A Look at MMO Economies: How Inflation Happens in MMOs and How to Prevent It

I’ve always believed games give people a lot in a practical sense. I don’t mean games with sales tactics that put you off playing, games that survive only on competition, games built on primitive gratification, or games that get you gambling through loot boxes. I mean games that have something to say, that keep you exploring, and that teach you something along the way. I think MMOs give people real-life experience too, especially when it comes to economics, because MMOs contain an economy that’s worth studying on its own.

What is an MMO?

An MMO, or Massively Multiplayer Online game, is a type of online game with huge maps where hundreds or thousands of players exist on the same server. A big part of the younger generation has played at least one MMO or knows what one is. Broadly, these games have four types of players: achievers, explorers, killers (players who love PvP and fighting other players) and socialisers. The people we’re talking about today are the traders: a mix of socialisers and achievers.

MMOs contain their own economy. Its liquidity mostly comes from hunting mobs, the creatures developers deliberately place in the game as the main source of experience, money and items. In other words, as players do quests and hunt mobs, there’s a constant, growing flow of cash into the server. That leads to one obvious result that can make an MMO unplayable: inflation. Just like in real life, inflation is an unavoidable fact of MMOs. You can’t stop it, but you can stop it turning into hyperinflation. Before we get to that, let’s look at how players trade and the economy they create.

In MMOs you want to turn your surplus items into money and cover your own needs. The game lets you sell those items to NPCs (non-playable characters, the characters created by the developers that no player controls). But sometimes you think an item is worth more than what the NPC will pay, and in those cases you’d rather sell it to other players.

So how do you sell?

Types of sellers in MMOs

1. The producer

Some players keep hunting in the same areas to get specific items because that’s how they enjoy the game. They usually sell items at low or average prices, but they can get greedy too. They’re the main source of item production on the server, and so they’re also the main source of inflation. An MMO is a closed system that doesn’t interact with other servers, so these resources keep piling up inside it, which drives inflation. Producers have a moderate influence on prices.

2. The merchant

Anyone who trades could be called a merchant, but these are the players who spend their time buying and selling, right in the middle of the market. Like producers, they’re always at the market (they may even be producers), but they usually start with a big pile of capital and try to profit by buying cheap items from second-hand sellers and selling them for more. They buy things they don’t need and find the people who do. They’re good marketers, and they’re always there when you need something. Merchants have a big influence on prices.

An important note about merchants: they might look bad for the economy at first, but they’re not. Merchants don’t create money, they pull money that’s already circulating into their own capital. Some put that money to work by taking risks. For example, they try to upgrade items that are hard to enhance to higher levels, and if they succeed, they make a big profit. That way they help create items on the server that can’t be dropped by mobs. The money they spend on those upgrades usually goes to NPCs, which also helps hold inflation back. I’ll explain how that works later in the post.

3. The second-hand seller

These players usually sell items they no longer need after using them. They don’t really trade, but they want to turn valuable items into cash, so they try to sell quickly and cheaply, usually below the price set by producers. They don’t move the market as much as merchants or producers. Second-hand sellers have little influence on prices.

Sales and marketing tactics in MMOs

Most MMOs let you set a title when you open a market stall. Apart from that, the only marketing campaign you can run is posting in the global chat. For example, if you need money fast, you can sell what you have to merchants, but first you have to let them know about your items. So what marketing strategies are there?

1. Informing

You write the items most likely to be in demand straight into your title, as far as the character limit allows. If it’s a special or rare item, you can let people know in chat.

2. Getting attention

You can draw attention and get people into your stall by writing something funny, or something controversial and topical, in your title.

3. Spam

You pick a keyword or phrase related to what you’re selling and keep repeating it in chat, and you use it as your stall name too. When people see it in chat and come over, they recognise you instantly.

These sales and marketing tactics can of course be expanded. This is just how I’d create and categorise them at first glance.

How do game developers prevent inflation?

Game developers need to think like marketers too. Earlier I mentioned that the money NPCs earn slows inflation down. The inflation caused by new resources constantly entering the server is held back by creating “black holes” that take resources out. For example, buying healing potions from a vendor NPC takes liquidity out of the server, and so does the money you pay for upgrades. In some games you can buy the game’s premium currency with in-game gold, which is another way to reduce inflation. There are many more methods, but in short, any money paid to a barrier set by the developer, rather than to another player, works against inflation.

That’s why the pricing of items sold in NPC shops needs careful thought and planning. Make them too expensive and you turn the game into a boring grind. Make them too cheap and inflation makes the money dropped by monsters worthless. That’s why in many MMOs the money monsters drop and the prices NPCs charge look absurd: the player economy is at a completely different stage, and those prices need to be adjusted for inflation. A monster that drops 100 gold on launch day still drops 100 gold two years later, which makes it almost impossible for new players to get started. This, along with gatekeeping, where veteran players bully newcomers and block their progress, is one of the main reasons MMOs die.

Today, the MMOs that survive, like WoW, ESO and FFXIV, are the ones that keep shipping and selling new content, run on monthly subscriptions or provide real customer support. That shows inflation is something that has to be actively managed.