The Economically-(Im)Perfect World of Online Games

Kris­ti­an Segerstrale–owner of online games com­pany Play­fish (acquired by Elec­tron­ic Arts for $400m in Novem­ber 2009)–discusses why online game envir­on­ments are excit­ing places for eco­nom­ics research (and spe­cific­ally: “how social factors influ­ence eco­nom­ic decision mak­ing”):

When eco­nom­ists try to mod­el beha­vi­or in the real world, they’re always deal­ing with imper­fect inform­a­tion. “The data is always lim­ited, and once you get hold of it there are tons of reas­ons to mis­trust it,” Seger­strale says. In vir­tu­al worlds, on the oth­er hand, “the data set is per­fect. You know every data point with abso­lute cer­tainty. In social net­works you even know who the people are. You can slice and dice by gender, by age, by any­thing.”

Instead of deal­ing only with his­tor­ic­al data, in vir­tu­al worlds “you have the power to exper­i­ment in real time,” Seger­strale says. What hap­pens to demand if you add a 5 per­cent tax to a product? What if you apply a 5 per­cent tax to one half of a group and a 7 per­cent tax to the oth­er half? “You can con­duct any exper­i­ment you want,” he says. “You might dis­cov­er that women over 35 have a high­er tol­er­ance to a tax than males aged 15 to 20—stuff that’s just not pos­sible to dis­cov­er in the real world.”

Of course, there’s a fairly obvi­ous caveat:

One pos­sible flaw in this eco­nom­ic mod­el is that the kind of people who spend hours online tak­ing care of ima­gin­ary pets may not be rep­res­ent­at­ive of the rest of the pop­u­la­tion. The data might be “per­fect” and “com­plete,” but the world from which it’s gathered is any­thing but that.