Virtual gaming's elusive exchange rates

In the world of online fantasy games, you can always buy more virtual assets if you've got a real-life credit card.

If you happen to find yourself short of fantasy gold pieces for the purchase of a scary-looking battle hammer in the game World of Warcraft, for example, you can surf to one of the many third-party Web sites trafficking in World of Warcraft gold, pull out your credit card and exchange real pounds or dollars for fantasy coinage.

At the Web site IGE.com, $51.99 can get you 500 World of Warcraft gold pieces, enough virtual currency to buy you the handy Hammer of the Titans weapon. IGE and its competitors also sell the virtual currencies of other major online games such as EverQuest, Ultima Online and City of Heroes.

But according to two of the leading experts in the economies of these virtual worlds, getting a fair price in the exchange of real dollars for fantasy coins can be a lottery. It turns out it's hard to find reliable data about the dollar/virtual currency exchange rates in a pretend world where there's no Alan Greenspan setting interest rates and scolding everyone about irrational exuberance.

"I have looked at this data acquisition issue for some time and... keep hitting a brick wall," said Dan Hunter, an assistant professor of legal studies and business ethics at the Wharton School of the University of Pennsylvania.

Given that millions of real dollars are being spent every year on these virtual currencies -- perhaps as much as $880m per year -- buyers could well be getting short-changed if they're paying sellers more than the true value, whatever it is, for their gaming gold. While some gaming companies try to keep a tight lid on rates of exchange between real dollars and fantasy coins on their own sites, they can't control the impact of secondary exchanges.

Here's how it works: since most multiplayer games allow players to transfer their virtual gaming possessions, enterprising players can temporarily leave the gaming world and buy and sell their virtual currencies on exchanges like IGE and auction giant eBay.

Players looking to sell or buy typically use the secondary exchange sites to find one another. On IGE, for example, a buyer and a seller can strike a deal for 10 million Ultima Online gold pieces and exchange real dollars for them. But in order to transfer the fantasy gold, they have to meet up back in the gaming world for the handoff of the goods.

IGE also acts like a middleman, buying with real money fantasy coins from game players and, in turn, selling them to other players.

It's the currencies and the behaviours of these massive multiplayer games' virtual economies that fascinate academics like Hunter, who find that they often mirror real-world economies and can sometimes predict the way people behave in the real world. And like the black markets of the real world, the secondary exchange sites of the fantasy gaming world are a difficult-to-quantify factor.