Tuesday, November 10, 2009

Trust Online: A World of Warcraft Anecdote

In World of Warcraft, some characters are, among other things, crafters, can produce useful objects such as pieces of armor that they or others can wear. To do so requires some level of skill, obtained by in-game activities, mostly crafting, and ingredients ("mats" for "materials"). At a high level, the required mats are very expensive in in-game money and the product is better—provides a greater improvement to the player wearing it—than most of what players can get in other ways.

A common arrangement is for the player who wants something made to provide the craftsman with the required mats plus a tip, an additional payment in in-game currency. The crafter makes the item and gives it back to his customer. The mechanics of exchanging goods involve each player showing what he is giving the other; the exchange happens when both approve. For ordinary trade, that provides automatic enforcement; if you don't put up what you offered in exchange for what I am offering, I don't click the relevant button and the trade does not happen. If, however, I hand over the necessary materials to a craftsman in order that he can make me something, there is nothing to keep him from walking off with them without giving me anything in exchange.

What started me thinking about this problem was my wife's account of a recent transaction . Her character is, among other things, a high level blacksmith with the recipe for a very high level piece of armor, one whose materials cost about 6000 gold. At current exchange rates—there is an active market trading WoW gold and other virtual goods for money, although Blizzard, the company that runs the game, tries to discourage the practice—that comes to forty or fifty dollars.

Someone looking for a crafter to make that item posted a query. I noticed it and referred him to my wife's character. He gave her the necessary materials plus some additional gold, she crafted his armor and gave it back to him. A satisfactory transaction for both parties.

So far as we know, she was a stranger to him. Why did he trust her? How did he know she wouldn't simply walk off with his materials, perhaps use them to make the same piece of armor for herself?

Part of the answer is that in order to be a high level crafter one must be a high level character, which normally means having spent hundreds or thousands of hours fighting monsters, going on quests, practicing one's craft. My wife's blacksmith is level 80, the highest level currently available in the game. If she cheated a customer, she risked a permanent black mark on her reputation. A single WoW server has a population in (I think) the tens of thousands, large enough to dilute but not eliminate reputational problems. I suspect that if the same transaction could be done by someone who had just created a new character and played him for a few hours, the level of trust would be much lower. The mechanism is the same one that explains why banks favor expensive buildings faced with marble and provides one explanation of why companies engage in expensive advertising campaigns—in each case, paying a sunk cost to make it clear to customers that it would be expensive for the firm to take their money and run.

There are possible substitutes for trust, but they are costly. The customer could, for example, offer to trade 6000 gold worth of materials for 6000 gold in one exchange, then give the gold back, along with the additional payment, in exchange for the armor. Doing it that way, however, would require the blacksmith to have that amount of in-game cash free for the purpose. In this case, at least, she didn't; she has not yet made the armor for herself because she cannot yet afford to do so. A customer who sets that requirement substantially reduces the number of potential transactions. That would be a serious problem for very high end crafting, where only a few crafters will have the necessary recipe. The customer also risks offending the person he wants to trade with by making his distrust obvious.

On one occasion, my wife noticed someone posting in search of a crafter with an additional requirement: "must be a member of a reputable guild." That is a way of improving the reputational mechanism, since guilds, in-game groups of characters who do things together, also have reputations. I am reminded of Adam Smith's argument in favor of a diversity of small religious groups—that they have an incentive to make sure their members behave well in order to keep up the group's reputation. But in World of Warcraft the practice is uncommon; my wife only remembers seeing one such post, and other people reacted negatively to it.

Trust mechanisms are not perfect—people do sometimes cheat. But I found it interesting that they work well enough so that the sort of transaction my wife's character engaged in, for an amount very large in in-game terms and significant even in dollar terms, is not uncommon.


Tom Courtney said...

I wonder if WoW would be a good place to test some of the ideas of the behavioral economists. In this case, since WoW feels like a reasonably close-knit community to lots of people, if it turns out it that some significant fraction of people end up short-circuiting the reputation-verifying process in situations where they shouldn't, you might be able to see it here.

FraserOrr said...

There are two other options that might be considered. One is to use an intermediary, who's stock in trade is trust, much like a banker, or a Knight Templar. If either party defaults, the trustee offers compensation. Their reputation is everything, and it is also their business to determine and upkeep other people's reputations too.

The other option is that, should your wife default on the deal, that she has her head chopped off my the offended party (or his proxy for a fee.)

Both seem to have direct real world parallels. In fact, often the two are combined.

Isak said...

Dr. Friedman, correct me if I'm wrong, but in World of Warcraft, do people not have the option of petitioning a GM (game master) if someone does not come through on a transaction?

If so, there is not as much to explain.

Anonymous said...

Blizzard does have a permanent record of every transaction and as I understand it, they can go back and credit characters and ban ones that cheat others. I haven't seen this in action, but there is a mechanism by where you can get cheated and have no recourse to the GM.

This mechanism is raiding with people. Raids have a lockout that lasts a week. So if you join a group and the others cannot pull their weight its easy to get in a situation where you're locked out for a week, and have to wait to be able to run that raid again. There's a fair bit of trust needed to join a group of people you don't know.

Randall Randall said...

Isak, a Blizzard GM would never help you get back something you'd traded away, even if you had a movie showing the whole process. Even when someone cracks your password and sells off everything on your account, you'll be lucky to see half of that stuff back again; they're *very* reluctant to just make things right, lest they have to deal with even more fraud than they (presumably) do now.

Unknown said...

When I played WoW which was 4 years ago or so this happened to me. I traded some some stuff for a high level enchant which he was advertising. He just took my stuff and ran away.I reported him to the GM...but I don't remember if I got my stuff back, though I suspect I didn't

This guy did it to many people so and was definitely blacklisted. Actually he became sort of a server celebrity from what I can remember.

The way people organize themselves in MMOs is pretty interesting. For a MMO where the game mechanics actually depend player reputation rather than being a neat side effect of placing a big group of virtual people in the same place see:


Unknown said...

Blizzard GMs actually do get involved in punishing scammers nowadays a lot more than they used to. If someone just ran off with 6000g, it's my understanding that a GM would almost surely be able to verify this event and reverse it, with probable sanctions for the thief.

Likewise, GMs used to have a policy of nonintervention in ninja looting disputes, but that's changed over time.

PlanetaryJim said...

MMORPGs are an excellent example of how people generate order without legislation and the coercive, externally imposed brutality, of police. Steal something from a WoW character and how does he dial 911?

He doesn't. But he may have other recourse, including defensive and retaliatory force.

Anonymous said...


Good ideas, wrong example. In WoW 911=writing a support ticket to Game Master (GM) as was explained in earliest posts. And you can't murder people of the same faction (you can only trade with the same faction directly).

Instead, take a look at full-loot PvP examples like Darkfall, Ultima Online.

Marcel said...

In another MMORPG, EVE Online, there was a big scandal at the beginning of this year: the CEO of the largest in-game bank stole about 5% of the bank funds and sold them for real cash. The developers intervened only because of the second step (selling for real cash - which in this case was, I believe, around $5000), as they have a policy of non-intervention for anything else.

As far as I know, the bank has not regained its reputation even now.

Marcel said...

Found an article with more details.

Andrew said...

Humans evolved as social, cooperative beings, not selfish utility-maximizing robots.