Tobold's Blog
Thursday, August 04, 2011
 
Diablo III mudflation

In case you aren't familiar with the term mudflation, it describes the drop in value of virtual items in a game over time, due to new items dropping every day. In economic speak this corresponds to a deflation, not inflation.

I keep reading blog posts and comments of people who believe that prices for rare drops and legendary items in Diablo III will be very high. I am sure that this could be the case for the very first legendary items that drop. But according to Blizzard, items in Diablo III will *not* become soulbound. That is the rare item you bought from the AH can be used by you, and then resold. Furthermore there is no virtual wear and tear, no item degradation. Thus items in Diablo III will suffer seriously from mudflation, because supply will constantly increase, while demand will stabilize over time. Pro tip: Legendary items on the Diablo III auction house are *not* a good investment opportunity. They will drop in value fast over time.

Of course Blizzard can over time introduce new items into Diablo III, which again *at the time of their release* will be very valuable. But however rare they make the drop, between millions of players there will always be a constant stream of these items coming into the economy, while the number of items leaving the economy (from closed accounts mainly) will be minor. It does not matter that there is maybe some Russian billionaire out there who would be willing to pay thousands of dollars for some legendary item; he'll only buy the first one, and because the number of Russian billionaires playing Diablo III won't increase much over time, prices will drop after the first bunch of crazy rich guys bought the first bunch of freshly dropped legendary items.

Virtual economies are subject to the same laws as real economies.
Comments:
For me, the price is not the issue, bot rather the effect it will have on the game population. Just like online poker sites, the minute there is a legit way of making money of internet gaming, people trying to make a quick buck, will flock there.
Scammers, spammers botters hackers dupers et al.
I doubt it will make for a nice community at all.
You may claim that in d2 there was item selling via ebay also, but it was such a small part of the populace to not really make a difference. But now.. Now players will try and scam those with more money than sense, or young players.

Also, can you just play for your own fun, knowing that this and that drop is worth 5$ ? Personally I'd prefer my gaming and my random drops to be priceless.
 
Agreed, I had exactly the same experience in Magic the Gathering Online.

But then the quick buck crowd is divided into a "dishonest but legal" and a "plain illegal" part. And I'd expect the "plain illegal" guys to be better persecuted on an official RMT platform.
 
Tobold -

That's just standard old deflation - increase in supply with stabilized demand.

"Mudflation" refers to stats: stats constantly increase, which trivializes challenge, which decreases the utility and lifespan of content. It's inflationary (an increase in demand in a specific market sector) based on the purchasing capital of basic buying ability.

Essentially, mudflation is that weird force that makes cutting edge raids eventually accessable to the masses, then the people who can barely work a mouse, then makes it into a five-man group doing it for kicks, then into something soloable and trivial and unused. It's also accellerative, which, using WoW as an example, is reflected in post-BC content: once a raid tier is passed by basic gear drops (you can't get gear there anymore that improves things) nobody really goes, no matter how interesting or challenging the content may be.

Anyway - you're dead right on what's going to happen, but Diablo's model is simply an infinite supply/limited demand deflationary one. TF2's RMT is about the same thing (though more limited in scope), where desirable items are available through Valve for just a few cents.

Your "Time vs. Money" post hit it dead on, I think - virtual items will turn out to be worthless things, and that'll likely come as a shock to folks. Garage sale fodder. :)

Where DIII may be different may be in set items. Even with infinite supply, the initial drops will be slow enough that it's unlikely the price fall will start in the first year. But investment opportunities? I doubt it. I doubt it a lot.
 
Spot on except the last thing. Virtual economies don't quite function like real economies because of a number of things like storage being free, supply being infinite and so on.

Very good article here:
http://www.gamasutra.com/view/feature/6437/the_fwords_of_mmos_faucets.php
 
We can make a guess as to how much things will cost on the Diablo real-money AH by looking at the WoW AH and comparing prices to the price of gold from sellers (around $1.5-2 per 1000 on my server - Argent Dawn EU)

So, one month into 4.2 patch, iLevel 378 (equal to normal mode raid drops) BoEs are sold for 30K-80K, which is $45-160 if you purchase them with gold bought for real money. Again, these items are equal to normal (non-heroic) raid drops (=nothing special).

We can only imagine how much the 4.2 legendary staff would fetch if it was BoE, but probably no less than 500-1000K gold (seeing that it requires about 50 boss kills at least, more for 10-mans). Translated to real money it is $750-2000.
 
I don't think you can conclude from WoW AH prices to Diablo III AH prices, because in WoW items traded on the AH are mostly bind on equip and can't be resold after use.
 
As prices go down Blizz can introduce a tier of content that is marginally higher than the previous one and so it will drain the lower items from the AH and add new stuff.
 
Dragon--- no. In the real world things wear out, get set of fire, sat on by elephants, whatever.

IMO the lack of degradation really renders this whole system more attractive to Blizzard. Rather than having people taking major chunks of cash out of the system, you will have the vast majority of players getting like 1 buck a month added to their battle.net account, since the cost of taking the money out of the system will make it uneconomical. It's a nearly closed system with Blizzard ending up with all the swag.
 
They said there would be (practically) no soulbound items.

Did they also say there would be no item decay?

If so, you're probably right. If not... I just don't see how that system would work properly without item decay. Make stuff repairable, but at an ever-decreasing max durability. It might also bring a lot more money into Blizzard's coffers.

I should make a post about my speculations about this.
 
Project Entropia worked like that, and the community was pretty nice and friendly. Of course it may be partly a function of size.
 
I am not a Diablo expert, but I remember that in D2 items wore off over time which needed repairing which cost gold.

So I would expect at least the wearing off of D3 items with use and the requirement to repair them using gold. You see how this might increase the natural baseline time equivalent value of an item.

If one spent 3000g on a very useful item over time including repairs, he/she might be reluctant selling it only at a fraction of that price. He/She instead might decide, for example, to keep the item hence removing it from the economy and contributing keeping its supply lower then or equal to its natural drop rate.
 
I agree, initially those very rare items might fetch a "good" price, whatever "good" means in this context but with time the supply will increase and prices will plummet. I doubt anybody will be able to make a living off of this, unless some "investor" takes $100K, buys every item he can find and then sells it at a profit. Even then, Blizzard said they would intervene if something like that were to occur.
 
That is the rare item you bought from the AH can be used by you, and then resold. Furthermore there is no virtual wear and tear, no item degradation. Thus items in Diablo III will suffer seriously from mudflation, because supply will constantly increase, while demand will stabilize over time.

And if people are paying attention, then this should be the writing on the wall that players should take notice of NOW, instead of later. The type of system Blizzard is introducing in D3 will undoubtedly put Blizzard into a position of monkey'ing with the content on a constant basis to maintain constant cash flow. How much advance notice is Blizzard going to give for new content additions/content updates? How fast are these updates to content and code going to come? How much "time" are players going to have to "invest" in constant research to ensure that what they pay is a fair price considering all of the above?
 
What about if they do full resets like they have with Diablo 2?
 
Thus items in Diablo III will suffer seriously from mudflation, because supply will constantly increase, while demand will stabilize over time. [...] But however rare they make the drop, between millions of players there will always be a constant stream of these items coming into the economy, while the number of items leaving the economy (from closed accounts mainly) will be minor.

This is wrong for a variety of reasons. First, some reading material:

http://us.blizzard.com/diablo3/world/systems/crafting.xml

http://forums.battle.net/thread.html?topicId=27807930581&postId=278057081416&sid=3000#36

1) Every player has a portal vendor they can use to sell their gear to mid-dungeon. This will eliminate a lot of the junk gear on the fly.

2) There is a crafting system that relies on Salvaging (aka disenchanting) gear for components. The crafted gear is randomly generated, and you lose the majority of those components in the process. The NPC crafters have XP bars that only fill when they craft something, so each and every character will likely have X amount of item destruction built-in.

3) Seems obvious, but the economy of the game is limited to those players using the AH. So while millions of players may be grinding millions of mobs at any given time, only the drops to players using the AH will "count" in the economy.

4) The best items will drop in Hell difficulty, of course. If there are no difficulty restrictions on gear (e.g. you can wear Hell-level gear in Nightmare mode), the best items will therefore come from the difficulty least conducive to straight farming. Straight-up gold farming by bots will be a much bigger concern IMO than rare item depreciation.

5) There is somewhat of an assumption that players will be selling back their BiS gear when it no longer becomes BiS. The way the skill system is set up though (e.g. pick any 6 skills out of a pool of 24 based on play-style), it is entirely possible that each player may want/need multiple sets of "BiS" gear based on their skill usage, increasing demand by X * number of players.

6) Convenience factor. That is to say, there could be demand for rare items from players who would treat them like purchases from a Cash Shop, having neither the time nor inclination in selling them again. The number of buyers on eBay is orders of magnitude larger than the number of sellers.
 
Hm - interesting.

It's increasingly seeming to me that we need more details on how DIII will work before we can make any solid economic predictions at all.

A high-randomness system with item degredation and a 1/1000000 chance for some items to drop will look very different to a low-randomness system with no items rarer than a 1/5000 drop and no item degredation.

My economic theory isn't good enough to figure out which one is more advantageous to Blizz, sadly.

- Hugh @ MMO Melting Pot
 
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