World of Warcraft: The Viability of Massively Multiplayer Online Role-Playing Games as Platforms for Modeling and Evaluating Perfect Competition

The objective of the study was to determine whether the virtual economy of World of Warcraft in fact behaves like a real world economy, whether it is a competitive free market approaching the ideal of perfect competition, and if so, whether it constitutes a suitable platform for further economic research. What makes this research feasible is that World of Warcraft exists on hundreds of servers, each of which is a replica of the same world, but with its own unique player populationvarying in size and experience level. The research makes the following three predictions about how the economy of World of Warcraft would behave if in fact it were perfectly competitive. The predictions are:1) Servers with larger populations will yield greater price stability;2) Servers with a higher concentration of players of a given experience level will yield higher prices for the goods most in demand by that set of players, and;3) Arbitrage exists only to a very minor extent across all server economies.Data was collected detailing the prices at which selected virtual goods were sold in World of Warcraft auction houses, over a period of thirty days. Using statistical methods, the predictions were tested against the data drawn from economic interactions within the game. The research concludes that the virtual economy of the World of Warcraft in most respects behaves like a highly competitive real world market, and in fact approaches the ideal of perfect competition