills but not better skills" argument; I'm merely saying it deters some potential new players.)
Hyperinflation greatly reduces barriers to new players entering the game. If you know that it will take you two years to catch up to where players who have spent the last two years in the game are today, by which time, they'll be far beyond where they are now, maybe you shy away from playing the game. If the hyperinflation caused by an expansion lets you get past where they are now in under a month, then it's not nearly the same deterrent.
This is why most MMORPG game designers conclude that hyperinflation is a lesser evil than doing what it would take to clamp down on it. This is especially so if a game doesn't have much of an economy anyway, so that not much is lost if a game is plagued by hyperinflation.
Comments
Quiz, why did you make this thread?
After reading your post it felt like started reading in the middle of the book.
Ha, I like it. He can start a series of posts each evening educating the masses on basic economic principles and MMOs. Maybe have some celebrity writers on occassion, bring in an economist, etc. Better than another thread that says: "GW2 rules. No it sucks. No it rules. Ok then, SWTOR sucks. Nuh uh. Yup. Etc"
GW2 "built from the ground up with microtransactions in mind"
1) Cash->Gems->Gold->Influence->WvWvWBoosts = PAY2WIN
2) Mystic Chests = Crass in-game cash shop advertisements
Er, the real reason inflation is more apparent during expansions is everyone comes back on their characters who are over-farmed with gold and is suddenly willing to pay exhorbent fees again to keep ahead (a sudden increase in demand after a period of virtually zero demand.)
But apart from that oversight, yes, obviously inflation occurs when the rate of supply increases faster than the rate of demand. You can tweak either side of the equation to fix things, and the rate at which higher level mobs provide more wealth is only one of many potential ways to keep things even.
It's perfectly workable to let the rate increase, however, as long as the need for gold rises to match.
Although honestly I never felt that inflation was an issue in any of the MMORPGs I've played. I never thought "Man this game was fun, but now I have too much money!", because I was either fixated on some other character need ("Man I need to beat that raid boss", "Man I need to earn this reputation", "Man I need to earn AA") or I was done with the game before I'd farmed enough.
Honestly I'm a little hard-pressed to understand why inflation is bad in games. The real-world situation I've seen most frequently in games is that the gold economy inflates but the gold expenditures remain static, meaning what used to be a 30 minute farming spree to recoup death fees now only takes 5 minutes because players will spend more money on the items I can sell on the market.
Unless there's a good reason we should keep forcing ourselves to kill monsters for the actual gold drops, I'm just not seeing a problem. I'd rather transition to those other resource problems (boss drops, reputations, AA, etc) once my character ages than to continually worry about gold because the economy is tightly tuned.
Hyperinflation has only helped my isolated WOW characters who immediately become rich by selling resources on the market where prices are inflated, which lets me easily afford any of the static uninflated AI vendor prices, and in general has also given me access to great AH gear too.
"What is truly revealing is his implication that believing something to be true is the same as it being true. [continue]" -John Oliver
Let me begin by saying that I always enjoy reading your posts Quizzical as they are consistently well thought out.
My opinion is that having an economy which avoids hyperinflation opens up the possibility for additional forms of gameplay. That being said. I believe inflation can be entirely prevented within a game if the proper mechanics are introduced.
This is how I would build an economy.
Player crafted goods make up the majority or entirety of items outside of raw materials. Player made goods require destroying a certain amount of game currency during creation in addition to raw material consumption
Items must degrade requiring the destruction of both currency and raw materials in the process of repairing or replacing items.
Player vs Player must exist allowing anyone to take another players currency and goods (I would say all non-soulbound items must be capable of being looted). This creates a self policing community against farmers. If you see a bot or crappily geared farmer you can simply kill it/them and receive instant rewards.
Economies should be localized with no auction houses. Allow players to set up shops. Force the transportation of goods at some risk between markets allowing for the possibility of great financial rewards at great risk.
Fast travel only allows the player to transport soulbound items with them. Additionally a large percentage of the currency the player is carrying must be destroyed in the process of teleportation (30-50%). This effectively prevents players from circumventing the transportation of goods from market to market.
All areas within a game should be level capped with equipment scaling. This prevents high level players from preying on those of much lower level. High level equipment scaled down would still be better but only marginally. The benefit of having equipment which far out paces your current content would come at the price of high repair costs. Twinking is fine if you have the money to support it.
Regarding new content being added. I don't see a need to allow the greatly increased loot drops. The new content itself should be incentive enough to encourage players to use it. Greater rewards are not necessary and in fact is detrimental to the rest of the game.
There are probably a few more things I would like to add to this but I have to shower and head off to work. Please feel free to critique my idea of an economy.
I like it, Bandit OnlineI would argue that inflation is in fact a negative - it makes it more difficult for new players to buy equipment and supplies off the Auction House, as they don't have sufficient money from their limited farming to afford anything. It also drives players into the arms of the gold farmers - if the Auction House price for that perfect item is ridiculously huge, the gold farmers are pretty much the only place to go to get the cash for it.
As you noted, inflation is partially a money creation problem - players are able to make money relatively quickly at high levels. But it is also a money destruction problem. At high levels, what things are players spending money on where it permanently leaves the system? The gold faucet is running at full volume, but where are the gold sinks?
The first would be repairs - but many hgh-level players have kiting or ranged attack strategies that minimize the need for repairs. Consumables are another potential gold sink - but many game designers are trying to move away from use of consumables, and most high-level consumables in games now are dropped or crafted, not purchased from vendors. That leaves mounts and inventory space - but what happens when a player has all the mounts or inventory space that he wants? The gold just piles up, and inflation sets in.
To really get inflation under control, game designers are going to have to get serious about gold sinks - and more mounts isn't going to cut it, as many players get one high-level mount and call it good. Repairs should be relatively expensive, and I would suggest adding consumables that are specific to ranged attackers - e.g., ammunition and mana potions. Yes, these things are hated by many players, but they make for a sensible constraint that keeps costs for melee classes and ranged classes in line (one constant irritation of playing a tank is that your repairs are ten times what they are for the sit-back-and-throw-fireballs mages).
Diablo 2 had a very good idea for a gold sink: a gambling merchant, where you could take a chance on getting a random item. Too bad the random items really stunk, and players could get much better from drops. But that actually would be one way to really bring inflation down: have a place where players can spend a fixed amount of money to get a specific chance at a reasonably good item of equipment, or a useful consumable.
Some great direct data about inflation/deflation in an MMO is in the first Quarterrly Economic Newlsletter that CCP had released. Here's a link to the PDF: http://cdn1.eveonline.com/community/QEN/QEN_Q3-2007.pdf
The section on Inflation starts on Page 9 and gives some insight into some of the things that cause the price changes and how to combat that.
As a fan of rich virtual world economies, I'm really enjoying this thread. Thanks, Quizzical, for starting this one!
There isn't a "right" or "wrong" way to play, if you want to use a screwdriver to put nails into wood, have at it, simply don't complain when the guy next to you with the hammer is doing it much better and easier. - Allein
"Graphics are often supplied by Engines that (some) MMORPG's are built in" - Spuffyre
The real problem is that the money comes out from nowhere. If you had some kind of closed system, so the money would come from someone you wouldn´t have inflation (but probably other issues).
To make a game with almost no inflation you would have to make a game that simulates a real economy (in a fantasy MMO based on some historical system).
Money does not grow on trees and most MMOs kinda works like the Spannish economy did in the 16th century. They suddenly got so much gold from south America that it more or less colapsed.
But when NPCs also suddenly needs to get profits and even mobs would have to get their gold from something we are talking about a lot of hard work to make a system like that really work. You would probably need a real economist to help you out with that.
Levels of course doesn´t really help but it would still not work without them, UO had inflation as well.
The subject is very interesting though.
lol. I had a billion ISK when I quit, which was right around when this newsletter was released. I had no idea I was rich... I guess all that Hulk mining/Mission Running paid off...
Great post. I agree with it as well except for one small detail. In the end its the players themselves that cause the inflation. They do it for all the reasons you said but its still thier own damn fault. Myself for example. If I am rolling an alt and find that super uber level 20 drop and I dont plan on using it will put it on the AH at a reasonable price for a low level player. My hopes are that someone who is just starting will find it. Or in say WOWs case I hope that someone poor finds it. Granted thats hardly ever the case but I still made money and someone else is happy (even if they resell it). Well in my case I only sell stuff that no one in my guild needs but thats not the point. The biggest problem is there arent many people out there like me. Not many people will look at an item and say "well for someone that level to afford it, it would need to be 20g." So I would post it at 20g instead of the 300g everyone else is asking. Then again I never buy from the AH unless its crafting goods that I'm to lazy to go farm myself. So I dont need to play the market like others do just to keep my funds going.
Again, I totally agree with Quiz. I just think the only people who could do something about it is the players themself.
Hyper inflation will exist in any economic system where supply of money vastly outweighs demand for goods...
In the current themepark quest driven fantasy funland, there is no reason to spend your gold except for dev contrived money syncs and the occassional gear altering item (enchants, sockets, whatever.) If all your amazing epic gear, or even better then average levelling gear, comes from quests and drops, then there is no reason to craft armor. If there is no reason to craft armor, then there is no reason to buy/sell crafting materials. This alone will cause inflation because suddenly people are only spending gold on other things like enchants or food or potions.
Also, new players enter the inflation market with the same rate as any other level capped player, because the inflation is across every level of gear. Since greens and blues have a good chance of dropping off ANY level mob while you level, you can sell the greens/blues you don't need at an inflated price, and buy the 1 or 2 upgrades you do need at the inflated price while you level. Levelling any alt in the current themepark wonderland will reveal this to you. By the time you reach level cap, your alt will very likely be MORE rich then your main was when he hit level cap.... (unless you throw away all your random drops, and continue to foolishly spend money on gear that can be gotten from quests.)
Unless your playing a market sim, or Eve Online, inflation in an AH system can be anything. On one particular item it could be +100% one day, and -75% the next because there is no market history except through AH addons. AH systems are extremely vulnerable to super rich manipulators who can buy the entire supply of an item and resell it at his own price.
If something is selling at a more expensive price, and selling consistantly, then that's the new price. A player might be more tight with their money if they didn't get 3000 gold just doing quests, and then level another alt and get 3000 more gold...
This doesn't even take into account all the ways you can get rich running people through arena's and raids, selling vanity crap, and farming the one or two valuable crafting material items....
Taru-Gallante-Blood elf-Elysean-Kelari-Crime Fighting-Imperial Agent
Wow that seems awesome topics this one sucks, others ones rules:P
Hope to build full AMD system RYZEN/VEGA/AM4!!!
MB:Asus V De Luxe z77
CPU:Intell Icore7 3770k
GPU: AMD Fury X(waiting for BIG VEGA 10 or 11 HBM2?(bit unclear now))
MEMORY:Corsair PLAT.DDR3 1866MHZ 16GB
PSU:Corsair AX1200i
OS:Windows 10 64bit
What is your basis for number 4? I definitely agree with localization, but no AH?
My thoughts on auction houses...
Auction houses make it entirely too easy to abuse a given market provided you have enough capital. A single location to buy and sell everything allows individuals to corner the market for a given item easily especially when a local market inherently has less quantity associated with it.
The existence of an auction house eliminates the possibility of having player run shops or carts to hawk their goods. It snuffs out a potentially thrilling form of gameplay.
It is completely impersonal as you do not have to interact with people or even care who is selling what. All you need to know is that the item is going to be showing up in your mailbox. Many people complain about lack of community and this only contributes to it.
Some people simply love negotiating prices on things. Thats part of why PawnStars and other similar shows are intriguing to watch.
It shrinks the city/town considerably if there is one place to buy and sell goods. Anything not located next to the AH becomes a hassle to travel to or visit even within a city.
I am sure others can probably elaborate even more on the detriments of an AH.
Most of your argument doesn't make sense to me, Quiz. You're using the term "better loot" as though it's synonymous with "more money". It doesn't matter if a new expansion comes out which has greens that put existing purples to shame. What matters is how much those greens sell for to a vendor. The only thing that matters is the currency.
Better loot could be more gold directly. It could also be vendor trash items that sell for more to an NPC vendor. The impact on the game economy is about the same either way. If the difference were better items that only have value to other players, and NPC vendors won't accept, then the analysis would get more complicated, but the end result would be about the same. But that's pretty unusual.
-----
The purpose of the original post of this thread was not to be a normative "this is what games should do". Rather, it was meant to be an explanatory, "this is why common game mechanics result in hyperinflation", and also, "this is why game developers commonly choose those game mechanics, even though they will result in hyperinflation".
1) The problem thereisn't the auction house but having globabl access to it. Regional auction houses fix that.
2) You can still have player/guild based alternatives in addition to an auction house. Contracts, buy orders, exchange agreements and loans can all be incorporated into gameplay in an auction-centric market, as well.
3) Those limitations can be bypassed by adding extra features to the auction house such as blacklists, discount lists, guild/clan buyout specials, etc. It can also be accomplished through the options mentioned in point 2.
4) See 2
5) See 1
There isn't a "right" or "wrong" way to play, if you want to use a screwdriver to put nails into wood, have at it, simply don't complain when the guy next to you with the hammer is doing it much better and easier. - Allein
"Graphics are often supplied by Engines that (some) MMORPG's are built in" - Spuffyre
Ah, I missed that bit on first read...
Totally agree. You can't catch up to older players in terms of gold, and therefore gear, if the price of X materials/green drops was the same since launch.
That being said, there are other factors that allow players to catch up to older players besides hyper inflation. Making old money sinks cheaper, quest design, and class changes can also have an effect on how quickly one progresses to catch up.
EDIT: Personally I think some developers don't even care about the economies in their game's anymore.
Taru-Gallante-Blood elf-Elysean-Kelari-Crime Fighting-Imperial Agent
A much simpler solution is to make resources and crafted items of lower level players useful to veteran players. The caveat there is that the world needs to be designed such that a) thelow level players can get their goods and gathered material to where the vets are and b) that the vets have access to them without having to travel back toand encroach on the low level player area.
There isn't a "right" or "wrong" way to play, if you want to use a screwdriver to put nails into wood, have at it, simply don't complain when the guy next to you with the hammer is doing it much better and easier. - Allein
"Graphics are often supplied by Engines that (some) MMORPG's are built in" - Spuffyre
I'd really like to meet the guy that came up with VT/Junk Loot and ask him whether he meant it as a lazy way out or if there was some greater purpose to it. having started MMOs with UO and AC, I always found junk loot to be both annoying and a complete insult.
There isn't a "right" or "wrong" way to play, if you want to use a screwdriver to put nails into wood, have at it, simply don't complain when the guy next to you with the hammer is doing it much better and easier. - Allein
"Graphics are often supplied by Engines that (some) MMORPG's are built in" - Spuffyre
Loot based games
That's true. But the only companies I've seen really do that is SE and CCP with their materials. (I haven't played EQ, SWG, UO if those games also had that system)
Developer's that really go "all out" in the crafting department are a rare breed.
Taru-Gallante-Blood elf-Elysean-Kelari-Crime Fighting-Imperial Agent
He replied a few times in a thread I made and touched on inflation. It was probably the influence for this thread.
http://www.mmorpg.com/discussion2.cfm/thread/343405/page/1.
I agree almost entirely with your opinion on inflation. A good example, because most people are familiar with it, is Warcraft where the first mobs drop 1-10 copper (1 copper is 1/10,000 of 1 gold) and yet at level 80, the grey trash that is meant entirely to be NPC'd sells each for more than 1.5 gold, and that trash stacks. Grey weapons sold for like 5 gold. Epic weapons sold for as much as 30 gold--coupled, of course, with the gold and other items that the mobs dropped. Just examples, I know we all hate WoW.
I tried, a time or two, to create new characters on WoW and not feed it any gold and found, before Cataclysm, that I couldn't afford a mount by the time I got to that level and definitely didn't have a budget for AH greens if I wanted to keep up with training and saving for my mount. So I logged to my main, shipped it 2000 gold (for everything it would need) and was done with it. Gold is so hard in the beginning and yet you can earn 4-5000 gold purely questing from 70-80. (edit: typo said 75-80 at first, my bad)
My original complaint in my thread was entirely centered around FFXI's player run economy and how frustrating and irritating it was. If you read through the thread, you'll see lots of people disagreeing with me, unless they'd played XI, and then the basic response was usually "You're right about XI but XI is a terrible example of a player-run economy.", which I acknowledged.
To talk for a moment about XI again though, the most valuable farmable drops in the game did not come from level-cap enemies. They came from level 30 tigers and level 45~ bats. They were quick to kill, and due to the nature of the game, could be easily farmed in mass (they really couldn't hit, nor hit hard, a level 75 so resting wasn't really necessary.
Only replying here with this because the influence seems to be based on my opinion of player run economies.
Very well thought-out thread Quiz.
Spec'ing properly is a gateway drug.
12 Million People have been meter spammed in heroics.
eGenesis, Three Rings, and Tecmo-Koei (well, really Koei) have done that as well, at least in their MMORPGs that I've played.
You also have to be careful about making players spend too much money or they will never have any. Some players in games like WoW for instance are always poor, but then there are players with 1mil plus gold.
I don't think there is a real good way to balance inflation yet. There will always be farmers and players that ruin markets.
It's probably impossible to control inflation in any system, closed or not, because every player has the power to modify the market in many ways.
idk, maybe you could have a tax system that takes a percentage of every players gold and materials every once in awhile and redistribute it to sources like mobs in a closed system. Closed systems are tricky because you have to adjust the resources for every player that permanently quits and others that join.
I think trying to make an open system workable would be a better choice.
Maybe you could make mobs always drop loot of the same value but you'd have to make them scale to the attacking players power levels for that.
For the minecraft like game I'm making, mobs don't drop loot but players gather loot from the world, like from treasure chests, or from mining, and exploration... so even new players can find valuable materials.