REAL ECONOMICS IN VIRTUAL WORLDS: A MASSIVELY MULTIPLAYER ONLINE GAME CASE STUDY, RUNESCAPE A Thesis Presented to the Academic Faculty by Tanla E. Bilir In Partial Fulfillment of the Requirements for the Degree Digital Media in the School of Literature, Communication, and Culture Georgia Institute of Technology December 2009 COPYRIGHT BY TANLA E. BILIR REAL ECONOMICS IN VIRTUAL WORLDS: A MASSIVELY MULTIPLAYER ONLINE GAME CASE STUDY, RUNESCAPE Approved by: Dr. Celia Pearce, Advisor Dr. Kenneth Knoespel School of Literature, Communication, and School of Literature, Communication, and Culture Culture Georgia Institute of Technology Georgia Institute of Technology Dr. Rebecca Burnett Dr. Ellen Yi-Luen Do School of Literature, Communication, and College of Architecture & College of Culture Computing Georgia Institute of Technology Georgia Institute of Technology Date Approved: July 14, 2009 ACKNOWLEDGEMENTS This thesis has been a wonderful journey. I consider myself lucky finding an opportunity to combine my background in economics with my passion for gaming. This work would not have been possible without the following individuals. First of all, I would like to thank my thesis committee members, Dr. Celia Pearce, Dr. Rebecca Burnett, Dr. Kenneth Knoespel, and Dr. Ellen Yi-Luen Do for their supervision and invaluable comments. Dr. Pearce has been an inspiration to me with her successful work in virtual worlds and multiplayer games. During my thesis progress, she always helped me with prompt feedbacks and practical solutions. I am also proud of being a member of her Mermaids research team for two years. I am deeply grateful to Dr. Knoespel for supporting me through my entire program of study. I remember various stimulating conversations with him, each of which gave me useful insights to improve my thesis. I will always admire his intellectual capacity and humanistic philosophy of life. I owe a big gratitude to Dr. Burnett for hours of careful editing and wise suggestions to shape my thesis strategy. Apart from being an incredible researcher whom I learned a lot, she brightened our thesis meetings with her cheerful attitude and caring spirit. Dr. Do contributed to my thesis with her positive approach and willingness to help. During the last two years, I have been in a friendly atmosphere full of bright students at the Digital Media Program of Georgia Tech. Salutes to Abhishek, Adam, Bobby, Calvin, iii Courtenay, Daniel, Evan, Hee Rin, Jimmy, Jisun, Joel, Leah, Ozge, Ray, Sara, and Sergio and thanks for great memories. My mother Burçin, my father Şeref, my brother Şansal and my extended family have always supported me; even from thousands of miles away. I send my warmest thanks to them. My husband, Kuzey, was the main reason for me to continue on this hard task. His love and intellectual contribution gave me strength to sail into unknown seas. I thank him with all my heart. My special thanks go to two academicians: Dr. Edward Castronova for inspiring many researchers, including myself, in the young field of virtual economics and Dr. Richard Bartle for not only pioneering MUDs but also his prompt responses to my e-mails and friendly encouragement. Finally, my thanks go to Garrett, Zoe Castillo, Lara Croft, Lucas Kane, Gabriel Knight, April Ryan, George Stobbart, Guybrush Threepwood, and countless others who help changing any usual day into a fantasy. iv TABLE OF CONTENTS Page ACKNOWLEDGEMENTS............................................................................................. iii LIST OF TABLES.............................................................................................................x LIST OF FIGURES ......................................................................................................... xi LIST OF SYMBOLS AND ABBREVIATIONS .......................................................... xiii SUMMARY................................................................................................................... xiv CHAPTER 1: INTRODUCTION......................................................................................1 1.1. Relevance and Research Questions ..................................................................7 1.2. Structure of the Thesis. ...................................................................................10 1.3. Keywords ........................................................................................................12 CHAPTER 2: LITERATURE REVIEW.........................................................................13 2.1. History of MMOGs.........................................................................................14 2.2. Research on the Economic Aspects of MMOGs ............................................19 2.2.1. Grimm and Mitlöhner (1995)...............................................................23 2.2.2. Simpson (1999)....................................................................................23 2.2.3. Castronova (2001)................................................................................25 2.2.4. Castronova (2002)................................................................................26 2.2.5. Burke (2002) ........................................................................................27 2.2.6. Lastowka and Hunter (2004) ...............................................................29 2.2.7. Nash and Schneyer (2004)...................................................................31 2.2.8. Bloomfield (2007)................................................................................32 v 2.2.9. Arakji and Lang (2008)........................................................................33 2.2.10. Castronova (2008)..............................................................................36 2.3. Research on RuneScape Economics. ..............................................................38 2.3.1. De Sousa and Munro (2008)................................................................38 2.4. Brief History of Jagex and RuneScape. ..........................................................40 2.5. Conclusion ......................................................................................................43 CHAPTER 3: METHODOLOGY ...................................................................................46 3.1. Methods and Relevance ..................................................................................46 3.2. Data Collection Settings .................................................................................51 3.2.1. Advantages of Online Data Collection ................................................52 3.2.2. Disadvantages of Online Data Collection............................................52 3.3. Conclusion ......................................................................................................56 CHAPTER 4: GAME PLAY IN RUNESCAPE .............................................................58 4.1. Tutorial............................................................................................................58 4.2. Skills ...............................................................................................................61 4.3. Geography.......................................................................................................63 4.4. City Life and Population.................................................................................64 4.5. Transportation.................................................................................................65 4.6 Quests...............................................................................................................66 4.7. Social Life and Interactivity............................................................................67 4.8. Conclusion ......................................................................................................69 CHAPTER 5: BASICS OF THE RUNESCAPE ECONOMY........................................70 5.1. Currency..........................................................................................................70 5.2. Banks ..............................................................................................................73 5.3. Trade ...............................................................................................................76 vi 5.3.1. Trading with NPCs (PvE Trade)..........................................................77 5.3.2. Trading with Other Players (PvP Trade) .............................................79 5.3.3. Trading in the Grand Exchange ...........................................................81 5.3.4. Item Lending........................................................................................86 5.3.5. Bank Sale .............................................................................................87 5.3.6. Virtual World Trade vs. Real Money Trade ........................................87 5.4. Price ................................................................................................................88 5.5. Profit ...............................................................................................................91 5.5.1. Production for Profit ............................................................................91 5.5.2. Mercantile for Profit ............................................................................93 5.6. Income and Expenses......................................................................................94