Tobold's Blog
Tuesday, December 23, 2008
Game over and the economy

There is an interesting phenomenon going on in the World of Warcraft economy: Deflation, prices of nearly all goods are falling. The WoW economist and the Greedy Goblin have different explanations for it, but I think they are both wrong. Both are far too much looking at the WoW economy like a real economy, and forgetting that World of Warcraft is first and foremost a game.

The reason why one would expect inflation in Wrath of the Lich King is that players can now make even more money when doing daily quests. And there are less money sinks, WotLK flying is 5 times cheaper than the TBC epic flying mount. So people could grind 25 daily quests a day, and spend that money on crafted epics, enchantments, potions, special buff food, and whatever else there is that can make their characters stronger. Which is what they did in The Burning Crusade, so why wouldn't they do it in Wrath of the Lich King?

Because in Wrath of the Lich King they don't need to. In a real economy it makes sense to get as rich as possible. In a game economy virtual gold is just a means towards a final goal: The game over screen. Wait! World of Warcraft has a game over screen? Not a real one, no. But at some point in time you will feel the game is over for you. Either because you just didn't have fun any more. Or because you reached something which is as close as it gets to a game over screen in a MMORPG: You killed the final boss and got the final gear, with no way to further develop your character any more before the next content patch or expansion adds more. And in Wrath of the Lich King that point is a lot closer for all of us than it was in the last expansion.

Nihilum famously "finished" Wrath of the Lich King just 65 hours after it was released. But even regular raiding guilds like mine cleared already most of the currently existing raid bosses. Not yet 6 weeks into the game I'm already wearing 7 level 80 epics, and getting full epic is only a matter of time. And as long as we are making good progress, why would we want to push much harder? The kind of effort where raiders were grinding all day to get the very best in enchantments etc. is simply not necessary any more. Be Imba! tells me that not all my gear has the best possible enchantments or gems in it, but I'm so not going to put an enchanment that cost several hundred gold on one of my remaining blue armor pieces! And I believe that most people think that way. If you can reach your goal with a reasonable effort, why would you want to make an exceptional effort, and grind money for hours for a small incremental effect? Especially if you can expect to soon find better gear, spending too much money on enchantments is just a waste. It is only when raid guilds get stuck that they go into overdrive, and try to get past the blockage by using every tiny little advantage. In Wrath of the Lich King most people simply don't experience that blockage yet, and depending how hard the future raids are, they never might.

Raids being easier and the end of the raid progression being so close right now has a profound effect on the WoW economy. Green Armadillo helpfully lists all the options you have to get an item-level 200 cloth robe, and concludes that by far the easiest way is to get it as drop in a raid. My mage is tailor and made a moonshroud robe for my priest, and an ebonweave robe for himself, but because of deflation and not needing the mage robe right away (mage is still 70, robe is 80), I'm trying to sell it on the auction house. No takers, although I'm just asking for a bit over the AH prices of materials. Because anyone who feels he would actually *need* such a robe, is probably in a position where he could get it easier as a raid drop. Why farm money or grind reputation if the same reward can be had with a bit of luck on your next raid night?

So I think inflation isn't happening because people just don't see the need to farm money to buy things. And WoW being less of an end game grind is totally fine with me. The current deflation is from prices falling towards a reasonable level from an initial "oh, new, shiny, I must have that immediately" level. The huge inflation in lets say enchanting materials that the WoW economist expects might still happen, but only if the next raid dungeon is a lot harder.
You could very well be right. WoW is on easy mode right now. But there are still competitive arena teams, and there is still half of the player base that hasn't hit 80 yet, and I'm sure hardcore people have alts that they want to deck out in all of the expensive stuff. The next content patch will hopefully knock all off you high end raiders on your asses, so you'll come buy my enchants. :) Prices are still relatively high for cosmic essences and infinite dust on my server at least, and the abyss crystal market can still be cornered for short periods.

Of course you are right that WoW is first and foremost a game. But people are going to have more gold. If they spend it on motorcycles and elephants, then prices will go down. If they spend it in the auction house, prices will go up.

Thanks for plugging us again. I love your stuff. Take care.
I think you're right. Once people feel they have 'enough' there's no real drive for most players to get more. And a lot of people went into this expansion with several thousand gold from TBC.

But the thing about the 'no real drive' is that this is what makes a game casual friendly. You could go for that extra edge if you really want, but you don't have to. So the people who don't have the time to grind out the cash/rep/etc aren't cut out of the content in the same way.

The other thing is that enchants and gemcutting recipes have been made much more widely available. You can just buy most of them and don't have to wait for random world/raid drops. So the prices on those doesn't go through the roof so much anyway.

I also think people will be working on gearing up alts, but not sure how much difference it'll make to prices. Because a lot of those alts will also be gatherers or otherwise selling as much as they buy.
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I'd have expected precisely the level of (short term) price falls we're seeing right now. At first, high level drops were rare as few were L80. As more people reach the level cap and start to pick up good gear, the BOE drops are being auctioned or disenchanted rather than kept by the players. The supply of goods is going up, the demand is going down and hence you get price reductions. In the longer term, though, I'd expect prices to rise again, as the amount of money in the economy grows and the supply of goods stabilises. I've been making good money by concentrating on trading twink items, because the mains have more money and the supply of low-level items for PvE and PvP has stayed constant (or even fallen).

This is just basic supply & demand isn't it?
Levelling tailoring is still a pita, though, so even less incentive for me to spend money on mats. At least in BC, Frozen Shadoweave was worth the grind.
As I've commented on the WoW Economist blog, I think the prices will pick up as more and more players get to 80 and the progression shifts from a level based one to an item/achievement based one. For those that want to wear the best gear, to be as powerful as their spec will allow them to be, items and enchants will continue to have their draw. For those who chase after achievements, particularly the harder raid/dungeon achievements in Northrend, certain gear will make these challenges easier, and perhaps even possible in a few cases. Then there are the more "casual" achievements and ways of distinguishing your character. Mount and companion pet achievements can eat up a lot of gold, particularly if you purchase the game's largest current money sink, but with the amount of gold players now have access to, these aren't impossible grinds even for the casual player.

Then of course we have PvP. PvP just got started a few days ago and once players begin devoting more time to the new arenas and we start seeing perhaps more serious organization on Wintergrasp fights, enhancing one's gear will become an issue again. Just because you can waltz through Naxx doesn't mean your opponents in an arena were as blase about their gear/enchants/gems.

Lastly, as you alluded to, there is still a lot of high end content left to be rolled out. Ulduar is by all accounts harder than the entry level raids and I can only expect "hard" modes for it as well. Also Blizzard is constantly reworking professions, adding recipes and tweaking items, to keep things fresh and relevant as the content changes.

Right now the economy is in flux. I think the new year and especially patch 3.1 will be better indicators of where it is headed.
You could always petition the Lich King to bailout the economy. Or would that be too realistic? Lol!
The bad thing is this kills one of the more enjoyable parts of the game for me. No one is buying my stuff, even when I post it at a loss. What's the point of even having crafting professions anymore?
Maybe it's just cuz my highest char is only 69, but everything under 70 is WAY OVERPRICED on my server (Blackhand). I took a break from WoW starting when AoC came out, and just resubbed in Nov. Prices for mats are insane. If I want to make a low level alt some low level items, I basically can't with my very small bank account. Need a single silver ore for a level 15 blacksmithing recipe? 10 gold. ??? Ok, maybe I'll just get a bar and not the ore. Nuh uh, 15 gold. WTF is going on? Stack of rugged leather to make Runecloth bags? 20-40 gold. It's insane and a more than a little frustrating.

On the other hand, I was able to pick up awesome gems for my mage's socketed head-piece for what I thought was very cheap. So it seems different parts of the economy are fluctuating in different directions. Old "high end" stuff from TBC? Deflated. Low level stuff that newly minted DeathKnights need to jumpstart their professions? Way, WAY overinflated.
"Prices for mats are insane."
That's not necessarily a bad thing. It means that a low-level character with gathering skills can generate money very quickly from all the DKs who can't be bothered to go mine all that copper.
Supply and Demand at its finest. Even disregarding how easy or hard Naxx is, a good chunk of the playerbase that actually gets enchants, buys gear/gems, are level 80. They are either farming for materials for their own professions, or they are done leveling and have bought the enchants they are going to use.

Frostweave cloth, at least on my server, was going for a lot the first few weeks. For tailors, it was a huge pain to level tailoring. Luckily I've never been a tailor, so I was able to charge "extra" for the stuff, because there was a high demand and relatively low supply of it. Now that most tailors have either leveled it up, or re-rolled something remotely useful, the price of cloth has dropped.

I think the price drops thus far are less because the game is "over" or "more over" than it was a month ago. Just as previous posters have said, supply and demand is the reason. If there are now 500 enchanters disenchanting every green and blue they get now, they drive the price down selling the mats now that they have leveled their profession. Just like with herb prices for inscription, if there is mass hording of goods (mats for professions) then the prices will rise as people need "X" and there are only 20 auctions up for "X".

I'd imagine as time goes on, when the extreme casuals finally hit 80, or alts start hitting 80, the prices will go up again. Not at any one particular date, but over time. I'm not sure if there are any WoW economic blogs or websites that track average prices of goods, but that would be an interesting idea, at least to me.

Tobold- are there any websites/blogs that track the prices of basic stuff, like cloth, ore, leather, enchanting mats, potions, etc, over time. I'd assume that the average prices go up and down over time. These seem like the base materials to track to see where the economy is going.

The release of WoTLK was just a huge peak of prices followed by the inevitable drop in prices. I bet like most real-life economies, the prices are much more of a wave of peaks and valleys than it is a stable line. In my opinion, the game being "finished" right now is just a shadow of supply and demand principles.
I don't think I could entirely agree with you in regards to your statement on the game over part, or at least why grind for money part. I think the statement is like saying Why PVP? I mean they way you put that there is really no compelling entertainment value to this aspect of play. There are a good number of people who enjoy that aspect of the game.

Also its hard to predict inflation possibilities, Blizzard will have a few cross hairs aimed at professions in the next big content release - I think they realize they need to keep that aspect of the game fresh. I think the honeymoon is over with Nax25 and post raiding content is going to be easier than sunwell but harder than TK/SSC. tracks historical prices across many servers. Prices vary a *lot* by server, and even by faction (Horde/Alliance) within a server.

If you made money before WotLK crafting, you can make money now. Every crafting profession has its ways. I have toons covering all the crafting professions, and I think the big ones are Jewelcrafting, Enchanting, and Inscription. But your server may vary.

I've also noticed some deflation. I attribute it more to increased supply than decreased demand. The majority of level-80's have *not* cleared Naxx-10, and many of them are not skilled enough to do heroics or arena. So they are farming and increasing the supply of mats on the AH.
If you are right and people aren't buying because they have hit the "game over" point already, does this bode poorly for long term interest in the expansion?
I believe that there is a combination of reasons for the prices being more stagnant and funds being slow to be released. The first and foremost is the fact that many players did save up a lot of funds and ran their mains straight to 80. The big word there is a lot of the content is much easier when compared to TBC release. So why would someone want to go out and pay a ton of money for items and enchants.

Another area I believe is hitting the economy is the fact that people are taking their times. A lot of people are leveling multiple toons and can create much of their own gear and items (as was stated in several comments). This will naturally hold the market down. The experienced players know how to gear and were better prepared for this release.

I do believe that the market will rise back up once the more casual group of gamers start leveling up. I do not mean this in a bad way, but I believe the mentatility of this group is to go out and spend the funds on buying the stuff. They tend to lean towards the easiest way to acquiring something rather than taking the time to make it theirself.

Ultimately, only time will tell. I am personally pulling for the casual gamers to cause the market to move again.
I think a lot of the casual players that crafted their way into BoP epic gear in TBC are hitting 415-425 in a crafting profession and trading it in for a gathering profession. This is creating a large surplus of gatherers compared to the consumption by end comsumers and crafters. Thus lower prices.

Another thing to consider is the large supplies of gold that many players had saved up for WotLK. The min/max raiders who went with double crafting profession were willing to pay a premium for raw goods on the AH just to reach 450 skill with their crafts. As a skinner/leatherworker, there is a maximum price that I am willing to pay for gathered mats that I can simply go collect myself. The enchanter/blacksmith does not have this option like a miner/blacksmith does. I would wager that most of the first players to rush to 80 and pay the high prices on the AH were the min/max crowd and now they are more or less out of the market and you are seeing the more casual players setting the demand and they aren't willing to pay as much.

Also while there are a TON of daily quests to do in WotLK they are all scattered around the world in small groups of 2-4. There is no Shattered Sun-like faction base yet with a hub of 10 dailys all easily accessible and easily completed. Perhaps future patches will introduce a true daily questing hub that even the most lazy of players cannot pass off as too time consuming. Additionally daily quests are still rewarding the same ~13g that they were in TBC.

You also have to look at the large cost of training skills, professions, and cold weather flying that are all sucking gold out of the economy.

<3 the Greedy Goblin and WoW Economist. I went from a net worth of ~2000g to ~8000g in about two weeks just from applying what I read there.
Without credit and interest, the WoW economy won't function like the real world economy. It's much more of a pure supply/demand system. Prices go down when there is a glut of supply or a reduction in demand. I suspect that it's actually a little of both at the moment, as there aren't as many people raiding (demand reduction) and the better gear and gold rewards from questing means the supply is covered through regular play rather than farming.
You've hit my point more succinctly than I did. My point was not that raiding is the easiest way to get stuff (it might be, but I wouldn't know since I don't raid), but rather that there isn't much incentive to put in exceptional effort (e.g. farm 80 emblems) if reasonable effort (e.g. PUG Archavon or Heroics) can get the job done.
yeah i never understand when ppl complain prices are too high on the AH. I must conclude they're just too lazy to make any money themselves. I've always found everything entirely reasonable and affordable. And I have some great ways to make easy money myself.

Personally I started out super eager to purchase the best gear, gems & enchants in game. But yes, when I found out how easy the content was, I stopped worrying about it. Mix/max makes no sense if you're already an experienced raider with a group of solid raider friends.

So you may be right that the game is easy so ppl dont bother to min/max. But remember a lot of people didnt even hit 80 yet... so once the initial rush of hardcore players finished, prices slumped (in some markets) I very much expect they'll pick up.
The discussion assumes that WoW continues to be built around "money", when money is becoming largely irrelevant.

Gold is slowly being designed out of WoW: Tokenised rewards side-step gold completely. In the current version of WotLK, we've even lost the ability to trade items used to gain reputation with factions. Personal benefits are becoming far more important in professions. And achievements appear to provide the real yardstick by which players differentiate themselves from one another - almost none of which can be purchased with gold.

Blizzard haven't shown their hand yet on WotLK consumables. Most of the professions are terribly "not yet implemented" at high level. But the cooked Feasts are an interesting depature from tradition: Rather than spend an individual's resources on consumables, each group is required to bring "a decent cook" to the party. It is not there yet, but conceptually it is possible that gold won't help you much with consumables either in the future.

Finally, don't forget that patch 2.4 raised the earning potential of players substantially. It pre-empted much of WotLK's inflation. Anyone returning to the game after a year away will be confused by suggestions that prices are falling.
"So I think inflation isn't happening because people just don't see the need to farm money to buy things. And WoW being less of an end game grind is totally fine with me. The current deflation is from prices falling towards a reasonable level from an initial "oh, new, shiny, I must have that immediately" level. The huge inflation in lets say enchanting materials that the WoW economist expects might still happen, but only if the next raid dungeon is a lot harder.


I agree with this explanation for the recent changes in prices on the AH. Additionally, the more hardcore players that got to 80 in the first week or two tend to have a lot more gold than the average player and were competing with each other early for items on the AH. Prices are just dropping to an equilibrium point now that they have purchased most of what they needed for initial upgrades/skilling up tradeskills.
Perhaps this will be the last expansion and money sinks are less useful in the "end-game."
Tobold grats on the interview with wowinsider
Damnit so thats why everything dropped suddenly... Now I have to go break even... Grrrrr
I have to disagree, however a very good point was made. My answer is too long to be a comment it will be tomorrow's post. Thanks for the tip.
I disagree completely.

Mats were overpriced in the first place:

The majority of the player base rushed to max out their crafting professions when WotLK hit. That, combined with large amounts of gold stores, skyrocketed prices of the most basic mats. Now that most people have finished maxing out their crafting professions, less and less people are ravaging AH prices for their own gains. The current state of deflation is just a matter of the price of mats tending towards their true market price.

You see this happening during every update (e.g. when new epic recipes are released, or new content/arena seasons come out). People rush to get their new stuff enchanted/made within the first week, and then suddenly the market is abandoned soon after. Prices always spike during these times and then flatten out over time.
As the guy above said, money is phased out and replaced by tokens, badges, whatever, as true and usually soulbound currency.
Super Tuesday still exists. Prices tend to spike around tuesday due to arena points calculating on, you guessed it, tuesday.

This is how the market tended to act in TBC, by the by. People get their new gear and enchant/gem it, once they reach a point where they personally can get no upgrades they temporarily leave the market until such a time as they can get upgrades again, be it their personal position improving or a new patch coming out with new gear they can get.

Enchanting and Jewelcrafting are still the best professions to make money off of because of their non-permanent nature. If you replace the gear, you have to re-enchant/re-gem it. Once you replace a crafted epic, it's usually with a raid or arena epic.
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