Guild Wars 2 Economy Review

Guild Wars 2 Economy Review

Real world economies involves the careful distribution of finite resources to the population to maximize societal productivity. In the real world, resources start off in abundance (especially things like air and water) and become more scarce over time. In order to simplify the math, many economists pretend that things like air and water are infinite, but clearly they are not, and clean air and water can quickly become scarce if these resources are abused on an extraordinary scale.

Virtual economies are upside down from “real” economies, and this causes many conventional economists to come to false conclusions when evaluating these environments. In a virtual world the economy starts with little (if a seed is provided) or no (more typical) resources and all economic currencies increase rapidly over time, approaching infinity if the world is not properly designed with resource sinks that dynamically remove resources from the environment at roughly the rate they are created.

It is also a given that all economic activity involves more than one person. An individual, acting completely alone, has no need for trade. Such a person would be the stuff of legends in the modern age, since even the most intrepid adventurer does not go into the wilderness without gear made through the collective efforts of thousands of other people. Even a casual gardener requires tools that are almost certainly not “home made”. A thousand people can produce one million tools faster than one person can create one tool, so this makes total sense. Complex tools like smart phones are completely impossible to create by one person, and require the collective efforts of millions of people to bring to market.

Guild Wars 2 makes a fascinating case study in virtual economics. As many reviewers have pointed out already, this game does so many things right from a game design angle that it will be the foundation for many MMO's in the future. Non-competitive looting and resource gathering, and rewarding players heavily for exploring and reviving their fellows means that you don't have to win at the expense of other players in this world. Doing this mostly without the need for instances makes this truly remarkable.

In looking at the economy and monetization model, it seems clear that Arena.net felt strongly that by tapping the in-game economy they could do away with the need for a subscription. It seemed they wanted to tax the currency exchange in a fashion similar to how CCP does it with PLEX in their EVE Online game. They also wanted to sell boosts and convenience items as is done commonly in other F2P MMO's. They even hired a conventional economist late in the development process, making it clear that they knew the condition of their in-game economy would translate directly to real world revenue generation. How well they did, and why, is the subject of this review. This review is not meant to be comprehensive, as that would be too long to publish on Gamasutra and I don't put those kinds of analysis into the public space.

Methodology

I had some basic familiarity with Guild Wars 2 from beta test participation, but I did not evaluate the economy for GW2 until four months after the game was released. This prevented me from measuring the rate of collapse of the economy like I did with Star Wars: The Old Republic on LinkedIn. There I conducted a one month “economic deathwatch” measuring the devaluation of the game currency daily, and demonstrating that the primary currency lost 97% of its real world value in the first 30 days.

Knowing that craft materials in GW2 are set up in tiers where low level inputs come from low level zones and allow the production of low level items, I made sure to hit all of the low level zones first so as to gather the first tier inputs at a time when presumably they might be useful. I went out of my way to gather resources such as wood and metal so as to have the greatest chance of being able to make something useful for myself through the crafting process.

I used a completely fresh GW2 account, had no prior retail GW2 experience, and received no aid from any source other than a gift of three 15 slot bags from a friend on day 1. These allowed me to go about my studies in less time than would have been required if I was forced to sell or craft inputs frequently as my bags filled.

My test avatar was a Sylvari elementalist. I chose to pursue the craft disciplines of artificing and jewelry. I tried to do many of the events once, but tried not to do too many events as it was quickly evident that the xp resource was flooded in the game as detailed below. I used no boosts at any time.

Low Level Economy

I completed all of the first tier content, meaning all of the beginner zones, with an avatar level of 37 (80 is the cap) and a world map completion of 27%. Note that the beginner zones have missions and enemies up to L15 but all areas on all maps scale your current level to be at most two levels above the mission area and you continue to get good experience points at any level. Also note that craft resource gathering gives you xp as does the actual crafting process, and this contributed to my total level.

At this point in the game I had 18,507 copper coins, which is not a lot of coin when you consider that repairing my junky equipment costs around 300 copper every hour or two, teleporting around costs 30 to 40 (this scales with level), and selling a blue quality L34 armor item only gives 42 copper. Every time you are defeated in battle (which happens fairly often when soloing) you have to pay for a teleport and there will be item damage that will eventually require repairs. I have not bought anything other than harvesting tools. Thus this is probably above average wealth for my level. The developers did an exceptionally good job of keeping the coin economy tight.

Crafting until I had used up all of my gathered resources raised my Jewelry skill to 85 out of 400 max, and my artificer skill to 82 out of 400 max. The items I was able to produce through Jewelry were useful as Jewelry items do not seem to drop from mobs at these levels. Weapon crafting was almost never of any use in this range as I was able to get high quality weapon drops of as high as L33 from mobs under L10 (the drops scale to your true level). The highest weapon I was able to craft in Tier 1 was L20.

If I had “a priori” knowledge of the crafting process, I might have been able to craft a weapon that was briefly useful, but of course on my first run I did not have this knowledge and it is unlikely that most people would have studied the crafting system intensely before even trying the game for the first time. If I had leveled up in a second tier area I would have gathered materials useful for making level appropriate gear in a timely fashion, but likely not had enough Tier 1 materials to level my craft skills to allow Tier 2 crafting by then. Tier two recipes start at the skill level of 75, and I barely crossed this threshold with the resources I accumulated while completing the tier one missions.

Thus there is a scarcity of craft xp that makes craft xp valuable to players. Avatar xp, as you can see by my L37 at the completion of the L15 content, is flooded and thus of almost no value in the economy. If I had engaged in pvp battles, then I would have been even higher level by this time.

Note that at no time did I need or use the auction house on the way to L37, so for me the item economy was nonexistent up to this point. Never did I need or want for any gear since low level critters were giving up finely crafted weapons and armor almost faster than I could sell them.

To give an example of the premium placed on craft xp, let's take a look at the creation of a Healing Green Inscription, an intermediate item in the Tier 1 craft process that can be combined with additional wood to make mediocre L15 weapons. It takes 3 Green Wood Logs to make a Green Wood Dowel, and a Green Wood Dowel and three Tiny Totems to make a Healing Green Inscription. The market prices for all of these items are below:

Healing Green Inscription: 6

Green Wood Dowel: 9

Tiny Totem: 42

Green Wood Log: 13

Note that in making a Green Wood Dowel, 39 copper coin is used to make a 9 copper coin item, for a loss to the player of 30 copper coin. In making a Healing Green Inscription, 135 copper is used to make a 6 copper item, for a loss to the player of 129 copper. You can see that if I tried to buy the craft materials I needed from other players instead of gathering them myself I would be out of coin in minutes and probably still would not have high enough skill to unlock Tier 2 item crafting.

Thus it seems almost certain that the demand for craft items comes from higher level players with excess coin that are trying to buy their way through the craft process since they probably did not focus on it at earlier levels. This makes sense since it is unlikely that such an investment early in the game would have yielded any useful results.

Mid Level Economy

I completed all of the second tier play zones (those with L15 to 25 content) at an avatar level of 64 (out of 80). My world completion percent was 44. Thus the content up to L25 is almost half of the game world, suggesting that content is front end weighted. I completed my main story arc (which is instanced) only to L50. XP flooding seems pretty linear at 2.7 avatar levels per content level. If I had continued with my review I would have hit the level cap at about the same time I finished the game content up to L31.

My craft levels were 151 for artificing and 153 for jewelry, 150 being the threshold for working with tier 3 materials so I seemed on track using my strategy of hitting all of the low level zones before advancing. Since 150/400 (roughly my craft level) is 3/8 (greater than 1/3) and 25/80 (my content level) is 5/16 (less than 1/3), then my craft level is slightly ahead of my content level but way behind my avatar level.

I had 4 gold pieces (40,000 copper) saved at the end of this run and spent 3 gold pieces buying all of the skill books. Thus up to this point money is still tight but never short. I continue to be able to buy a complete green-con outfit, including weapon, for 10 silver (1000 copper) any time I want, and can sell my old gear back to vendor for more than 6 silver. Thus a full gear upgrade is available at any time for about 1% of my wealth.

Note that I did have left over craft materials for the craft paths I did not pursue. If I had sold my unused craft materials I would have had significantly more coin, but since I never was wanting for coin at any time during this review, that last exercise seemed pointless.

End Game Economy

I have identified 3 primary resources, and an item market, in this virtual economy. The three resources are Experience (avatar xp), Craft xp, and Coin (the primary currency). There are a number of additional currencies that cannot be traded between players. I call these prestige currencies, though they act more like resources since they can only be traded to NPC's. What makes them prestigious is that they have to be earned, they cannot be bought or traded. Two examples of prestige currencies in GW2 are Glory (which comes from pvp play) and Karma (which is earned from completing quests). Karma, despite being more rare than copper, has a value in the economy of much less than one copper, making it almost valueless in the economy.

The value of prestige currencies in the end game economy is that they give a reward pathway that has not been compromised by the corrupted primary currency economy. This removes or at least limits the “pay to win” effect on the end game, the intention being to maintain player engagement beyond the first month of play. Many of the items that can be purchased with prestige currencies also require the player to have very high crafting levels. By adding this requirement, Arena.net has created demand for crafting xp and anything that can provide that. Thus a powerful money sink was added to the economy with this mechanism.

Final Analysis

Experience is flooded, and thus of minimal value in the marketplace. I would anticipate that experience boosts sell poorly here relative to other games since your level is not so critical in the game and leveling up is very easy. Since there is a maximum amount of experience the demand drops to zero as you approach the cap.

Craft xp is scarce, which is good, lending itself to monetization in the form of selling craft boosts. It also makes anything in the item economy that can give Craft xp more valuable.

Coin is scarce, which is good as it makes the primary currency economy tight. This is essential because the game hosts charge about $1.25 per 100 gems, and players can trade gems for coins with each other. The hosts take a cut of all such transactions, which is about 15%. This acts as a money sink on the economy. Since Experience is almost valueless, but coin is extremely valuable, wealth is the primary achievement metric in the game. Being able to purchase this metric makes the game somewhat “pay to win” as the primary game objects are for sale.

With the exception of craft materials, the pre-endgame item economy is broken. As an example, I can buy a L39 coat of green (good, better than blue) quality level for 112 copper coins on the auction house. This is not a rare low sell. As I look at the auction house there are over 1000 items of this type selling at this price. I can sell the same item to a vendor for 111 copper coins. Over 1000 players took the time to sell this item on the auction house at a premium of 1 copper coin over what any npc vendor would pay them. Given that the auction house charges 5%, these players are actually losing at least 4% of the value of their goods by joining the economy. Goods are so badly flooded that it is much cheaper to just sell your equipment and buy new equipment instead of repairing it when it gets damaged.

The item economy is so bad that essentially all items of white, blue, and green quality are junk items. There is a “sell junk” button that lets you sell all items that have no game use. If this button sold all white, blue, and green quality items (which was all the items I encountered up to L64) with one click, this would have been more useful. The only items I encountered as loot that were not junk were those related to craft activity.

Thus the item economy would have been improved if all players automatically got free gear upgrades every 5 or 10 levels and all of those white, blue, and green junk items were just never itemized as loot at all. Any excitement the player feels about loot drops very quickly fades in such an environment, and it all just becomes a pointless loot gathering exercise. In other words, the item economy would have been better if it had been removed.

Thus the pre-endgame item economy in GW2 is one of the worst I have studied in the last 14 years. This acts to further undermine the crafting professions since what is the point of investing heavily in craft skills when you can buy items of similar quality on the auction house for 10% of what it would cost for you to make that item? For the cost of crafting one L20 green con weapon (just the weapon, not the skill to get that craft level) I was able to buy an entire set of green con L35 gear including all armor slots and a two handed weapon.

The only possible exceptions are the crafting of jewelry and food, since these don't seem to be itemized as loot drops. This makes these products valuable to craft. This points to a solution that somehow escaped the design team: If all wearable/consumable items did not drop from loot, but were instead crafted, then both the crafting and looting process would have been improved. This would have also made it much easier to balance the economy.

The usefulness of various prestige currencies later in the game improves the situation a bit for max level characters. The patchwork construction of the economy works, kind of, but never seems to drive player engagement. The strength of the game play keeps players going for a while but every player I interviewed told me that “there just was something missing”. I would suggest that something was effective reward mechanisms.

Since the GW2 business model seems dependent on tapping a sustainable economy for continuous revenue, it seems logical that they would have wanted to build a sustainable economy into their game. They even hired a conventional economist late in the development cycle, implying that they realized that this was important to the product success. Unfortunately, this seems to have been too little, too late.

While the gameplay seems to have benefited from a “how can we do this better than has been done before”, the reward system in the game seems to be at best business as usual.

The hosts have announced that they will be revamping the reward system later this year, so they seem to be aware that they have a problem. I am eager to see what they come up with.