IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v44y2013i3p1053-1064.html
   My bibliography  Save this article

Price convergence in an online virtual world

Author

Listed:
  • Michael Morrison
  • Matías Fontenla

Abstract

This paper tests for the existence of price convergence using a unique data set from the largest online game, World of Warcraft. It provides a controlled setting without the usual obstacles that make testing price convergence difficult. These difficulties include trade barriers, transportation costs, imperfections and restrictions in capital markets, and differences in productivity growth. The data set consists of eight structurally identical copies, or worlds, of a virtual macroeconomy. We use the non-linear convergence test developed by Phillips and Sul (Econometrica 75(6):1771–1855, 2007 ), and find price convergence in all eight worlds. We further develop our own simple band of inaction test for price convergence, and under reasonable parameters find price convergence in all eight worlds. Copyright Springer-Verlag 2013

Suggested Citation

  • Michael Morrison & Matías Fontenla, 2013. "Price convergence in an online virtual world," Empirical Economics, Springer, vol. 44(3), pages 1053-1064, June.
    • Handle: RePEc:spr:empeco:v:44:y:2013:i:3:p:1053-1064
    DOI: 10.1007/s00181-012-0567-3
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00181-012-0567-3
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s00181-012-0567-3?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chesney, Thomas & Chuah, Swee-Hoon & Hoffmann, Robert, 2009. "Virtual world experimentation: An exploratory study," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 618-635, October.
    2. Peter C. B. Phillips & Donggyu Sul, 2007. "Transition Modeling and Econometric Convergence Tests," Econometrica, Econometric Society, vol. 75(6), pages 1771-1855, November.
    3. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72(6), pages 584-584.
    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. Mario Cerrato & Nicholas Sarantis, 2007. "Does purchasing power parity hold in emerging markets? Evidence from a panel of black market exchange rates," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(4), pages 427-444.
    6. Dumas, Bernard, 1992. "Dynamic Equilibrium and the Real Exchange Rate in a Spatially Separated World," The Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 153-180.
    7. Fischer, Christoph, 2012. "Price convergence in the EMU? Evidence from micro data," European Economic Review, Elsevier, vol. 56(4), pages 757-776.
    8. Baum, Christopher F. & Barkoulas, John T. & Caglayan, Mustafa, 2001. "Nonlinear adjustment to purchasing power parity in the post-Bretton Woods era," Journal of International Money and Finance, Elsevier, vol. 20(3), pages 379-399, June.
    9. Robert Lafrance & Lawrence L. Schembri, 2002. "Purchasing-Power Parity: Definition, Measurement, and Interpretation," Bank of Canada Review, Bank of Canada, vol. 2002(Autumn), pages 27-33.
    10. 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.
    11. 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)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Morrison, Michael & Fontenla, Matías, 2017. "Purchasing power parity across eight worlds," Economics Letters, Elsevier, vol. 158(C), pages 62-66.
    2. Artur F. Tomeczek, 2025. "Innovative activities of Activision Blizzard: A patent network analysis," Papers 2502.02259, arXiv.org.

    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. 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.
    2. Philip Hans Franses & Dick van Dijk, 2006. "A simple test for PPP among traded goods," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 19-27.
    3. Andreas Nicklisch & Tobias Salz, 2008. "Reciprocity and status in a virtual field experiment," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2008_37, Max Planck Institute for Research on Collective Goods.
    4. 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.
    5. Carl Mildenberger, 2015. "Virtual world order: the economics and organizations of virtual pirates," Public Choice, Springer, vol. 164(3), pages 401-421, September.
    6. 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.
    7. Ivan Paya & Ioannis A. Venetis & David A. Peel, 2003. "Further Evidence on PPP Adjustment Speeds: the Case of Effective Real Exchange Rates and the EMS," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(4), pages 421-437, September.
    8. Domingo Rodríguez Benavides & Abigail Rodríguez Nava, 2019. "Convergencia de los precios locales en México: un enfoque de pruebas entre pares/Convergence of local prices in Mexico: A pairwise approach," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 34(2), pages 309-332.
    9. Ho, Tsung-wu, 2005. "Investigating the threshold effects of inflation on PPP," Economic Modelling, Elsevier, vol. 22(5), pages 926-948, September.
    10. Ivan Paya & David A. Peel, 2003. "Purchasing Power Parity Adjustment Speeds in High Frequency Data when the Equilibrium Real Exchange Rate is Proxied by a Deterministic Trend," Manchester School, University of Manchester, vol. 71(s1), pages 39-53, September.
    11. Michael Arghyrou & Virginie Boinet & Christopher Martin, 2005. "Beyond Purchasing Power Parity: Nominal exchange rates, output shocks and non linear/asymmetric equilibrium adjustment in Central Europe," Money Macro and Finance (MMF) Research Group Conference 2005 35, Money Macro and Finance Research Group.
    12. Mihály Borsi & Norbert Metiu, 2015. "The evolution of economic convergence in the European Union," Empirical Economics, Springer, vol. 48(2), pages 657-681, March.
    13. Mario Cerrato & Nick Sarantis, 2006. "Nonlinear Mean Reversion in Real Exchange Rates: Evidence from Developing and Emerging Market Economies," Economics Bulletin, AccessEcon, vol. 6(7), pages 1-14.
    14. Liew, Venus Khim-Sen & Baharumshah, Ahmad Zubaidi & Habibullah, Muzafar Shah & Midi, Habshah, 2008. "Monetary exchange rate model: supportive evidence from nonlinear testing procedures," MPRA Paper 7293, University Library of Munich, Germany.
    15. Frédérique Bec & Mélika Ben Salem & Marine Carrasco, 2010. "Detecting Mean Reversion in Real Exchange Rates from a Multiple Regime star Model," Annals of Economics and Statistics, GENES, issue 99-100, pages 395-427.
    16. Milas Costas & Legrenzi Gabriella, 2006. "Non-linear Real Exchange Rate Effects in the UK Labour Market," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(1), pages 1-34, March.
    17. Apte, Prakash & Sercu, Piet & Uppal, Raman, 2004. "The exchange rate and purchasing power parity: extending the theory and tests," Journal of International Money and Finance, Elsevier, vol. 23(4), pages 553-571, June.
    18. Christoph Rothe & Philipp Sibbertsen, 2006. "Phillips-Perron-type unit root tests in the nonlinear ESTAR framework," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 90(3), pages 439-456, September.
    19. Charles van Marrewijk, 2004. "An introduction to international money and foreign exchange markets," International Finance 0410006, University Library of Munich, Germany.
    20. Eaton, Jonathan & Kortum, Samuel & Neiman, Brent, 2016. "Obstfeld and Rogoff׳s international macro puzzles: a quantitative assessment," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 5-23.

    More about this item

    Keywords

    Price convergence; Law of one price; Virtual worlds; Online video games; Phillips Sul log t ; Band of inaction; F1; F3; C99; C23;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F3 - International Economics - - International Finance
    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    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:spr:empeco:v:44:y:2013:i:3:p:1053-1064. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.