Virtual Economies: Design and Analysis (Information Policy)

How the basic concepts of economicsincluding markets institutions and moneycan be used to create and analyze economies based on virtual goods. In the twenty-first-century digital world virtual goods are sold for real money. Digital game players happily pay for avatars power-ups and other game items. But behind every virtual sale there is a virtual economy simple or complex. In this book Vili Lehdonvirta and Edward Castronova introduce the basic concepts of economics into the game developers and game designers toolkits. Lehdonvirta and Castronova explain how the fundamentals of economicsmarkets institutions and moneycan be used to create or analyze economies based on artificially scarce virtual goods. They focus on virtual economies in digital games but also touch on serious digital currencies such as Bitcoin as well as virtual economies that emerge in social media around points likes and followers. The theoretical emphasis is on elementary microeconomic theory with some discussion of behavioral economics macroeconomics sociology of consumption and other social science theories relevant to economic behavior. Topics include the rational choice model of economic decision making; information goods versus virtual goods; supply demand and market equilibrium; monopoly power; setting prices; and externalities. The book will enable developers and designers to create and maintain successful virtual economies introduce social scientists and policy makers to the power of virtual economies and provide a useful guide to economic fundamentals for students in other disciplines.