Many video games contain some form of economy, but those that most realistically represent them are usually simulators or real-time strategies (RTS). Given that the former has the very intention of accurately modelling the workings of real-world economies, the sections below focus mainly on real-time strategies and, to a lesser extent, massively multiplayer online role-playing games (MMORPG).
The basic premise of most RTS’ is to collect one or more resources in order to build some sort of base or town, and then use this economy to construct and battle with a military. This condition is not necessary to call a game an RTS, however. An RTS may consist solely of battle (see DEFCON).
Resources are most often collected by collector units, which travel from the resource itself to a deposit point. For example, a villager in Age of Empires may collect gold from a gold mine and deposit it in a mining camp. It is only when the resource is deposited that it is available for the user to convert into structures or units. This basic act of collecting a resource and depositing it contains several aspects real-world economies.
Elasticity of supply may be taken into consideration. In an RTS where the player controls many collector units, and resources and their collection points are abundant, supply is elastic in the short run, such that if there is a sudden increase in the demand for a particular resource, the labor used for collecting another may be transferred. Additionally, creating extra collector units may be cheap and quick. In this way, the player can quickly acquire more resources when needed. In the supply and demand diagram (right), this is shown as the red line. Supply changes by an amount equal to or greater than the change in demand.
On the other hand, if resource collection points are few and far between, and collection structures are slow to build and expensive, supply is inelastic in the short run. If, for example, there are only two sources of resources in close proximity to the player’s resource structure, it will take some time for all resources to be utilized, since units must travel further to build collection structures or gather the resource. An example of this type of resource collection can be found in Red Alert 3, and is shown as the blue line in the diagram.
The above problem may be considered an example of diminishing returns, where, over time, resources close to the player’s base may be exhausted, and units must travel further even if collection units and structures are cheap and quick to build. This is similar to the classic mine-shaft example of diminishing returns, where, as miners dig deeper and further into the ground, they must travel greater and greater distances to mine coal, making their job less and less efficient over time.
Diminishing returns may also create inefficiency by making collector units redundant. In a grid-based RTS, there may be eight squares around a resource from which units can collect (one unit per square). If the player builds more than eight (say, twelve) units to collect the resource, only eight will be utilized, with the cost of the additional units (four, in this case) becoming a wasted expense. This also applies to the building of structures. In RTS' where buildings are erected by construction units, and more than one construction unit may be used on each building, the number of spaces available in which to stand may be exhausted.
In the diagram, left, the marginal cost (MC) of each unit produced is shown in blue as a horizontal line. This is because, as in the vast majority of RTS’, the cost of a particular unit does not change. Similarly, the marginal revenue (MR) gained by each unit’s work is shown in red as a kinked line. Assuming each unit collects the same amount of resources and must travel the same distance to deposit them, the revenue gained will also be identical. However, when the above theory is applied, that only so many units can collect from a particular point, the revenue produced by each new unit is zero, since they simply cannot gain access to the resource. Although the MC and MR curves intersect, traditional profit maximization (MC=MR) does not apply, since each collector will generate an undetermined level of revenue (depending on the number of collections and deposits that are made before a) it is either destroyed or b) the game ends.
In reality, few games require the player to even approach the number of collectors where MC = 0, since matches rarely last long enough for resources to be so extensively utilized. The relationship between MC and MR remains important, however, since building the optimum number of collectors is a vital skill.
If income for a player stops, they will be unable to build more structures or units, and, thus, the economy will stagnate. A common strategy is to force the opponent into such a situation by destroying economic structures. As in a real-world economy, the building of military structures and units restricts the capital available for economic growth.
Deficit spending is a necessity in most RTS’, but not in all. Simply, more credits or resources are spent on production of structures and units than is being collected. For instance, if the player has collectors producing at a rate of 500 credits per minute, but a building is being constructed at a rate of 750 credits per minute, deficit spending is being used. In the real-world, deficit spending is a risky strategy for lifting markets, or the economy as a whole, out of stagnation or recession. In an RTS, however, players may choose to have spare resources at all times in case of an emergency. In such an event however, deficit spending will almost certainly occur if the base is to be defended. Because of this, extended, aggressive actions by both players may lead to a war of attrition.
Types of Economy
Command Economies (RTS)
The economies generally present in RTS’ are command-based. That is to say they are, essentially, communist
. Market forces are, apart from a few cases, non-existent in RTS’, leaving the player in complete control of their assets. Prices of units and buildings never change with demand. In a free market, if the player started to build a large number of tanks, the price of each tank would increase. Moreover, all resources are collected for and distributed by one entity, including labor (which may be divided between several resource types as the ‘state’ sees fit). In games such as the Anno
series, the player (the head settler) is responsible for the well-being of the population. The population will never build a theatre for themselves, instead requiring the intervention of the player. Obviously, few would find the alternative (a game where the world basically runs itself) much fun.
There are a few exceptions to fixed prices in RTS’, however. In the later installations of the Total War series, the price of a unit in multiplayer increases after four are purchased. In Age of Empires II, the more of a resource is sold in the market, the lower its price in relation to other resources.
Market Economies (MMORPG)
In MMORPG, such as World of Warcraft, markets are only partially controlled by the game. Markets for potions, armor, weapons etc. are all free. Prices fluctuate according to the demand and supply of goods and services, as they do in real-world markets. As such, Blizzard Entertainment must note the rate of inflation in Azeroth. If the price of a particular potion is 35g, for example, and there is a sudden increase in the number of potions available through vendors, the price may fall to 30g. Similarly, if there is an increase in demand for the potion (perhaps due to players having more money overall, more players in general etc.), the price may increase to 40g. This principle extends into the labor market, such that different classes of characters may be worth a different amount depending on their rarity. For example, melee characters with a large number of health points (known as ‘tanks’), may be uncommon, and thus highly sought after by parties looking to enter a dungeon. Such markets often display characteristics similar to those in the real-world. Competition between vendors keeps prices low, ‘uncompetitive’ and monopolistic behavior (such as buying the entire stock of competing vendors and selling them back to other players for an inflated price) and finding a good spot to trade (e.g. next to the entrance of a difficult dungeon) are all present.