How to Avoid Inflation in Virtual Economies

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Virtual currencies are governed by the same economic principles of real money. If you don’t closely monitor your virtual economy, inflation can erode the purchasing power of your currency—which can deter new users from playing your online game. Inflation is caused by an excessive growth of the money supply, which can drive up the prices of your virtual goods to the point where new players simply can’t afford to play your game.

Some of the most common causes of inflation of virtual economies include:

  • Misaligned payouts, or rewarding users with large amounts of currency for little effort
  • Offering too many opportunities to earn currency, and too few ways to spend it
  • Players gaming the system to fraudulently earn virtual currency

Here’s a look at ways you can prevent virtual currency inflation:

Managing your offer completions
Offer completions are an effective way to monetize online games. But many game publishers use fixed exchange rates, which encourage users to actively seek out the highest paying offers rather than those they are genuinely interested in. As a result, exposing your exchange rates can significantly inflate your average user wealth. You can avoid this by grouping your offers as shown in the example below:

Monitoring your economy
Analytics can provide insight into the health of your virtual economy and help prevent inflation. Viral analytics platform Kontagent recommends that game publishers should:

  • Monitor average net worth
  • Track individual virtual good purchases
  • Balance sources (ways your users can earn currency) and sinks (ways your users can spend currency)

If your analytics indicate that your currency is inflated, it’s time to reduce the ways your users can earn currency and increase ways for them to spend. Implementing multiple currencies can also combat inflation by making some items available only with premium currency.

Implementing fraud detection
When users game the system and unfairly earn excessive amounts of currency, prices of your virtual goods will rise. With strong fraud detection, online game publishers can deter such behavior by deducting coins or banning the user from the game. Such monitoring can be done in house, or better yet, you can choose a payment platform that manages fraud for you.

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