When thinking about the economics of video games one can distinguish three categories:

1. Video games as a business

Games are big business. Economics can be a tool to investigate investment decisions and earning strategies (DLCs, freemium etc.) for example.

2. Economics of video game mechanics

Many games involve a hard-programmed economy. For example trading games (whether set in space, or elsewhere) have markets where supply and demand mechanics play a role. These mechanics have to be balanced and realistic to make for an enjoyable game.

3. Gamer-made economies

Especially in MMO games players can trade goods with each other. Whole economies can evolve over time. Obviously, the game mechanics need to support these transactions. However, the distinction is that these mechanics are not programmed directly, so economic outcomes depend more on player behavior.

Further reading:

• Valve Economics blog
• The Economics of Video Games (Washington Post)
• “A Multiplayer Game Environment Is Actually a Dream Come True for an Economist” (reason.com)
• Game Changer: What Society Can Learn From The Economics Of Video Games (GameInformer)
• John Smith on the Guild Wars 2 Economy (1)
• John Smith on the Guild Wars 2 Economy (2)
• What can video games teach us about economics? (JSTOR)
• Tim Harford on economic experiments in video games
• In-Game Economies in Team Fortress 2 and Dota 2

Epilogue

One year later I realized I never got to thinking and writing about the economics of video games. Maybe I will in the future, but a dedicated blog on the subject is out of sight.