Headline Nov 17, 2014/


IF YOU'VE SPENT TIME ON FACEBOOK, YOU might be mystified by all the people tending to their  virtual farms and  virtual pets. !WOW! certainly is.

Not only does this seem a strange way to spend time, but here's even the  weirder part : a lot of these people are spending real money to buy virtual products- 

Like pretend guns and fertilizer, to gain advantage in these Web-based games.

But to Kristian Segerstrale this is very serious business, and not only because he runs Playfish, a maker of online games and a top seller or virtual goods.

Segerstrale, an economist by training, says the world of virtual goods open up a new way to study economics. ''You can learn a lot about human behaviour, and how people interoperate in an economic environment,'' he says.

''There are a lot of valuable lessons.''

Segerstrale, 36, grew up in Finland and studied economics at Cambridge University and earned a master's degree from the London School of Economics.

After university, in 2001, he and some friends started a company to develop games for the mobile phone. They sold the company in 2005.

In 2007, when Facebook said it would open its platform to outside developers, Segerstrale recognised that this could be a great new venue for games. He and some colleagues created Playfish.

Adapting a business model in which the games cost nothing but Playfish would make money by selling virtual goods inside those games. 

Business soon boomed, thanks to game like Pet Society, which has nearly 20 million active users who make little animals and take care of them.  

November 2010, Playfish was acquired by videogame giant Electronic arts for $400 million. Playfish won't disclose its revenues or profits, but Segerstrale says the company sells:

90 million items through its 12 different games. ''I don't think anyone realised how quickly this was going to grow,'' he says.

The total U.S. market for virtual goods was worth just over $1 billion in 2009, according to Inside Network, a market research firm.

That's up from $500 million in 2008.

The market grew to $1.6 billion by 2009, Inside Network says. Worldwide, the market maybe have been worth as much as  $6 billion, according to the Virtual Economy Research Network in Helsinki.

For Segerstrale the businessman, that was terrific news. 

For Segerstrale the economist, it's was equally exciting. That's because when economists try to model behaviour in the real world, they are always dealing with imperfect information.

''The data is always limited, and once once you get hold of it there are tons of reasons to mistrust it,'' Segerstrale says.

In virtual worlds, on the other hand, ''the data set is perfect. You know every data point with absolute certainty.

In social networks you even know who the people are. You can slice and dice by gender, by age, by anything.''

Instead of dealing only with historical data in virtual worlds, ''you have the power to experiment in real time,'' Segerstrale says.

What happens to demand if you add a 5 percent tax to a product?

What if you apply a 5 percent tax to one half of a group, and a 7 percent tax to the other half?

''You can conduct any experiment you want,'' he says.

''You might discover that women over 35 have a higher tolerance for a tax than males aged  15 to 20   -stuff that's just not possible to discover in the real world.''

The idea of studying behaviour in  virtual marketplaces is starting to catch on among academics. The focal point of the effort is the Virtual Economy Research Network, which serves as a kind of:

Clearinghouse for scholars who are interested in studying virtual goods and virtual currencies.

This organisation was founded in 2006  by  Vili Lehdonvirta, an economic sociologist at the Helsinki Institute for Information, who believes virtual economists could help scholars:

Better understand how social factors influence economic decision making.

EVE Online actually, hired an  in-house economist to regulate the economy of its online , which had over 330,000 members in 2010

One possible flaw in this economic model is that the kind of people who spend hours online taking care of imaginary pets may not be the representative of thee rest of the population.

The data might be  ''perfect''   and  ''complete,''   but the world from which it is gathered is anything but that.

The Honour and Serving of the operational research will continue at regular intervals in the future. Thank you for reading and maybe learning. - and don't miss the next one.

With respectful dedication to the Students of the world. See Ya all on !WOW!  -the World Students Society Computers-Internet-Wireless:

''' The Digit And The Economics '''

'''Good Night and God Bless

SAM Daily Times - the Voice of the Voiceless


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