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Regulating Markets, Digital Original Edition

A BIT of Virtual Economies


In the twenty-first-century digital world, virtual goods are sold for real money. Digital game players happily pay for avatars, power-ups, and other game items. But behind every virtual sale there is a virtual economy, simple or complex. This BIT explains that the objectives of virtual economies—providing content, attracting and retaining users, and earning revenues—are often best pursued in unfree (that is, regulated) rather than free markets.

About the Authors

Vili Lehdonvirta is a Research Fellow at Oxford Internet Institute, University of Oxford.

Edward Castronova is Professor of Communications and Professor of Cognitive Science at Indiana University. He is the author of Synthetic Worlds: The Business and Culture of Online Games and Exodus to the Virtual World: How Online Fun Is Changing Reality.