Video Game Design: Game Economies

Many games use some kind of resource or currency.  How the game manages these resources can have a major impact on many aspects of game play.  Games that flood the economy with resources can dramatically reduce the influence of skill on the outcome of the game.  Games that starve the economy can take a very long time to finish.  Poorly designed game economies can also limit the number of effective strategies for winning.  In games where resource management is important, it is essential to have a well managed economy.

Sources and Sinks

In most game economies, there are sources and sinks for resources.  For the rest of this article, I will call resources money, because the primary resource in most games is some kind of currency.  This applies to non-monetary resources as well though.  Money sources are places that players or characters can obtain game money.  Money enters the game economy through sources.  In Monopoly, the main money source is getting $200 for passing Go.  There are also money sources among the Community Chest and Chance cards.

Money sinks are places where players can spend money.  Money sinks remove money from the game economy.  In Real Time Strategy games, creating buildings and training units are money sinks.  In Monopoly, taxes and some Chance cards are money sinks.  Also, the interest for mortgages and the fee for getting out of jail are money sinks.

Money sources and money sinks are the tools of economic control and resources management in games.  Controlling the sources and sinks can control the amount of resources in the game economy.

Open Economies

There are several basic types of game economies.  The most common is the open economy.  An open economy is an economic system that allows money to flow into and out of the economy.  In an open economy, no one typically keeps track of any money that is not in the possession of the players.  Outside of trading with other players, if the players gain money, it is created on the fly, and if players spend money, it is destroyed.  No one cares about money that is not owned by the players.  Monopoly is an excellent example of an open economy.  No one cares how much money the bank has.  If the bank runs out, the rules require more money to be created.  When money goes into the bank, no one keeps a ledger (except, possibly, to detect cheating, but this is about how much the players have, not how much the bank has).  In Monopoly, money is not literally created and destroyed, but it could be without making any difference to the game.

Open economies have several benefits.  The first is that they are easy to scale.  The economy will work fine with 10 players, 100 players, or 1,000 players.  Vendors or banks never run out of money, and in tabletop games with open economies, if they run out of the currency provided with the game, the players can just create more.  The second benefit is that no one has to keep track of how much money non-players have.  In tabletop games, this would not be much of a problem, but keeping track of how much money each vendor has in a video game could end up taking a lot of extra memory.  In general, open economies are the easiest to manage and the most flexible.

There are also some problems with open economies.  It is easy to have rampant inflation or deflation.  Players can easily hoard money, which results in high level characters having enormous amounts of money.  The resulting inflation can make the game harder for low level characters.  The most obvious resolution is giving the lower level characters larger rewards, but this drives the inflation even harder.  On the other side though, a few especially motivating sinks can result in players spending everything very quickly, which can cause rampant deflation instead.

Open economies are the most common type of game economy, because they are scalable, easy to implement, and can be controlled, but the cost is that they must be carefully balanced and controlled, otherwise they can rapidly decay toward inflation or deflation.  Thankfully, they are fairly forgiving.

Closed Economy

Closed economies are extremely rare in video games and uncommon in tabletop games.  Most tabletop games have rules that allow the creation of additional currency, should the players run out.  I cannot think of any mainstream games with closed economies, but there are at least a few tabletop games with closed economies.  Closed economies have a fixed amount of money in the economy.  No money can enter or leave the economy.  In most games with closed economies, the players start with all of the money, and it is only traded between players.  This is not necessary to a closed economy though.  Some of the money can be in a bank, or it can be owned by other non-player entities.  The important part is that the total sum of all money in the game never changes.  If there is even one source or sink, then the economy is not a closed economy.

Closed economies must be balanced during game design.  If a closed economy is well balanced during the design phase, then nothing additional is required to keep it balanced.  This is probably the biggest benefit of a closed economy.  Closed economies can also be used to create a unique game play experience.  Having limited resources can require players to work together, even if they are competing.  A player that hoards money may end up stalling the game, because no one else can progress.  Of course, if the objective of the game is to get the most money, then hoarding is the point, which can make things even more interesting.

Closed economies are not scalable.  Tabletop games can work around this by scaling before the game begins.  Most tabletop games with closed economies give each player a certain amount of starting money.  The total money in the game is naturally scaled this way, as more players means more money, and fewer players means less money.  In video games, where players may come and go during the game, this is not a viable solution.  This is not a closed economy, because new players become one shot money sources.  With a true closed economy, adding or removing players during the game would not change the amount of money in the economy.  Eventually money could become incredibly rare, because there is not enough money for everyone to have some.  A mass exodus, on the other hand, could cause rampant inflation, and now the game developers also have to figure out where to put the money the exiting players owned.

There is a genre of games that are typically a sort of "half open, half closed" economy.  This genre is real-time strategy.  The entire WarCraft RTS series and StarCraft 2 have no money sources (players harvest resources from non-player entities that have limited amounts), but they do have money sinks.  The reason StarCraft is not in this category is that even once the gas geysers are empty, they can still produce small amounts, which makes them sources.  These RTS games do have sinks though.  All resources spent exit the economy permanently.

Closed economies seem to have the best application in tabletop games where the limited resources are deliberately intended to create scarcity and stimulate player interaction.  This application may also be extended to single player video games or multiplayer video games where the number of players is static.  Closed economies do not work so well in video games where the number of players is constantly changing.

Scaled Economy

Scaled economies are also quite rare, but they can resolve some of the problems with closed economies.  Unfortunately, they come with their own problems.  Scaled economies change the amount of money in the economy to fit the number of players.  In tabletop games, it is possible to combine closed economies with scaled economies, by starting each player with a set amount of money.  Session based video games, where a game has a set number of players (and generally a finite duration), can have scaled economies that are also closed, but I don't know of any that actually do this.  In video games, scaled economies would be economies where money only enters the economy as new players join, and money only exits when players leave.

Scaled economies can relieve the scalability problems with closed economies, by scaling money in the economy to the number of players.  It can also avoid the long term balance requirements of an open economy.  In some kinds of games, scaled economies may also have value as a novel game mechanic or even as a central part of the game.

Scaled economies in video games come with a lot of challenges.  When a new players joins the game, where does the money that comes with them go to?  If the amount of money has a high value, just giving it to the player can prove problematic.  New players may start the game with so much money that the early game is not challenging enough.  The money could be split between vendors or given to a centralized bank, if such a mechanic exists.  This might be better, but there still must be ways for the players to eventually obtain the money.  The second problem is, what happens to the money when a player leaves the game?  If the player has a lot of money, the excess may need to be distributed.  If the player has little or no money though, where will the money being taken out of the economy come from?  The last major problem with scaled economies is, what happened when a vendor or bank runs out of money?  If the money is transferred from other non-player sources, what happens if all of the money is owned by players, so there is no other non-player source?  The vendors could stop buying stuff until they get more money, but that could cause grief for the players.  Several hoarders could ruin the game for everyone else.

Just like closed economies, scaled economies require a lot of up front design to establish balance.  Unfortunately, it is not always possible to achieve perfect balance.  If you get players that are hoarders, you can still run into problems.  There are ways to mitigate this problem though.  Overall, scaled economies are best for games with a fixed number of players that all start the game at the same time.

Trading

Trading between players does not add money to or remove money from the economy.  Not all games should allow trading between players, but certain types of multiplayer games with a cooperative element tend to attract players that expect to be able to trade.

Trading can add an element of game play that will attract a different kind of player to your game.  Many games focus on a specific type of gamer, but there are people who prefer a more laid back gaming style.  Some people just prefer things like trading over the action and combat that is so common in games.  A quality trading mechanic can attract these players to a game, and this can make the overall experience better for everyone.  Also, trading allows players to buy or sell items to other players instead of interacting solely with NPCs.  This can create a more social atmosphere in the game, which is generally beneficial.

Trading can be difficult to implement.  In older games, trading would often be done by dropping money and items on the ground.  This often made it possible to cheat other players by picking up both the money and the item and running away.  As game interfaces evolved, trading systems were created that allowed direct trading, where both parties had to agree to the trade, and it was impossible to run off with everything.  This still required the characters to actually meet at a common location, which became more and more inconvenient as game worlds got bigger.  Many massively multiplayer games now have some kind of centralized trading house system, where players can post items for sale, other players can buy them, and the game facilitates all of the trading.  This has allowed bigger games to develop robust economies that can be studied and compared to real world economies.  This also provides places for economic experimentation that might not be considered ethical in real-life economies.

A trading can be a valuable addition to a game.  Players enjoy trading, and some players enjoy trading more than other aspects of the game.  Trading can also take considerable work to implement though.  It is important to consider the type of game and your target audience when deciding whether to implement a trading system and how it should be designed.

Economic Control

Even closed and scaled economies need an economic control scheme in multiplayer video games.  Even if the money in the economy is static, players can still hoard money or spend until all of the money is owned by non-player entities.  Balancing a game economy can be difficult, but it is much easier when you understand your tools.

In-game Consumables

In-game consumables are things that players can buy and consume.  They act as player level money sinks (taking money from players but not necessarily out of the economy).  To be successful though, consumables have to be valuable enough that players are willing to spend game money on them.  If players are hoarding money, high value high cost consumables can be an effective way of drawing hoarded money back into the non-player part of the economy.

Permanent Items

Permanent items are in-game items that cannot be discarded or destroyed.  They can be traded though.  Permanent items are useful when there is too little money owned by players.  If an item is valuable, but it is no longer useful to a player, it can still be traded to lower level players that might find it useful.  If this trading reduces spending that puts money in the non-player economy, it will help to keep money in the player side of the economy.  To be effective, these permanent items must be worth using, and they must be finite (otherwise people get frustrated that they cannot get rid of them).

"Soul Binding"

World of WarCraft has an item attribute labeled "Soul Bound."  Soul bound items cannot be traded to other players.  They can only be sold to NPCs or destroyed for materials.  This mechanic is not unique to Wow.  Soul binding does two things.  It can keep valuable reward items out of the hands of characters that have not earned them.  It also brings more money into the player economy, because the items can only be sold to vendors.  In an open economy like Wow, this just increases the money in the economy.  In closed or scaled economies, it moves money from the non-player economy into the player economy.

Unique Items

In some games, unique items are rare items that any player can only use one of.  In this case though, we are talking about permanent items that are literally unique.  There is only one or a finite number of them, and they cannot be destroyed or created.  Unique items can be collected, hoarded, or passed around.  They may or may not have practical value in the game.  This keeps any money used to trade them in the player economy.  Like permanent items, they may get passed around because they cannot be destroyed, but they typically have greater value because they are also rare.

Crafting

Crafting solves a common problem that is often overlooked, but it has to be implemented correctly to be effective.  Crafting allows players to add items to the game.  When these items can only be sold to non-player entities (either because they are soul bound or because they are not valuable to players), this can be used  to bring money into the player economy.  When these items can be sold to other players though, they can be used to influence the distribution of wealth.  When low level characters can craft things that are valuable to high level players, this can draw wealth downwards.  Combining crafting with consumable items can create a long term draw that helps keep wealth distributed more evenly.  This is not useful in all games, as many expect high level characters to be significantly more wealthy, but in scaled or closed economies, this can be useful to mitigate hoarding.

Economic Abuse

As a game developer, you will have to deal with players who find ways to abuse your economic system.  Game economies rarely have the level of regulation required to keep real world economies running smoothly and fairly.  It is not even reasonable to expect game developers to do that kind of work.  This means that game economies are often open to kinds of abuse that have been problems in historical real world economies.  In addition, because game economies are not controlled by natural processes, other types of abuse are also possible.

It is important to realize that most game economies are very different from real world economies on a microscopic level.  Game characters don't generally have to pay rent, eat, or replace worn out clothing in video games.  This means the stakes are much lower.  A corrupt businessman in a game world is unlikely to cause the death of large numbers of characters out of negligence or greed.  This does not mean that players focused on the economic element of the game cannot make things difficult for other players though.  On the other hand, the low stakes also allow experiments to be conducted that would be unethical in real life!

Many years ago, I conducted such an economic experiment in World of WarCraft.  At the time, Wow gold was much more valuable than it is now (I did say open economies are prone to inflation).  It was considered unusual at the time for a level 30 player to have even one gold.  I managed to get over 400 gold before I reached that level.  It turned out to be such a big deal that I was approached by people at work who wanted to know how I had managed it (I still don't know how they found out).

I will explain how I did it.  I started by mining a lot of copper ore.  The selling price for this material averaged around 2 gold for a stack of 20 ore on the Wow Auction House.  After selling a fair amount, I found I had around 20 gold.  I realized that I could buy most of the cheap copper stacks and sell them for a higher price while still undercutting the competition, at a small profit.  I did this, and it did not take long before I could afford to buy out everything listed below 5 gold a stack.  This raised the minimum price to just under 5 gold a stack, and I was the one selling it all.  Over the next few weeks, as I amassed more wealth, I was able to buy out even more, and eventually I had the minimum price at 8 gold a stack.  I also had around 400 gold.  I never really had to worry about money, because at the time, that was more gold than even significantly higher level characters had.  I did not actually even realize it was a big deal until people started making a big deal out of it.

From a real life perspective, what I did was to establish a monopoly on copper and then use that monopoly to force people to pay exorbitant prices for it.  To be clear, this is illegal in most countries, but it is not illegal in Wow.  For me, this was a good learning experience, both on an economic level and a social level.  Had I logged the entire process, it might even have value as an economic study.

The point of this is, game economies can be abused, and as a game developer, it is important to consider things like this.  In most games, it does not make a huge difference if someone like me establishes a monopoly like this, because no one is going to starve because of it.  In a video game, something like this is a minor inconvenience, and the worst it will cause is annoyance.  I could easily have done worse though.  With enough gold (and given a few months of this, I could have had plenty), I could have shut down the copper market entirely, by consistently buying out everything until I ran out of money.  I could also have crashed the market by putting a lot of copper on for extremely low prices (in fact, I would like to try this one, at some point).  As a game developer it is important to consider whether you want to permit this behavior or not and what you might do to prevent it.


Economics in games can be quite a difficult task.  It is easy to end up with very unexpected results. Monopoly is a perfect example of this.  It turns out the Monopoly economy is fairly well balanced.  The problem is that practically no one plays by the rules.  The biggest problem is how Free Parking is treated.  Most money sinks in Monopoly are diverted into the middle of the board, to be given to whoever lands on Free Parking.  It is not obvious, but this creates a problem.  Money keeps coming into the economy, but the money that is supposed to go out does not.  The end result is that the game often takes 5 to 10 times as long as intended.  Ironically, the thing people hate the most about monopoly is that it takes so long, but if they followed the rules, it would actually be much  better.  A balanced game economy can make or break a game, but even in tabletop games, the players can still ruin it for themselves.

Understanding different types of game economies and the tools that can be used to control them can make the task of creating a balanced economy much easier.