Monday, February 05, 2007

Time Inconsistency in MMORGs or The Case Against the Burning Crusade

In my previous post I argued that the incentives of Blizzard, the company responsible for the very successful massively multiplayer online role playing game World of Warcraft, were on the whole aligned with those of their customers: Blizzard wants to make the game more fun so that more people will pay them more money to play it. The purpose of this post is to discuss a possible exception, analogous to some familiar problems in economics.

The big news of recent months for World of Warcraft fans was the introduction of an expansion to the game, permitting players to explore new areas, get new and better gear, increase their characters' level above the old limit. While many players welcomed it, some did not.

To see why, consider the situation of a long term player just before the change. His character—for simplicity assume he has only one—has been at level sixty for a long time. Since no higher level was possible he has put his time into acquiring elite gear, armor and weapons and such that increase the wearer's strength, magical ability, endurance. Acquiring that gear involved spending hundreds of hours, some of it in twenty or even forty man raids organized and scheduled on a weekly basis and running over a period of months, designed to let the character gradually accumulate items and status that could be used to acquire very high grade equipment. Through these and other efforts—the game provided several different ways of getting high grade gear, all difficult—the character acquired equipment that both made him more effective and got him status with other players. When another player sees him and looks at his gear, most of it showing as elite purple, it is clear that he has earned it.

Now comes the new upgrade. In ten hours of play in the new area a level sixty character can acquire as quest rewards two or three pieces of equipment, each as good as something that used to take a great deal more work to get. The player who stopped playing his first character at level sixty and switched to developing a new character—or even, as is rumored to occasionally happen, stopped playing almost entirely—can now get his character to the same level of equipment as those who put in many months pushing their level sixty to higher and higher levels of achievement. This makes the game more fun for some of us, but for others it feels as though all the accomplishments of the past year have suddenly turned to ashes, their treasured purples no better than the new, easily acquired, high level greens. A priori, one cannot tell if the change is on net a gain or a loss.

The interesting point is that it might be a gain for Blizzard even if it were a loss for the players. Sunk costs, as economists say, are sunk costs; there is no way of getting back all the time you spent acquiring elite gear. Even if your past efforts have turned out to be worth much less than you thought they were, there are now lots of new opportunities for new efforts to get new elite gear far better than what you used to have—if you are willing to spend enough time doing it. It was your past playing time that took the hit, which may not be an argument against continuing to pay Blizzard to continue to play in the future.

Readers who are economists will see where this is leading. In a full information zero transaction cost world, Blizzard would take the hit in advance; the knowledge that they were going to devalue purples in 2007 would reduce the incentive to acquire them, and the fun of acquiring them, in 2005 and 2006, and so reduce Blizzard's revenue in those years, giving them an incentive to take due account of the cost the expansion imposed on some of the most active players. But in the real world with its real limits, players do not know—Blizzard does not know—what future expansions will be like. Once 2005 and 2006 are past, Blizzard can, in effect, double cross some of its old players by devaluing their items, and it may well be in its interest to do so.

The logic is very much like the logic of rent control. One of its undesirable consequences is to reduce the incentive to build new apartment buildings. One possible solution is for the Mayor to announce that new buildings will be uncontrolled. But once new buildings are built, they are old buildings; the same political incentives that led to the initial rent control will give the Mayor, or his successor, an incentive to expand rent control to the buildings constructed since. Unless the Mayor has some way of committing himself to a long term policy of keeping them uncontrolled, developers will discount his promise to take account of his incentive to later break it, with the result that fewer new buildings will be built. Interested readers may want to look at the relevant chapter of my webbed Price Theory.


Anonymous said...

Two words, repeated game, Blizzard was actually fully aware of that and they did not expect it to happen.

It is however important to say that the level 60 players didn't lose anything, their asset lost value, that's all, but since they didn't own an option to guarantee future "elite recognition" we cannot say they lost something :) Now, they could have bought such an option on a free market, in the form of a label, guaranteeing that they obtained such status under such circumstances

Anonymous said...

Most relatively experienced MMORPG gamers will realize that when a brand new MMORPG emerges, an expansion will always follow. This was true for Diablo 2, Neverwinter Nights, Guild Wars, Everquest, and so on. In the case of Neverwinter Nights, several expansions have been added before the release of Neverwinter Nights 2. The same experienced MMORPG gamers may also realize that all MMORPG expansions have a very real potential of devaluing the gear you can acquire in the pre-expansion game world. But this is part of the MMORPG industry that has become routine, which makes it different compared to rent control. Buildings are not deregulated then re-imposed with rent control nearly as often as expansions for computer games are made, primarily because political reactions against that form of regular policy reversals on rent control would be visibly more hostile.

What this means is that the onus is on players to balance out their short term interests (i.e. this new game is really fun) against their long term interests (i.e. but don't overindulge until the expansion comes out), much like the dilemmas outlined in your previous post about dual maximands. This is where Blizzard could have enacted some paternalistic policies to provide incentive for players to not invest an amount of effort that they will regret when the expansion comes out. But this would hardly be in the interest of Blizzard. Their very objective of wanting you to have fun is framed in the overarching premise of wanting you to play the game to start with. This, I think, is a more accurate representation of Blizzard interests not aligning with those of its customers.

David Friedman said...

Anonymous argues that experiences gamers will expect the sort of devaluation I described. But their expecting it doesn't eliminate the problem, any more than in the rent control example. What you need is some sort of commitment device--some way in which Blizzard can if it wishes promise not to devalue items and have the promise believed.

Anonymous said...

The developers of MMORPG City of Heroes/(Villains) initially didn't want to have "gear" and that whole endgame thing. Because the variety of powersets in the game is very large, and each combination plays very differently against the various mobs, and because the character/costume creation is unparalleled in any game anywhere (no two characters look alike in the game at all) the "endgame" for City of Heroes is just to roll another "alt" (another hero/villain with another combination of powers - powers you might have seen in action used by other players and thought "wow"), including 2 ATs (Archetypes - e.g. blaster, tank) that are only unlocked for lvl 50s (highest level in game atm).

Something sort of analogous to what you are talking about with WoW happened with CoX though. At one point something called ED (enhancement diversification) was introduced, whereby the enhancements (permanent powerups) one had in one's powers were modestly devalued. (The devs said this was to provide "headroom" for later high end content, which hasn't yet been introduced.) My you should have seen the furore on the forums! (The population didn't suffer all that much though - a regular phenomenon on CoX forums is people humbly returning after a soujourn on WoW or GW :) )

The devs look like they are now introducing something equivalent to crafting ("inventions"), and the leading dev said in an interview recently that he'd learned his lesson that the "traditional" aspects of the MMORPG were there for a reason.

I highly recommend CoX, the character creation system has to be seen to be believed, the fighting action is slick and intuitive, the animations are great, the "spell" effects (graphics/sound) are incredibly varied and thematic, and there are tons of them, the control system is massively redundant so you can tailor it minutely to your playstyle, the game balance (even in PvP) is pretty good (perhaps not as good as some games, but there are no game breakers in there). The population is mostly warm and helpful (I think mainly because it's composed of slightly older gamers - perhaps people who used to read comics when they were kids, when there wasn't the plethora of alternatives there is now). And (after 14 levels, if you wish) you get to fly!

(Btw David, I only just recently discovered you've got a blog, great to see it, thanks for taking the time and trouble over it, and it's now on my list of regulars!)

Leonard said...

I'm thinking an inflation analogy could serve well here, too. Blizzard controls the "currency" of elite items, and can create more of them at essentially zero cost. So, they have the incentive to do so if it can help them.

daublin said...

The players love this change, David! I hated it, because my guy was at level 58 when the expansion came out. :) But most players are pretty excited about it. Collecting ultra-super-elite gear is okay, but it is boring compared to leveling and exploring new areas.

I don't have a crisp economics lesson, but let me sketch two aspects.

First, the game is supposed to provide interest, not just earned status, and so there is a constant shell game going on to keep people playing anyway. So a lot of what Blizzard does is to make you think you are getting ahead when really what you are doing might not matter too too much.

More interestingly, existing players are not super-great at the second maximund you describe in your previous article. That is, they really seem to *think* a higher level cap will make them happier, even though IMHO it would be better to stick at level 60 and limit themselves to new classes and new areas--something more like the many-alts style of play that gurugeorge describes.