A Test of the Law of Demand in a Virtual World

TLDR

A virtual world is a persistent, synthetic online environment accessed by many users, yet its fantasy themes raise doubts that player behavior is economically normal, prompting the creation of Arden to test this assumption. The study aimed to determine whether fantasy gamers in Arden obey the law of demand by testing if higher prices of a health potion reduce its demand. Researchers built two identical worlds differing only in the price of a health potion—twice as high in the experimental world—and randomly assigned 43 players to each, allowing them to play for a month. The experiment reported how price changes affected demand for a health potion in the virtual world.

Abstract

We report results of an experiment on prices and demand in a fantasy-based virtual world. A virtual world is a persistent, synthetic, online environment that can be accessed by many users at the same time. Because most virtual worlds are built around a fantasy theme, complete with magic, monsters, and treasure, there is considerable skepticism that human behavior in such environments is in any way “normal.” Our world, “Arden,” was designed to test whether players in a typical fantasy environment were economically “normal.” Specifically, we tested whether fantasy gamers conform to the law of demand, which states that increasing the price of a good, all else equal, will reduce the quantity demanded. We created two exactly equivalent worlds, and randomly assigned players to one or the other. The only difference in the two worlds was that the price of a single good, a health potion, was twice as high in the experimental world than in the control. We allowed players (N = 43) to enter and play the environment for a month.