Links between real and virtual economies

Economist 1/20/05 A model economy, Should links between real and virtual economies be encouraged or banned?

For many years, game items such as swords or gold have been traded online: virtual objects are sold for real money to the tune of at least $100m a year. But the links between real and virtual economies are now becoming far more elaborate.
Last month, a “Project Entropia” player paid the game's creators $26,500 for an island in the game's virtual world. (He hopes to recoup the money through mining and selling plots to other players.) This month, an “Ultima Online” player set up a scheme to let players donate items and currency to raise money for tsunami relief. Currency exchanges even allow gamers to move funds from one game to another.
Not everyone approves: some games ban the sale of game items, a few encourage it, but most turn a blind eye. But the sale of the “Project Entropia” island, and the popularity of “World of Warcraft”, a game launched in November which bans the sale of in-game items, highlight an emerging split, says Edward Castronova, an expert on virtual economies at Indiana University.

http://www.economist.com/printedition/displayStory.cfm?Story_ID=3577988
Edward Castronova, Associate Professor of Telecommunications, Indiana University
http://mypage.iu.edu/~castro/home.html

I specialize in the study of synthetic worlds: massively multi-user spaces on the internet. People in these worlds create virtual items to use there – magic wands and whatnot – and they’ve begun buying and selling them on eBay. eBay’s category 1654, 'Internet Games' includes most of the non-Asian trade in virtual items and currency, and as you can see, this is a very active market. (If you are not familiar with virtual item trading, please see this introduction.)

http://video-games.listings.ebay.com/Internet-Games_W0QQfclZ3QQfcoZ1QQsacatZ1654QQsocmdZListingItemList
http://mypage.iu.edu/%7Ecastro/VirtualItemTrading.html
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