Player as firm: The unit of analysis

An important part of the research process is identifying the smallest feasible unit of analysis. So what is the unit of analysis in WoW? Well, it’s the player! This may seem obvious, but to my knowledge it has never been explicitly recognized in any of the economics work I’ve seen. Let’s take a moment to understand why.

WoW players often have multiple characters on a single server. The reasons for this are many, but there are three that are most important to understanding the WoW economy. First, players like to create bank and auction house characters, and often these roles are mixed. The bank character becomes a store of cash and valuable items that it can quickly mobilize to participate in the economy. For some players who particularly enjoy dealing with the economy, the bank alt is more like a main. Second, players like to have access to multiple professions. Not having to tip other players for their, say, enchanting or blacksmithing skill, can save a little cash. (This is notwithstanding that the cost of actually learning and levelling the tertiary professions could be quite high for the player). Lastly, players who want to experience a different perspective on the game will most likely create alts on the same server as their more powerful high-level characters. That way, they can participate in a sort of nepotism with their alts, moving them through the game more quickly.

What should we make of this? A player’s characters on a single server are jointly engaged in production, and each has access to the same information about the market. They constitute the productive units of a ‘firm’. (One could also argue that they are individual firms in perfect collusion with one another, but I think this overly complicates the picture). The CEO, board, and shareholders are all embodied by the player. Players, not characters, are the smallest productive units in the game economy. On this view, competition within the economy should be viewed as taking place between players (“firms”) who have interests in multiple sectors of the economy. The organization of firms is heterogeneous and occurs on a spectrum: at one end are players who do not engage in a lot of inter-character interaction, as if they were wholly-owned subsidiaries of a conglomerate. On the other end are players who actively engage their characters with one another to meet a single economic end, and this would include both gold/item farmers and players who get the most fun out of participating in the economy.

We are left with several practical and theoretical questions. On the practical side is the very real problem of identifying players when you can only directly observe the actions of single characters. This is not easy, but there are ways to do it. On the theoretical side, a whole host of interesting research topics presents itself: How are player-firms organized? What is the nature of competition in the economy? How economically organized are guilds? What role does arbitrage play in the economy? How influenced are players by day-to-day fluctuations in the market? I hope to take up these and other questions in future posts.

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