Lately, inflation has been rampant on my server in World of Warcraft, which makes me wonder what we can learn from the models presented in the game's economic system.
For anybody unfamiliar with MMORPGs, or even World of Warcraft in general, there are some peculiarities about things that occur in order to keep the economy stabilized. There are, of course, your average video game occurrences - loot, such as cloth, money, quest items, weapons, etc, drop off of mobs that you kill. Everything in the game is vendorable, but there is a big distinction between resources that matter -- things like weapons that have excellent stats or capital (called mats) for your professions -- and vendor trash, which are lame armor and random drops such as "squished bug eyes" meant to get money into circulation.
There is a subsection of vendor trash which are weapons that bind on pickup, thus becoming "soul bound," which you cannot sell on an auction house, which has quite a bit to do with the economy, but that's a little bit beyond my focus at the moment. World of Warcraft is full of opportunity cost experiences, and there are many different ways to upgrade your character. There is gear that can be quested for or raided for, or even purchased through player vs. player arena points, but all of these are soul bound. There is also comparable gear that is craftable. Furthermore, there is decent gear that can be purchased for the lazy player, or else disenchanted for capital for different types of character upgrade.
I'd like to know how inflation has come into being on the server -- I suspect it occured at a time where professions necessary for the gaining of capital such as mining and disenchanting were not much of a focus for the server, and so the goods that were on the auction house were more scarce, and therefore became more expensive. Once prices were established for the server, people were unwilling to start undercutting the total, because it seems like there is an abundance of people willing to pay for capital to get their professions up as quickly as possible, especially since the introduction of the expansion, where gold is much more available after a certain level.
So, the situation stands that people with more money, seeking the quick and easy, are able to lay more out to get their professions upgraded as quickly as possible, reinforcing the inflated prices at the auction house, which is the primary barter system for the server. Lower level players, which I can associate with the lower class, are kept out of the market by the scarcity of opportunity to gain resources, since you either have to do a lot of hard, gold farming through killing monsters and looting them to gain money, or have a profession in order to have any sort of lead in the game. In the real world, you have to have money to make money, and this holds true here as well. Leveling your professions are expensive, and people won't buy things from you until a point where you've invested a lot of money to get your "profession points," or certifications up.
A friend of mine once made the quip that a way to make a lot of money off of the auction house would be to start out with a decent amount of money, buy out everything on the auction house of a certain good, and then put it all back at a higher price -- not necessarily a lot higher, but higher nonetheless. It seems like the reverse of that would have a chance of getting the realm back into stability -- a person starting out with a lot of money could buy inflated goods, then resell them for a loss on the auction house.
The only problem is that it would take a sizeable group of people to perform this action. One person's name showing up repeatedly for all the goods on the auction house at lower cuts only lets the people who originally sold them on the auction house know there is some goofball out in the world that is buying and selling at a loss, which gives him an opportunity to get rich off of you. Ineffective system. The best way would be to have a team of an unknown percentage involved in the program, each taking a small loss, so that eventually, the market becomes accustomed to buying at the more realistic, lower price, rather than the inflated, money grubbing price.
I'm still in the process of learning and reading about all of these things, so there are undoubtedly some economic theories already in hand that deal with these types of situation, both in the game model world I'm describing, and in the real-world parallels. It really does make me wonder what kind of watch dogs are sitting there, in the market, scrounging around for things going awry... In the meantime, I think I'm going to try to get a group together to perform an experiment on this virtual market.