The core principles of building prosperous game economies

Crafting a robust game economy is no small feat; it's a multifaceted challenge that demands careful consideration. The goal of game economy design is to maintain the vitality of your game in the long run. Economic problems can cause entire projects to collapse.

In this article, we'll delve into the three pillars you need to worry about when designing a game economy:

1. Currency stability
2. Price rationality
3. Proper allocation

While the spotlight often falls on currency stability, it's essential to understand that each pillar is necessary, but not sufficient – you have to have all three. Neglecting any one of them can undermine the overall stability of your game economy.

Before we dive deeper, let's address a pertinent question: why should you care about your game's economy? A well-crafted economy, when functioning seamlessly, wields the power to breathe life into your game world, making it feel dynamic, relatable, and real.

Granted, not all games place the same emphasis on their economies. Some are laser-focused, while others incorporate economic elements more subtly – a trading mechanic between players or perhaps a virtual store where players can buy items.

Regardless, most games involve some form of transaction. Much like a soundtrack that sets the mood without drawing attention, a successful game economy operates almost unnoticed but significantly enhances the player experience.

Game economy design ties into making your game fun. Even if the economy is not directly part of the fun creation, it shouldn't get in the way of it, it should function in the background. By building a well-functioning game economy, you're doing something that is both good and in your interest: you're making your players happy, and you might be able to pay your bills. A lot of projects fail because they can't get the economy right.

• Theory: the three pillars of a successful game economy, explained
• Practice: building and maintaining a healthy game economy

Theory: the three pillars of a successful game economy, explained

Pillar 1: Currency stability

This should be the true target of economy design, making it the most important of the three. A currency is defined as an item that has no use in and of itself, but is spent to obtain other items that do have a use.

A stable currency needs to provide all these three functions:

• 1. It is a medium of exchange – it can be used as a method of payment. Imagine a scenario within your game economy where players can effortlessly propose, "I'll trade you 600 crowns for that camel." Why is this functionality significant? Well, think about it this way: a player needs a cheeseburger, but all they have is a camel. How does that trade happen? A currency works that problem out.

• 2. It is a measure of account – it can measure value in transactions. Having a standardized unit or system used to quantify and record the value in transactions allows players to have meaningful conversations about the value of different goods, in terms of what they're worth. If you have a stable currency, your players and you, have a ton of information about the value of different goods in your economy.

• 3. It is a store of value. If you have a stable currency, it's a medium of exchange, it's a measure of account, players can set it aside. They have the confidence of knowing that if they want to take a break for a few months when they come back, they are going to have everything they accumulated before. The world feels stable and real.

Stable currencies sustain their value over time. A currency that rapidly gains or loses value or drops out of use can destroy your game's economy overnight. In Diablo 2, for example, gold became so abundant in the game that players abandoned it and started trading in a common, but useful item, the Stone of Jordan. The Stone entirely replaced the game's primary currency, and in-game items were priced in numbers of Stones of Jordan.

If you don't have these functions working with at least one good in your economy, it's almost like you don't have an economy. What you have is a very chaotic situation where players need to talk to each other about goods, and they don't have any way of doing that. It creates this difficulty that detracts players' focus when they really should be focusing on slaying the dragon and having fun.

Pillar 2: Price rationality

Price rationality means that the prices of goods should match what players expect them to be and adapt to changes in supply and demand. This might sound obvious, but if a good is supposed to be valuable, its price should be high: the sword should be expensive, and the carrots should be cheap. Yet sometimes, the market does not work as intended:

Prices can get stuck:

• Below the true value, there will be excess demand leading to shortage
• Above the true value, you are going to have insufficient demand and, thus, a surplus

Production and consumption rates may be off:

• Too much of a rare item being produced causes its price to go down
• Tremendous demand for a common item causes its price to go high

A well-crafted economy wields the power to breathe life into your game world, making it feel dynamic, relatable, and real

Quickly, your economy will be at breaking point. The absence of a fair pricing system creates cascading effects. When prices are off, trading becomes difficult and frustrating for players. This leads to brute force responses from developers, like giving up and declaring the good that's causing issues non-tradeable. This might solve the price problem, but now the game is left with no economy.

Another thing developers sometimes do is put merchants in the game that buy and sell things at fixed prices, in infinite amounts. This does put prices where you want them, but it's a soft way of elbowing out players.

The idea of a living economy is that you don't force things. As a developer, you may say, "We don't really care, we just want to make a fantasy game," but the problem is that a true player economy, where players buy and sell things, feels so much deeper and real to your community.

Pillar 3: Proper allocation

Proper allocation means you want to make sure:

• The right goods get to the right people: you don't want the wizard to get the shield, the warrior to get the wand, and them not being able to do anything about that. It frustrates players.
• As part of that, you also want to make sure the right rewards are in the game. Players should receive the right level of reward for the right input (skill, time, effort), in a way that seems reasonable and fair to everyone.

Otherwise, issues of economic justice come up, like the rangers community being so angry at the rogues because "it's totally unfair that all rogues have to do is walk into a fight, press one button, and they kill everyone."

A virtual economy will be considered fair if it has:

1. Equal opportunity – all the players start with the same thing
2. Equal returns for effort – players who put more into the game get more out. Nothing gets players angrier than seeing that someone else puts in very little effort and gets big rewards

Now, within all this, you don't want it to be perfectly predictable. You, as a developer, want to know everything that's going on, but for your players, you want to create some unpredictability and some randomness – otherwise, it's boring. Unpredictability makes a game deeper and more interesting.

Get all of these three things right, and you have a reasonable chance that your economy is going to work. Now let's talk about practice.

Practice: building and maintaining a healthy game economy

One of the most common questions when building a game economy is "What do I start with?" Should carrots cost one crown, five crowns, 500 crowns? How do you decide?

Developers often build a system based on assumptions. In the absence of an existing market, prior to launch, you can only guess. You make an initial estimation, roll it out to your player base, and if you made a mistake, you adjust. This can happen again and again, increasing player frustration and stress for the developer.

We imagine you asking – how do I bypass this? Is there a practice that empowers me to validate assumptions before presenting them to players? Our answer to that is simulations.

By simulating different scenarios you will take the reins of control over your economy firmly into your hands, ensuring that your players have a fulfilling and enjoyable gaming experience. This practice of simulating, whether you're performing it with specifically designed tools or basic spreadsheet models, should be integrated early on in the development cycle. Otherwise, by the time you see a problem impacting your economy, it is often too late.

Let's see how that should play out.

Rule number 1: Test the economy before launch

In fact, throw things at it. Imagine this scenario: it's 3am on a Sunday morning, and, by some twist of fate, the only players in your game are the wealth hoarders. Then everybody who goes to play the game on Monday night, finds that all the wealth is gone because the hoarders took it all. And now your economy is in disarray.

To avoid such catastrophes, it's essential to test your game's economy thoroughly before launch. You do that by coming up with scenarios and simulating what happens to the economy in those situations.

This proactive approach changes the emotional context in which you and your team operate: it transforms the nightmare situations that keep you up at night into experiments that you can explore and learn from. Instead of fretting over what could go wrong, you can simulate and observe these scenarios, making it easier to fine-tune your economy. While you will not be able to predict everything, it's far better than staying up at 3am worrying about it.

Rule number 2: Understand the control points within your economy

Embrace the idea of deliberately attempting to break your game by simulating different scenarios. In doing so, you not only uncover situations in which the game fails but also find out where the game is brittle.

You learn about the sensitivities of the system: which parameters are so sensitive that even minor adjustments to them can have a profound impact on the system, and which parameters are not as influential. These nuances empower you to make informed and effective decisions because you know which levers you can pull to fix a potential issue.

Rule number 3: Proactively monitor your economy, after launch

Having integrated a simulation engine, you should keep using it throughout the game's lifecycle, constantly calibrating the economy using actual player data from the live game. Having this level of control and insight ensures that you're not merely reacting to issues but proactively shaping the economy to maintain player satisfaction and balance.

By adhering to these practices, you not only gain a deeper understanding of your game's systems but also the ability to maintain control over it. This approach enables you to foresee potential issues, fine-tune sensitive parameters, and ultimately create a game economy that not only survives but thrives, even in the face of unexpected challenges.

Building a successful game economy is hard, and we all know of countless examples where developers have got it wrong. But we hope these tips will help any game development team out there struggling with creating and maintaining a sustainable game economy.

Professor Edward Castronova founded the field of virtual economy research in 2001. Mihai Gheza is the co-founder and CEO of Machinations, a simulation tool for game economy design, and has worked in game economy design throughout his career.

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