IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0186407.html
   My bibliography  Save this article

Results of a massive experiment on virtual currency endowments and money demand

Author

Listed:
  • Nenad Živić
  • Igor Andjelković
  • Tolga Özden
  • Milovan Dekić
  • Edward Castronova

Abstract

We use a 575,000-subject, 28-day experiment to investigate monetary policy in a virtual setting. The experiment tests the effect of virtual currency endowments on player retention and virtual currency demand. An increase in endowments of a virtual currency should lower the demand for the currency in the short run. However, in the long run, we would expect money demand to rise in response to inflation in the virtual world. We test for this behavior in a virtual field experiment in the football management game Top11. 575,000 players were selected at random and allocated to different “shards” or versions of the world. The shards differed only in terms of the initial money endowment offered to new players. Money demand was observed for 28 days as players used real money to purchase additional virtual currency. The results indicate that player money purchases were significantly higher in the shards where higher endowments were given. This suggests that a positive change in the money supply in a virtual context leads to inflation and increased money demand, and does so much more quickly than in real-world economies. Differences between virtual and real currency behavior will become more interesting as virtual currency becomes a bigger part of the real economy.

Suggested Citation

  • Nenad Živić & Igor Andjelković & Tolga Özden & Milovan Dekić & Edward Castronova, 2017. "Results of a massive experiment on virtual currency endowments and money demand," PLOS ONE, Public Library of Science, vol. 12(10), pages 1-14, October.
    • Handle: RePEc:plo:pone00:0186407
    DOI: 10.1371/journal.pone.0186407
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0186407
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0186407&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0186407?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Liran Einav & Jonathan Levin, 2014. "The Data Revolution and Economic Analysis," Innovation Policy and the Economy, University of Chicago Press, vol. 14(1), pages 1-24.
    2. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1991. "Rational Addiction and the Effect of Price on Consumption," American Economic Review, American Economic Association, vol. 81(2), pages 237-241, May.
    3. Falk, Armin & Zimmermann, Florian, 2011. "Preferences for Consistency," IZA Discussion Papers 5840, Institute of Labor Economics (IZA).
    4. Edward Castronova, "undated". "Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier," Gruter Institute Working Papers on Law, Economics, and Evolutionary Biology 2-1-1008, Berkeley Electronic Press.
    5. Edward Castronova, 2001. "Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier," CESifo Working Paper Series 618, CESifo.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karol Borowiecki & Juan Prieto-Rodriguez, 2015. "Video games playing: A substitute for cultural consumptions?," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 39(3), pages 239-258, August.
    2. Edward Castronova, 2008. "A Test of the Law of Demand in a Virtual World: Exploring the Petri Dish Approach to Social Science," CESifo Working Paper Series 2355, CESifo.
    3. Sousa, Yannick Ferreira De & Munro, Alistair, 2012. "Truck, barter and exchange versus the endowment effect: Virtual field experiments in an online game environment," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 482-493.
    4. Olivier Hueber, 2011. "Innovation in virtual social networks: the widespread of new electronic currencies and the emergence of a new category of entrepreneurs," International Journal of Transitions and Innovation Systems, Inderscience Enterprises Ltd, vol. 1(2), pages 163-174.
    5. Sascha Fullbrunn & Katharina Richwien & Abdolkarim Sadrieh, 2011. "Trust and Trustworthiness in Anonymous Virtual Worlds," Journal of Media Economics, Taylor & Francis Journals, vol. 24(1), pages 48-63.
    6. Qiu-Hong Wang & Viktor Mayer-Schönberger & Xue Yang, 2013. "The determinants of monetary value of virtual goods: An empirical study for a cross-section of MMORPGs," Information Systems Frontiers, Springer, vol. 15(3), pages 481-495, July.
    7. Michael Morrison & Matías Fontenla, 2013. "Price convergence in an online virtual world," Empirical Economics, Springer, vol. 44(3), pages 1053-1064, June.
    8. Carl Mildenberger, 2015. "Virtual world order: the economics and organizations of virtual pirates," Public Choice, Springer, vol. 164(3), pages 401-421, September.
    9. Fiedler, Marina & Haruvy, Ernan & Li, Sherry Xin, 2011. "Social distance in a virtual world experiment," Games and Economic Behavior, Elsevier, vol. 72(2), pages 400-426, June.
    10. Yang, Yan-Hong & Xie, Wen-Jie & Li, Ming-Xia & Jiang, Zhi-Qiang & Zhou, Wei-Xing, 2017. "Statistical properties of user activity fluctuations in virtual worlds," Chaos, Solitons & Fractals, Elsevier, vol. 105(C), pages 271-278.
    11. Edward Castronova, 2003. "Theory of the Avatar," CESifo Working Paper Series 863, CESifo.
    12. Edward Castronova, 2004. "The Price of Bodies: A Hedonic Pricing Model of Avatar Attributes in a Synthetic World," Kyklos, Wiley Blackwell, vol. 57(2), pages 173-196, May.
    13. Fiedler, Marina & Haruvy, Ernan, 2009. "The lab versus the virtual lab and virtual field--An experimental investigation of trust games with communication," Journal of Economic Behavior & Organization, Elsevier, vol. 72(2), pages 716-724, November.
    14. Edward Castronova, 2005. "On the Research Value of Large Games: Natural Experiments in Norrath and Camelot," CESifo Working Paper Series 1621, CESifo.
    15. Karol J. Borowiecki & Hasan Bakhshi, 2017. "Video Games is Cultural Participation: Understanding Games Playing In England Using The Taking Part Survey," ACEI Working Paper Series AWP-05-2017, Association for Cultural Economics International, revised Mar 2017.
    16. Justin Rex & David J. Jackson, 2009. "Window of Opportunity? Internet Gambling in Canada," Canadian Public Policy, University of Toronto Press, vol. 35(1), pages 121-137, March.
    17. Edward Castronova, 2003. "The Price of "Man" and "Woman": A Hedonic Pricing Model of Avatar Attributes in a Synthetic World," CESifo Working Paper Series 957, CESifo.
    18. Dymek, Mikolaj, 2006. "Communities build up Steam," Pink Machine Papers 26, Royal Institute of Technology, Department of Industrial Economics and Management.
    19. Karol J. Borowiecki & Juan Prieto-Rodriguez, 2017. "The Cultural Value and Variety of Playing Video Games," ACEI Working Paper Series AWP-01-2017, Association for Cultural Economics International, revised Jan 2017.
    20. Kanis Saengchote & Voraprapa Nakavachara & Yishuang Xu, 2023. "Capitalising the Network Externalities of New Land Supply in the Metaverse," PIER Discussion Papers 203, Puey Ungphakorn Institute for Economic Research.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0186407. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.