Archive for the ‘Economics’ Category

Is the goal of our participation in any economy to maximize our utility? Something very much like that guides my actions, so that seems a reasonable assumption. When running game economies then, what could be better than to maximize utility for players?

In a post on the Bay12Games forums, Servant Corps writes in response to my post on Cost and Utility in game economies:

If the goal of a SP game is to produce the most utility (and it does not have to have such a goal, granted), then cost is counterproductive. Cost reduce the amount of utility that can be acquired. Sure, you got the +5 Sword of Slashing, but you spent an hour of your time getting that item. An hour that would never be gotten back.

Thus, why would one have the Player pay any Cost whatsoever? Give the player all the Items he wants. The player gets all the Utility from the Items, and do not have to pay any Cost.

To answer this, I think it’s important to step back and address why we are putting these items in the game in the first place. Let’s say that our purpose, in creating a game, is to maximize the utility that game has to the player. We do this by making the game extremely fun, and by giving it replayability and longevity. Key to maximizing the value the game has to players, then, is to address how to make the game fun.

There is a concept of the flow channel that carries a lot of water with game developers, based on the work of Mihaly Csikszentmihalyi in Flow: The Psychology of Optimal Experience. The basic idea is that people are in a state of “flow” when they have clear goals and challenges that approximately match their skills, leaving them neither anxious nor bored. As applied to games, it means that the challenges must increase as the player’s abilities increase:

Flow Channel

When we design games, we do try to make sure that the player chews up plenty of time playing our game, but it’s not just throwing up a treadmill. We want players to move through the flow channel, neither overwhelmed nor bored, moving up and to the right on that graph over time. Players complaining of grinding and treadmills aren’t in the flow channel, they’re in the boredom section — their skills exceed the challenges. This is failure on the part of the designer. But to consume time isn’t in itself bad; after all, the whole point of games is to provide fun and recreation. The longer we can do that with a game, the better we’re fulfilling that purpose. In other words, providing utility to the player means keeping them challenged for an extended period of time.

Players work hard to beat the challenge because that’s what the game is about. In an RPG, they’ll grab the best equipment they can buy, and minmax their stats. Players are exercising their skills to demonstrate mastery over the game. If the game ever beats the player by making a dungeon so hard they can’t progress, the player will give up and play something else. If the game ever surrenders to the player by not having another dungeon, or having each challenge so easy it’s not worth the player’s time, the player will get bored and play something else. Either way, we failed to entertain, and the utility of the game is decreased.

Taking this into account, there are two reasons we don’t just give the player the +10 sword of devastation at no cost. The first reason is because it breaks the balance, the PC dominates all enemies, and the game drops into boredom. The second reason is because, even if the sword is appropriately balanced against the enemies the player is fighting now, managing money and equipment is part of the challenge of the game. The cost of that sword is actually part of the flow equation, and removing it drops the challenge a few points closer to boredom.

Ultimately, the reason simulated economies like weapon shops exist in games is because it’s more fun to have them than to just give the player that power directly. Many people love to browse through, pine for some sword they can’t afford, save up for it, and then laugh gleefully as their power increases substantially due to your shrewd decision to save up for it. Taking away the costs here is like using cheat codes — it’s fun for awhile, but it drops you out of the flow channel, and in the end you’ll get bored and move on to another game.


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There’s a necessary ambiguity to analyzing aspects of game design, but as in many other fields, we try very hard to find or make rules that help us to determine how something should be or how it is. Linear perspective is an example from visual arts — a constructive system that allows a creative class to improve their work using a structured, pre-designed approach. Especially when it comes to online games, some designers have found that economics has already developed many such tools that can be readily “ported” to game design.

But our approach is sometimes a little bit fuzzy. Economics has a beautiful spectrum of tools used to analyze decision making, and designers often don’t have a complete grasp of these tools and so will try to reinvent the wheel, missing key factors and building heuristic formulas that don’t quite describe the situation in the general case they’re supposed to.

I’m not an expert on economics, but I’m passionate about the field. I was disappointed in high school because the instructor wasn’t sufficiently hardcore about the subject, and when I dropped out to homeschool and pursue my GED instead, I bought a good textbook and read it cover to cover, multiple times. Before I learned to write a line of C code, I was already holding economics as a major possible career path.

This post is designed to discuss two concepts from microeconomics as they apply to economies in video games. It is an indirect response to in-class discussions about how we assess an item’s value — both its real value, and its value to a player. The strategies we looked at in class were a bit too ad hoc for my taste, and I wanted to explore looking at items and strategies from the perspective of a straightforward cost to utility ratio, in hopes of giving a more robust and complete perspective on how players assess the attractiveness of items or strategies, both before and after they’ve committed to acquiring those items or using those strategies.

I also think it’s important to define useful terms with clarity. We don’t want to just make jargon — the ideas behind the terms have to be transparent, vitally useful, and intuitive. The two terms I’m defining here, utility and cost, are both straight from economics.


Utility is the usefulness of an object or strategy, its desirability and the amount of satisfaction the player can derive from it.

Utility may be more than the mechanical value of the object as determined by a point system. It also includes how cool the thing looks when the player’s avatar has it equipped, bragging rights and intimidation factor, and any other “soft” factors that affect how much a player considers an object desirable and valuable. The same object may have different utility to different players.

Utility can also change dynamically in the game. In rock-paper-scissors, if your opponent is particularly fond of picking rock, paper has high utility and scissors has low utility. If your opponent suddenly switches strategy to pick scissors a lot, paper now has low utility, and rock becomes the higher utility option.

Finally, the actual utility of an object or strategy may not be fully understood before the player has engaged with it, and if the game is particularly opaque, sometimes the utility of the object is not clear even then. If the player has access to a lot of statistical information about a certain sword by checking a strategy guide, the perceived utility of that sword is probably very close to the designer’s intent, and to the actual utility the player will receive once the weapon is equipped. But if the sword is just a picture and a name before it’s actually picked up, it’s substantially more likely that the perceived utility will vary significantly from the actual utility.


Cost is the burden the player has to sustain in order to acquire an object.

Cost might include a time investment. Maybe the player has to walk their avatar to the store. Maybe the player has to exit the dungeon, then will have to fight through it again. Maybe the player has to watch a five second cutscene of their starship docking with the space station before they can get to the store interface. Maybe the player has to complete a one hour raid after planning and scheduling it, and waiting for forty guildmates.

Cost might also include a price in some in-game money. As with real money, in-game money is generally an abstraction of time multiplied by a factor derived from the strategy being used and the player’s skill. In a strategy game, for example, your money might be gathered over time, but time translates into money at a ratio that is dependent on how much you invest into your economy, as opposed to your military. In an MMORPG, money may relate fairly directly to time spent fighting monsters and fulfilling quests, and also to craft skills and engagement in the player-driven economy.

Cost might involve a risk factor. If you have a chance of dying and having to repair your equipment, or you might need to down some potions or replace some destroyed missile turrets, these all become part of the cost of acquiring the object or using that strategy.

Cost might also include lost opportunities, or opportunity cost. The cost in selecting skills or stat boosts when a character levels up are almost always exclusively opportunity costs. For example, life magic and fire magic might both be useful, but my character can only select one. The opportunity cost of life magic is reduced DPS (damage per second). The opportunity cost of fire magic is the inability to use healing spells.


If you divide utility by cost, you get a general rating for how awesome an object or strategy is, and how willing a player will be to get it.

It might seem like a perfectly balanced game would have all of its objects have the same utility to cost ratio, but this is not necessarily true. MMORPGs often rate their equipment in rarity tiers, where higher rarity items have both higher costs and higher utility — but the opportunity cost in lost utility from using a lower rarity item instead of a higher rarity one is so high that medium to high rarity items almost always win out as the superior strategy. A game like World of Warcraft manipulates this over time by shifting the dominant rarity across levels, so that low level players will tend to play with low rarity items, while high level players will be decked out with high rarity items. This adds to the sense of progress and accomplishment in the game as players exceed the base performance of their level more and more the longer they play.

Additionally, even without these factors, there’s no way to keep these in universal balance anyway. Utility can vary over time and from player to player, and opportunity cost or the real cost of spending money may vary depending on the player’s options and abilities.

For multiplayer games, this makes it especially important to build in negative feedback systems for when one strategy becomes too strong. For games that reach professional levels of play, this kind of negative feedback almost always takes the form of always having vulnerabilities and counter-strategies. Dominance, in which one strategy has no or very weak counters and is obviously superior in almost all cases, is devastating to in-game strategy, no matter how it occurs. And it really pisses players off.

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