Michael Romanovsky

Firms in Runescape

What is a firm?

This common definition of the firm is popularly accepted: "a commercial partnership between one or more people."1 But can’t that also be the definition of a market or, indeed, any sort of trade? Is the existence of a “firm” just a figment of our collective imagination? What does it really mean to be a firm? How can a firm be identified? Must it maintain a building where people congregate, or be a legal entity set forth by the dictate of law? How is the fundamental link between the people working together in a firm created?

I define a firm as “a long term contract between two or more people”. In this framework, I analyze in this paper whether it is possible for a firm to form without any legal incentive to maintain contracts, and without any physical incentive to produce anything, even for basic sustenance. Can people can break contracts without legal penalties (they aren’t thrown in jail) or can a firm form when basic human survival needs do not require any work? For my analysis of this question, I turned to Runescape, where both such conditions are present. The purpose of this paper is to both answer my question and observe how the Runescape markets operate in the process of answering my question.

Runescape

Runescape is an online, multiplayer, 3D overhead-view game which can be played using a web browser. It is accessible through the site www.runescape.com. In Runescape, the activities can be divided into questing, leveling or gaining experience (there are several skills which can be leveled), trading (otherwise known in Runescape as “merchanting”), player killing (in designated places. The incentive usually is what the player is carrying), and miscellaneous social activities.

Runescape allows players to trade goods. There is law, other than simply scamming items from other players, that says agreed upon contracts must be fulfilled. Thus one partner in a contract may lose money if he were not to receive the agreed upon good, because he promised to deliver to someone else. This thus can disrupt an entire economy. When hurricanes hit the seas near the Gulf of Mexico in 2004, oil prices throughout the US increased because tankers were unable to fulfill their deliveries on time and pipelines became damaged2. What then if this is commonplace in an economy?

Are we to presume, then, that the trading that takes place, the so-called economy of Runescape, is primitive and inefficient? Do firms exist without the brick and mortar, without legally, and physically, binding arrangements? Can they? This is the prime question I attempt to uncover as I describe in detail the world, and the economy, of Runescape.

What is Runescape?Player Skills

We begin where all Runescape players begin, Tutorial Island. In Runescape, players may fight hideously powerful monsters, engage in far-reaching quests, and thus enhance their power

through training combat skills and skills that facilitate combat and fighting. There are three combat types: melee, ranging (archery), and magic.

To advance in melee skills, a player must train in strength, which raises the power of his strike, attack, which increases the accuracy of his blow, and defense, which allows him to dodge and counter strikes more easily.

To advance in the magic skill, a player must utilize runes, small, magical, weightless stones. Each time a player casts a spell, he gains magic experience. Experience can also be gained by dealing damage to the opponent. This is true for meleers and rangers as well. Defense helps the mage defend against all forms of attack, as it does for rangers as well.

To advance in the ranging skill, a player must shoot from a bow or cannon and hit the opponent.

There is also a skill, called “prayer”, which enhances all of these three skills temporarily. (the length of time depending on the prayer level)

The hitting power of all of these skills can be enhanced by wielding weapons and wearing armor. As players advance in levels, they can wield and wear more powerful weapons and armor and can utilize better spells, special attacks, or prayers. The accuracy of the attack is dependent on “attack level” for meleers, and on the “magic level” and “range level” for rangers and mages.

There exist secondary skills for players to create weapons, armor, arrows, and runes, as well as food to replenish hitpoints (at 0 hitpoints the player “dies” and usually loses all items but 3) and potions to replenish prayer or temporarily increase attack, strength, defense, magic, and ranged levels. Potions can also be used to temporarily increase the secondary skills.

Fishing allows a player to fish something edible (and sometimes not edible) out of the water. Cooking allows the player to cook fish and make other foods, such as pizza for instance. Mining allows players to mine coal and various types of ore. Smithing is the ability to create weapons and armor for meleers from coal and ore. Crafting is the art of making jewelry items that enhance all three combat types, and, at the higher levels, make ranger armor. Crafting requires gems (obtained from mining and monsters), bars (made from ore when smithing), and hides, (obtained from killing creatures ranging from cows to dragons). Many other items can be crafted.

Woodcutting is the ability to cut various trees, some of them very mighty and hard to cut. Fletching is the art of creating powerful bows and arrows using logs and arrow heads, obtained by smithing bars. Firemaking allows players to burn logs, either for cooking food on or as part of a process to obtain the armor of the mages. Runecrafting is the ability to create runes from “rune essence” at certain rune altars throughout the Runescape world. Herblore utilizes vials (made from crafting or bought) and ingredients (herbs and secondary ingredients, such as eyes of newts: obtained by killing monsters or bought) to create powerful potions.

There is also Thieving, which is necessary for certain quests and allows players to steal gold and items for almost all other skills. The last skill is Agility, which is used to run faster and for quests. Agility allows players to receive pirate hooks, which can be traded for money..

There is a great deal of interdependence among the skills. (see figure 1) The best items take a very high skill level, which takes a long time to obtain. This facilitates specialization and thus, trade. From trade, a merchant class arises to capture the profit of the difference between seller and buyer prices.

figure 1. The interconnections among Runescape skills.

figure 2. A half key (item used partially for crafting purposes) being bought for 50K.

What is Runescape?Trading and Monetary System

The common unit of currency in Runescape is the GP, or gold pence/piece. The system operated stores and players accept this currency. Gp is created by fighting monsters, who drop a small amount of it, by finishing quests where the reward is gp, by selling items made by players

to the system stores, and by far the most significant method, high alching. Through the magical spell known as “high alchemy”, a player can turn any item into gold. The amount of gold is 50% more than most stores will buy the item for, and it is much easier to high alch an item then sell it to the store, due to the store price decreasing as more is sold and that high alch can be done anywhere with a large amount of items. Here is an example of high alch:

A player has 1,000 magic longbows, which high alch for 1536 gp each, in note form. A note is a promise from the bank that it will give X amount of that item (in this case 1000) from the note. Notes can be created and cashed in at banks. The player can cast high alch on each note, using 5 fire runes (or a fire staff) and 1 nature rune, 1000 times, to receive 1536000 gp.

At first glance this looks like a terrible system. It seems equivalent to printing your own money. This system allows money to flow into the system that otherwise would not have been there, and it is supported/blacked at a basic level by the ability to buy certain items in the game for set prices. But is this system prone to making GP less and less useful, especially for player-created items? There are negatives and positives to this approach in Runescape.

This system allows an alternative from selling to the store. Otherwise, players would spend large amounts of time selling their items to the store, and there would be much less (not enough) gp, reducing trade because items could not be differentiated enough in price. However, the use of this system may create inflation, and thus making it unprofitable to trade.

The backing of the GP is achieved through two things: players quitting/losing their gp, and the flow of gp to system stores for various items that players cannot produce. This creates an alternative to buying from players in certain markets and sets a base price (min or max) for certain products. However, rare items, as we shall see later, do not follow this pattern and continually increase in price simply because they are unable to be produced and because of increasing accumulation of gp. This does, indeed, counterbalance the reason for trade and thus weaken the motive behind a firm’s existence.

Types of Goods in Runescape

The goods in the Runescape economy vary in their cost structure, in the demand structure and in the supply structure. There are two basic types of goods, the rare good and the consumption good. Rare goods are expensive, not meant for consumption, and increase in quantity slowly or none at all. Consumption goods are relatively less expensive, consumed each day, and the quantity produced and consumed is very high. All goods in Runescape are commodities in that there is no differentiation of the product itself in its design or function.

In the following analysis, I have used both data collected before and after my hypothesis question was posed to present a clear view of the various Runescape market structures.

Consumption Goods

The consumption profit structure can have either economies of scale or diseconomies of scale depending on whether each person requires one or more than one of each good. Consumable armor and weapons (that which is often lost in battle) are an example of such a diseconomy of scale profit structure. The more that is sold, the lower the profit per unit, because producers have a limited amount of time to sell the good and thus sell to wholesalers or retailers at volume discounts.

When a large number of a good is more desirable than a smaller number for each person, such as goods that give experience points (for levelling), there is a profit economy of scale. People pay more for each unit for larger amounts of units because it becomes time consuming to gather larger amounts quickly for the average consumer. Each consumption good has a certain limit to total production, and a range of total quantity produced where costs are low and high. This maintains minimum and maximum prices for goods without any “governmental” interference.

An example of a consumption good where the cost of the good is at first low, and the producers can only produce a limited amount, is Chaos runes. (Chaos runes have profit economies of scale) These can be bought at the game stores. The respawn (restock) time of these runes forces a maximum quantity “produced” (bought in the store) per time cycle. If the average price of the chaos rune exceeds a certain amount, there is another, more expensive, way to obtain Chaos runes: through runecrafting. The price of Nature runes, by comparison, has far exceeded the price required to start runecrafting. There is a very low volume in the stores and monster drops and thus most Nature runes are produced by runecrafting.

Trading arrangements in Runescape for Consumption Goods

A trader (also called a merchant in Runescape) can take advantage of these variations in prices to buy several smaller quantities and sell larger quantities, sometimes making very large profits. In this market, certain firms develop where a buyer would agree (contract) to buy a set quantity each week for a set price. This decreases search cost for both buyers and sellers. Even with high volume commodity goods, some sellers or buyers are time constrained or resource constrained and it is not affordable to search for the best price each time they sell. In high volume (quantity and trading frequency) markets, where the search cost is limited, such an arrangement is beneficial for buyers who need very high quantities because search cost increases as quantity traded at a time increases. It is harder to find larger quantities since each person can only produce so much at a time, and thus people must resort to trade to achieve higher output.

For the purpose of reducing the search cost, there have also been arrangements made where a person publicly sets up a thread advertisement (a thread is a post in a forum, or a place for exchanging messages, which can be replied to) with a list of available suppliers or purchasers and price rates. Often this person gets a fee for this service, but more times than not the fee is nothing, because the thread maker is doing a service to his friends as well as himself. Buyers can post and request certain amounts. They are then assigned a supplier who contacts them when they are ready.

Another arrangement made is when a product requires more than one stage to produce and thus a friend is contracted to help produce the product for a long time or to achieve a certain mutually agreed skill level for one of the partners. This is another way to reduce search cost of materials for markets with high search costs / lower trading volumes.

Similar to the previous example, a group of (usually two) people, buy or sell in a low volume market. The search cost is theoretically reduced by two and both have an equal incentive to keep the company, and their contracts, afloat. Using the data gathered (which will be later discussed), it has been determined that it is easier to maintain with only two people. In this scheme, buyers or sellers create a thread (a post in the Forum) where they request what they need to trade. The requestees post in the forum or message the buyers in-game and they are added to the list of

tradees. The partners are not responsible for both selling and buying, like in the second example, and this, theoretically, makes it much easier to maintain this arrangement. The good in question is then used by the partners, converted to another good, which is sold, or resold altogether.

Rare Goods

The rare good can either have no functional use or some functional use. The rate of sales of a rare good can decrease over time, increase over time, or stay constant depending on current desirability of that good. A rare good that can no longer be obtained decreases in total quantity throughout the Runescape world over time and the rate of sales, generally, decrease as well. This type of rare good can measure the money supply situation. When a player has a lot of money to spend, he will buy the item because in the future there will be none or fewer available and because he knows more money will be in the game system in the future, thus demand will go up. Thus players start buying the item partly on a speculation basis, simply because in the future the price of the item increases, and it does increase. The price change of the rare item is proportional to how much money each player wants to “invest” in that item, which is thus proportional to how much money the rare speculators have at any one time and indicative of the overall change in money supply.

Semi-rare items, those rare items which can increase in total quantity (from monster drops), do not normally inflate in price because speculators do not expect their price to rise, but only decline or stay the same. However people can gain large profits from these items by buying at low prices and high prices, due to market fragmentation and much lower trading volume than that of consumption goods.

Real rare items do not usually inflate at a constant rate. Somewhat higher rates of sales in one type of rare item creates more and more sellers, as people rush to buy that item to make a profit by selling it in the next hour or day. All other rares meanwhile stay constant. When that rare no longer sells enough to maintain the rush, some other rare increases in activity and that rare price rises incredibly. This type of market behavior is a disincentive for production goods to be sold. One can just transfer his assets to the rare market, buy rare itemsm and watch them rise in price. Incidentally promotes a certain type of firm’s existence: rare hoarders.

Trading Arrangements for Rare Goods

A rare hoarder would quietly buy a certain rare at market price, and maintain contacts with other rare hoarders. When a large amount of these rares have been accumulated, the rare hoarders can communicate amongst themselves and begin selling some of their rares, triggering a price rush. In the frenzy, rare hoarders make a profit off of people not knowing the “current” price and they buy for the old, lower price, and sell at the high, new price. In this way they make a profit, which allows them to buy more of the same rare than before.

Rare goods, and much more often semi-rare goods, are also bought from producers and resold to consumers by some people. They make a profit off of their knowledge in being able to sell certain types of rare goods quickly and knowing the maximum prices they can obtain.

figure 3. In this market, each firm or individual will have different marginal costs depending on organizational skills of that entity. The marginal costs will rise as more units are produced, because it becomes more expensive to buy larger and larger quantities from other players. Price rises according to the advantage of bulk (lower search costs for a consumer) and then levels off as bulk becomes less profitable. (consumers will only pay a certain amount for bulk).

In the industry supply/demand curve, average supply price is steady, and then increases, because of high fixed costs necessary to create more production beyond a certain point, and because the game system can supply a portion of the demand at a set price. The demand price will remain the same due for a while to the same reason and then slowly decrease according to the regular demand curve function.

figure 4. This structure can be associated with an armor or television market. In this market, some firms produce in quantity and sell in quantity, and others buy from them, who sell in smaller pieces for larger profits, and so on, on to the individual consumer of only one or a few pieces. Marginal cost increases as search costs for larger quantities increases. Profit decreases as profit per unit decreases to attract bulk buyers. The industry supply and demand curve is normal as an aggregate of all the firms because most consumers in the end are simply one-good consumers with regular price distributions, and most firms are relatively the same as well.

Runescape Final and Intermediate Objectives

There is no fundamental human survival requirement for playing Runescape. In order to understand the impetus for achieving profit, one must understand the impetus for playing the game.

In Runescape, the final objectives are to complete a quest, to reach a certain skill level, or to obtain a certain item. The intermediate objectives are the logic and dexterity puzzles that a quest presents, and the patience needed to obtain an item or reach a skill level. The drive for new experiences, new challenges, adventures, and companionship drives humans to achieve. In Runescape, these basic principles allow the formation of an economy. In order to reach an objective faster, one can trade consumption goods and specialize. One works to acquire rare goods to show people his or her dedication, economic power, or wealth.

Profit from Price Disruptions

In order for an economy to be active, the role of luck and the possibility of price shocks must not be so disruptive as to cause players to stop trading, and stop contracts, for fear their expectations will not match the reality. In some gameplay areas, luck is large, such as monster drops (after a player kills a monster it drops something). A player may get lucky and get something as valuable as 7.2 million gc, or he (in many cases) gets nothing of value at all. To compensate for this luck disparity, many players do other things which earns a steady income and one which is better than average luck. Having good luck is often perceived as more valuable than skills and thus a few players do not level their secondary skills (for making money) as much.

Changes allows a certain profit when a player is perceptive enough to notice the change in this balance. He or she can buy secondary skill goods to make a profit when the price is higher, or buy/sell the “luck items”—usually semirare items-- in question to make a profit in the future. The more that luck affects the outcome, the more players do not level their secondary skills and thus the price of goods increases, but contract formation suffers with chance playing a larger role.

A price disruption, such as a game update that accidentally allowed a certain monster to be killed much faster than before, allowed a certain high price rare helm, the “dragon medium helm”, to decrease in value by 15 percent in 3 weeks. This was fixed in a later update. The price has started to slowly increase in value and perceptive players can buy this helmet for a lower price now and sell when the price is higher.

The market generally is responsive to changes in conditions, but only immediate changes. The majority of players do not factor in possible future prices and price changes. Thus, for the smart investor a hefty profit can be earned, and indeed this is how a large amount of players operate.

One such example of an extremely large and fast price swing was when new weapons came into existence (via an update to the game): “rune claws”. The price for the first few hours of the existence of rune claws was 200K, even though the raw material price was 26K. In the next two days, the price was maintained at 100 to 80K. In the next week, the price dropped to 40K, 5K over the price of an equivalent cost item. The novelty of the item in the first few days overrode all other price considerations. Temporary firms consisting of two people, a producer and a retailer, sprang up to capture the profit of this market. Thus manageable changes in market conditions can create new opportunities – and provide an incentive for contracts.

Avenues of Trade There are varied avenues of trade: the forums (official and unofficial forums), the public chat inside the game, and the private messaging system. Forums can be used to maintain lists of people who want to buy/sell a certain product to/from certain other people. Players advertise in forum “threads” to bring in new customers for a seller, bring in new producers for a buyer, and in some cases, both. Forums are a way to reduce the inefficiency caused by players not being online 24 hours a day: people attempt to get better (market) prices using forums.

Advertising in public chat is a way to attract customers who otherwise would not have bothered with a purchase or to sell an item quickly. (but often at a reduced price) It’s also a way to buy something quickly. (often at a high price) Private chat (a 1:1 messaging system) is used for finalizing and negotiating possible deals in both public chat and forums.

How Income is Determined

The weekly income of a person is based on how much money/items that person has, luck, (person-to-person) connections, and experience level in certain skills. The higher the experience level, the more valuable the skill and thus the income. For a trader (merchant), the more connections, the faster a merchant can trade goods and the more money he can make. If someone is lucky, he or she will get a good drop from a monster or will buy the right item right before a price swing. The amount of money (GP/GC) a person has can determine how many items he can have for sale at any one time, (if he is a merchant/trader), and alternatively whether one can buy the supplies s/he needs to complete a certain task in a secondary skill. (and thus, ultimately, make more money)

I have made two polls on income. The first is a private poll where I personally asked each person for answers to every data point except the last. The second is a public poll where anyone can respond with any number. The numbers diverge wildly in the public poll, but in the private poll one can see certain occupations earning a more stable range of income and thus for reasons of income stability people may want to be in a firm.

Using the information about Runescape market structure, my hypothesis of firm existence in Runescape was the following: longterm price stability and regular known price swings, long term commitment to the game, and a low (time) maintenance cost versus reward of a firm will allow firms to form and be maintained. Unknown price swings, high maintenance costs versus reward, and unreliable contract partners will only allow primitive temporary firms to firm, if any at all.

Based on the conditions of Runescape, I hypothesized that the structure of the firm would either have one person at the top and everyone else taking orders from him, or a partnership where two people share the burden of the firm.

Interviews

I conducted three interviews with leaders of three “companies” in Runescape, three interviews with people who claim not to have formed such companies, and two interviews with people in a “clan”.

The three firms in question are comprised of: the leader of a group of individuals who cut logs, one of the two partners in a fishing and cooking firm, and one of the two partners in an herb gathering firm.

According to the interview and follow-up examination, the main advantages of the log cutting firm versus individual sellers are decreased search costs (you receive orders from the firm leader) and increased profit: through large orders, the firm can charge higher prices per log, and thus the higher price difference is shared between the cutters and not taken by an individual who bought for a lower price separately and resold the logs. However, I thought that the main individual behind this firm does not have a sufficient incentive to maintain it: the benefits are dispersed among the members of the firm, but the time costs lie in large part on the man running the show.

The leader of this firm did say that previously he was in another firm where 15% went to the man running the show, but claims that that is too much. As part of an experiment, I have ordered 1,000 yew logs and assigned a worker.

After a week (the maximum waiting period, as mentioned by the owner), I was informed by the worker that the log order was not going to be fulfilled. He got to a new fletching level, which allowed him to make use of the logs himself. After some discussion about his (non binding) contract, he agreed to cut me the logs if I would not receive another person from the “owner” of the company and I still wanted the logs. After a brief yet informative conversation with the owner, I was informed that the log company was dissolved. “Why?” I asked. He gave me two reasons, reasons that I anticipated.

Reason 1: workers did not read the rules and/or did not show up for work. There is no legally binding contract between the worker and the owner.Reason 2: The owner is not being rewarded for his efforts. The commercial incentive is not strong enough to overcome the organizational cost.

I also looked at a fish firm. The objective of the fish firm is to maintain a flow of sold fish so that the two objectives of the partners in the firm are achieved: a high cooking level and a lot of money for the sold fish. By posting an advertisement, the partners always have someone to buy their fish, cooked or raw.

The third firm I looked at is a firm that buys unidentified herbs with two partners. An unidentified herb is used for leveling the herblore skill. The herblore skill is especially hard to train (level) because the ingredients for potions take time to find. Thus the higher-exp herbs are very expensive. By buying at a low price and identifying these herbs (it requires a high herblore level to identify everything), they can make a profit selling identified herbs for higher prices. The main advantage of mutual advertisement and sharing of workers is that the partners can retain their workers by buying herbs more frequently and maintaining interest in gathering herbs for them. (killing monsters and getting herbs that is) They also can distribute the load of herbs, ie: one partner can utilize the herbs for selling and leveling and the other just for selling, and they can later switch these roles without turning down their workers and each can retain the workers for future use. There aren’t that many competitors (it’s a fragmented market), so that really helps, too.

In contrast to these different firms, the majority of players in Runescape engage in trade without the aid of “official” partners. The three examples that I present are Runeking 53, a wealthy runecrafter, Apoc24, a very wealthy rare trader, and Agamemnus (self-interview), also a wealthy commodities and semi rare trader.

Runeking 53 makes his money in two ways. One is runecrafting and selling fire runes, by himself, and the other is selling nature runes. Fire rune making does not earn a very high income but runecrafting does (the level requirements are higher and usefulness is higher) Incidentally, many nature runecrafters utilize “runners”, and this is a sort of firm. Runecrafting is performed by walking to a runecrafting altar, placing “essence” (which is mined prior) on a runecrafting altar, and going back to a bank to get more essence. This is why runners (essence is traded for runes at the altar) are used: runecrafters get experience, and runners get a service for free. However, this comes at a great organizational cost. (to organize all these runners), and thus Runeking53 doesn’t do that. He still makes a lot of money, though.

Agamemnus makes a lot of money, a good deal more than Runeking 53. How does he do it? He bargains a great deal, and engages into contracts to buy or sell items. Usually he contracts for buying purposes, as he sells in bulk for high prices. , Selling items in a contract requires him to keep providing that specific item quickly. Sometimes he is unable to do so because his supply is limited by his “hired” workers who may at any time quit the game or quit selling to Agamemnus. In spot sales to buyers, however, Agamemnus is quite receptive to long term hired workers, because he accumulates a resource and then sells it. At times, he has hired lackeys to find him good deals, and many times he has used his connections to find prices and find other trading partners. His connections have asked the same of him. This has worked well for everyone.

Agamemnus does not maintain any sort of public company because then he’d have to give up some of his income, and he believes he can sell everything he wants to sell quickly enough. And he really doesn’t need more of these kinds of workers-- the ones that come with declaring a need for a specific type of resource and maintaining this declaration for a long period of time), as he has enough long-term workers working “in the shadows” as it is.

Apoc24 also makes a lot of money, a good deal more than Agamemnus, simply because he had a lot more to start with. (or he started earlier in this business.) Apoc24 usually buys the highest price items and with those items it’s easy to change the price under or over one million. With a high enough volume, Apoc can make serious money. As for workers? Well, it’s the same deal as Agamemnus really. He does form a temporary firm sometimes though, to help a friend sell something for instance. (well so does Agamemnus..) He claims that a firm in the rare and semi-rare business can even drive up prices, sort of a cartel if you will.. The price change begun by a cartel, though, affects everyone in this market, and he doesn’t find it profitable to help it along too much, since it works by itself to raise prices for everyone. I have noticed that certain players do indeed influence this market by their comments.

Even though these three people do not think they are in a firm, their behavior, and the behavior of people of their type, fits the definition. They engage in short-term, and then possibly long term contracts to maintain a profit level and reduce search costs throughout the varied market structures of Runescape.

The third type of firm that was discovered by two informative interviews was the clan. The clan is a network of people with an established identity that shares several combat resources, skill level resources, and fights together in battles and wars to acquire battle loot from the defeated. The clan is proposed by some, such as The Wilderness author “His Lordship of the Wilderness Guardians” to be a way for people to dispose of weapons, armor, and combat resources. Although this view is perhaps correct, clan serve another purpose: the reduction of search costs imposed by specialization, where high levels are required to create certain objects and thus these services are required, which accrues a search cost. Clans will minimize this search cost by providing a willing and available pool of people in a clan website or discussion board.

Prisoner’s Dilemma

Fundamentally, there are firms, and there are contracts. Historically, a firm has been separate from contracts because it appears to be an entity that works in its own overall best interest, not any particular sub-party’s best interest.

The one buyer and one seller market framework, a structure which can be expected with a high search cost for other buyers or sellers, allows the simplest description of the free trade (bargaining) efficiency problem. The problem arises when one party must make a sub-optimal (over a period of time) choice because it knows that the other party’s choice will be determined by its maximum outcome. It is the Prisoner’s Dilemma:

party 1party 2 trade don’t trade

trade (10, 10) (-5, 2)don’t trade

(2, -5) (3, 3)

In Runescape, the imposition of a search cost for finding the maximum price leaves players with a Prisoner’s Dilemma: search, and incur a higher cost and the possibility of higher profit, or or don’t search, and trade, with immediate profit but no possibility of higher profit? In many circumstances, there will be no agreement and search costs will be great. The existence of contracts provides a way to minimize the search cost by trading with a pre-agreed partner at least until a better deal is reached.

There are four theories on the existence of a firm. The first theory, and the earliest, states that a firm exists simply to enjoy economies of scale and scope. However that itself is insufficient because a market can act in this way, too. In 1937, Coarse’s thesis was that transaction costs determine whether a firm exists: the cost of organizing activity in the firm must be less than the cost of organizing activity in the market. This still does not answer the fundamental difference between a firm and an efficient market. Williamson (1981) was one of the first to describe what is called the modern theory of the firm.4

The firm’s primary objective is to supercede two problems with contracts in a fragmented market: bounded rationality, and opportunism. If a producer is rational, but simply cannot expend the effort to make the best possible decisions, he has bounded rationality. A firm shares the cost of rationalizing market action. Opportunism is the breaking of contracts. A contract will be broken between two people if one person has a larger incentive to break the contract than to maintain the contract. In an n-period market where n is uncertain, the existence of a firm allows producers to minimize risk by minimizing opportunism. In a firm, a contract is presumably fixed and unbreakable.

It has been my opinion, however, that the breakability of contracts usually crumbles the entire firm structure because one side may take advantage of the other until it is ready to reneg on its agreements. Thus it is highly beneficial to have legally enforceable contracts, or in other words a system of legal law and physical enforcement authority. When, however, the possibility of higher profit is known to be impossible, or the gains of the current trading arrangement far outweigh search costs for new partners, a firm can form.

Findings, Theoretical and Practical

Based on these interviews and myriad intangible data playing this game, I believe that it does pay to maintain certain firms in Runescape for certain industries and goods markets, even firm structures that I did not previously expect. What types are they? A firm in Runescape will form where there is a high enough search cost associated with the buying or selling of a good, and a high enough benefit to maintaining the contract.

The major problems associated with retaining a long lasting firm, the possibility a player will quit or do something else (and by default renege on a contract), or simply transfer his work or business efforts to another partner(s) day-by-day, are eliminated by having a high profit, high search cost, and high entry cost. Thus a firm should work to decrease that search cost for people in the firm, and in some cases reduce entry cost for its members and increase profit.

A relatively high entry cost to an industry, whether in terms of money (gold coins), time (skill level), or connections to other players, will necessarily be accompanied by a high profit, and, almost always, the promise that the player in question will have played this game for some time, has invested more into it, and is less likely to renege. A high profit, in terms of money made or reduced search costs (once in the firm or market) will provide an inventive for a player to stay in a company. A high search cost will provide the same incentive because the player’s price is determined by how much searching he has to do for a good price.

In the woodcutting company example, the search cost can be attributed to finding a high enough price for a good, made easier by having integrated sellers because a larger quantity sells for higher prices. However, and especially for lower level logs), the entry cost is low. Having dedicated contractors helps (those who don’t quit the game) maintain the company and not having them ruins it. High market profits are also imperative to forming a firm, and the price in the market is not great per hour of effort, even for volume logs.

The market that a firm in the form of a “clan” offers: reduction of search cost for a large variety of goods and a lower fixed cost to enter the commodity/secondary skill industries and the industry of “pking”. The advantages that a network of merchants and skill builders offers, as a type of firm, is also the reduction of (in some cases) significant search costs (even for commodity goods), allowing increased turnover rates and thus increased profit.

The competitive advantage that one person or “firm” can have over others in this game is in terms of quantity sold or bought, for higher prices, and higher goods turnover rates as a result of that and as a result of better organization. The search cost can be attributed to the time and effort spent bargaining for a certain price and the time spent finding a certain quantity. The quantity sold, if larger, will increase in price per unit because it decreases the search cost vis-a-vis many sellers of lower quantities at smaller prices. The quantity bought can be higher if one has better connections to suppliers or more of them. The turnover rate is also higher if there are more buyers or sellers.

In the above examples, for successful entities, either the quantity bought/sold increased (and thus profit) or the turnover rate increased. These effects were not limited to firm versus individual behavior. The difference between a firm’s (one that lasts for some length of time necessary to create an economic profit) and an individual’s contract reneging behavior in Runescape lies in longetivity and reliability of the contract: individuals without connections (not in firms) will not, generally, be reliable as trading partners to be included in firms, but those with connections will. This circular arrangement encourages the formation of such firms.

Real World Theoretical Comparisons

The private investor can be thought of as a specialist craftsman, clothier, dentist, lawyer, or any of a variety of consultants. Yet even these can increase their potential by hiring nurses, secretaries, and lackeys. They can increase their potential by forming organizations, guilds, etc, with the most senior members having the most respect and authority. In Runescape, this happens as well. In a world where contracts cannot be legally binding, reputation and authority matter even more.

Both in Runescape and in the real world, one can find, in the commodities or consumption goods markets, the emergence of a system of interdependent players: the producers, wholesalers, and retailers. They each function independently in the market, but they can contract among themselves forming a loose association that can be interpreted as a firm. In Runescape, the goods are just ones and zeros on a computer server, but they have similarities to real world items. The production of chaos runes (skill/production good, rising profits per unit, high fixed cost) can be considered equivalent to the production of diamonds by the DeBeers monopoly in some respects. After a certain price is reached, just like for chaos runes, quality diamonds can be economically artificially created. In other respects, many Runescape markets are unique. Chaos runes can be produced by anyone, for example, and are consumed in mass quantities. Unlike diamonds, there are few sellers of mass quantities of chaos runes.

The same logic applies to TV sets as rune armor (the best production armor for warriors). Producers must produce large quantities to remain efficient, yet they must devote a lot of resources to selling TVs and thus turn to wholesalers and retailers to help them, just like in Runescape.

Real World Real Comparisons: Search Costs

There are certain search costs associated with buying and selling in Runescape. The coal mine/plant paper titled “Contract Duration and Relationship Specific Investments: Empirical Evidence from Coal Markets” by Paul L. Joskow illustrates how contract duration increases where there is more interdependence and decreases with more independence. For instance, lack of transportation alternatives is illustrated to increase cooperation and contract lengths. The same happens in Runescape, where players with limited time to search for their goods often create long term contracts, even if implicit contracts, to alleviate their search costs.

In “Contracts and Quality in the California Winegrape Industry”, Rachael E. Goodhue and others show evidence for more specific contract agreements between low-quality and high quality producers. This is in direct correlation with Runescape’s low-dependability and high-dependability contractors: whether or not they are likely to fulfill the current contract. With low dependability players and especially those who do not produce large quantities, there are more stringent conditions that must be met in order for their trading partners to trade with them: a certain quantity or a certain meeting place. Thus the trading partner who set forth the conditions can be assured of a minimum profit and a smaller search cost, much like the wineries can be assured of the same thing.

In Runescape, the response to high search costs are either firms, with the intent of lowering these costs, or private profiteers, with the intent of reaping a huge monopoly. Many profiteers

themselves exist in a firm-like structure in Runescape. High profit and sign of long term contracts feed on themselves in a loop: high profit forces out short-term contractors because they are undesirable and long term contracts lead to high profits.

Conclusion

The Runescape economy, a virtual, but in all other respects, real economy, can provide understanding of the real world without complex surveys or impossible analysis. The data is there. Once one is in the Runescape world, one can see the transactions taking place that normally take place behind closed doors and known to a few people. One does not have to extrapolate these transactions; one can see them. The firm is present in Runescape, and it does not involve huge bureaucratic rules and regulations or a complex organizational structure. It functions efficiently in the free trade market alongside with spot trades and private investors.

Although, as evidenced by the income data, income is widely variant, each player has a potential to achieve the highest of incomes by being responsive to the market conditions. In Runescape, a person does not have to be “stuck” in a certain income range as in real life. Skills can be gained and thus the player’s income can rise with his skills. Thus, Runescape is not just an excellent tool to observe the effects of similar price changes in the real world; it is much more fluid than the real world, allowing an observer to see effects materialize quickly before him or her. Players and firms respond quickly to changes in conditions, sometimes even unwittingly, almost as much as certain high volume stock market areas... through Runescape, it is possible to answer many economical questions, including “can firms form without legal or sustenance incentives?” Perhaps such a fluid and transparent market structure is the future of our economy..?

The Data

I interviewed 8 people, including myself. Three people ran what appeared to be a firm, or “a commercial partnership with two or more people”. Three described themselves as not much of a firm, and two were in a clan.

After these interviews, I list data of the two polls I conducted.

---------------

Following is the thread for Chucko4's log company in the Runescape forum. The idea behind it is to benefit everyone: buyers, and sellers. For buyers: with a set price range and good (fast?) service. For sellers, job security. Basically this reduces the search requirement for both sellers and buyers of logs.

---------------

**Status: ONLINE-Me, the shadows, and baboon are busy with 56k yew order).- 6 orders maximum for now, once the business starts going we will raise.

**Owners: Chucko4 and Sh4d0w Pker- We sell all kinds of logs but specialize in yews.

**Workers:- INACTIVE WORKERS WILL BE FT FT CLIPPED!- Workers Keep their profits unless it is a very large order. Unique company.1. Chucko4 - 72 wc (andymay003 project)2. Monkey2166 - 72 wc3. sh4d0w pker - 78 wc (andymay003 project)4. Cowkin - 73 wc (1k yews for Agamemnus)5. Han Is Fit - 70 wc6. Redmage303 - 63 wc7. Blacky88 - 53 wc8. Lt Bob24 - 64 wc9. Sam1113 - 83 wc10. Codelyoko77 - 67 wc11. Chris 6966 - 52 wc12. Studude14 - 85 wc13. Baboonuses - 62 wc (andymay003 project)14. Syamilo - 75 wc (1k yews for Critty105)15. Pladin517 - 81 wc16. Xsrailer - 62 wc (1.66k yews for pumaslayer)

**Stock (give me a week to straighten out)Yews: 3.1kMagics: 100 Oaks: 1500Willows: 2500Normal Logs: 100

**Current Orders:1. open2. Andymay003 - 56000 yews (busy busy busy)3. Critty105 - 1000 yews4. Pumaslayer - 1660 yews5. open6. Agamemnus - 1000 yews

EVERY WORKER REPORT WEEKLY ON YOUR STOCK OF LOGS(Example: 1300 extra yews, its ok to have 0 logs)

Last edited by Chucko4 on 21 Nov 2004 16:31 Chucko4 20 Nov 2004 19:09

**Prices:Yew Logs: 300 each if under 2000 logsMagic Logs: 1k each and above-Other Log Prices Negociable

**HOW THE COMPANY WORKS: I will assign what you need to cut in parenthesis such as (1.5k yews for johndoe). CHECK THE FORUMS FREQUENTLY FOR YOUR ORDER. Complete order in 7 d ays max or be punished, possibly fired. You sell directly to customer and keep your profits, unless it is large project i will assign a few people. CHECK THIS FORUM AT LEAST ONCE EVERY 4 DAYS.

Last edited by Chucko4 on 21 Nov 2004 14:35 -------------

A: So do you make any money in this business?C: The thing is with my company, my cutters make all the profits.A: Tell me about big orders.C: I will assign 2-3 people on big ordersA: So in essence, you make more money than you would have individually?C: For the most part. If we sell under 2k yews the price is 300 each. Over 2k yews it rises depending on the amount.A: What motivated you to create this business?Well my love for woodcutting of course. And an empty pocket didn't slow me down.A: One more question, how much have you been doing this?Cutting wood or company?A: Both.C: Well I'm almost 72 woodcut and was in another log company for about a year.A: And this one?C: A week...A: What prompted you to leave your old company?C: Had to give too much to the leader.A: I see. How much was he taking?C: 15 percent.A: Is that other company still in existence? Or did it fall apart?C: It fell apart over time.

A: What was the name of the old company's leader, if he still plays RS?C: I'm not sure, it was a long time ago.A: Ok, I'll order 1 K yews for your trouble. How long will it take to get the yews?C: Talk to cowkin, he will cut your yews.A: Ok thanks.

---------

A: Did you see my message?C: ?A: Cowkin isn't getting me logs and I want another seller.C: Business closed sorry.A: Closed?? What do you mean closed?? As in forever? He told me that he can make bows now and doesn't want to sell logs.C: For now at least a month.A: Interesting. What happened?C: Lots of things. Workers didn't read rules. And inactive workers. Too many workers.A: Ehm. And is that it?C: Too much work for me. I have to explain rules to everyone who bought and every worker.A: I think you may not be saying that if you had 10% commission.C: They don't read the rules.A: In other words, you have no way to enforce your company's rules.C: I will bring up after I beat legends with 4-5 loyal cutters.A: And you are not being compensated for your involvement.A: Is that a fair assessment?C: I guess.A: Ok.A: If you did start up your company again, are you going to organize your forum thread like before?C: Yes.A: I see.---------------

Below is Nido Dragon and Rl1323’s forum thread. The impetus behind the formation of their company has been to get Nido dragon’s cooking to 80, and Rl needed money.

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~~Hello fellow fish goers! We are just your average lads lookin' for some excitement in fishing. We are here to take orders of Lobsters, Swordfish, Tuna, and Shark.

*~! Current fishing stats and Cooking !~*Nido Dragon - 86 fishing, 76 cookingRr1323 - 77 fishing, 65 cooking

Our current online status:

~~Forums + Game~~Rr1323 - offline

Both Busy with ordersPlease postpone further orders Ty

Nido dragon - online~~~~~~~~~~~~~~~~~

~Please keep all orders at 1k or under thank you.Our prices for raw and cooked are as follows:

~^*Raw*^~Swordfish - 200 eaLobster - 140aTuna - 50 eaShark - 750 ea

~^*Cooked*^~Swordfish - 275 eaLobster - 200 eaTuna - 85 eaShark - 850 ea

We will only take up to 2 orders at a time so please do not exceed the limit :DOrders in preparation and how many Ordered:

1.Slchui - 5k raw lobster, 5k raw tuna2.death piker - 1.2k raw lobster*Note - All orders are 1k and under please*~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Thank you for your orders, all orders will be fulfilled ASAP and you will be notified.

[This advertisement was brought to you by: The Baxtorian Bafoons Fish Co. Owned by Nido dragon and Rr1323!]

Rr1323 21 Nov 2004 03:33 I'm Rr1323,we are happy to fish for you! Nido Dragon 21 Nov 2004 03:35 I'm Nido dragon,We love to see you smile! :D

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A: Do you make more money than you would have otherwise [by] working for yourself?N: I work with a partner and a lobby fisher, and yes I do.A: What would you say the most important advantage that you have is, versus working alone?N: Being able to do excessive orders, more than normal limit.A: Do you only get orders from the forum?N: Mostly, we seem to get f2p players approaching us as well.A: Do you think that because you log in at different times, you have a higher chance of getting a customer? Or do you have so many customers that it doesn't matter?N: It helps most of the time, we seem to have to turn people down more than we accept business.

A: How long have you been at this gig?N: Only since yesterday evening, a lot of business since then.A: Do you plan on expanding your business into different foods/more fishers?N: It can be considered, more fishers would be good but right now we can't afford any more.A: Can't afford in terms of..? Time? Or do you want to buy their fish outright?N: Just to buy the fish, I can fish all the fish that we have posted. Lobbies are the most commonly bought item so I only have a lobby seller.A: Or do you get some money from helping your friend sell the fish or do you resell at the same price? N: Yes, we split all profits.A: So if you collectively made 100K in a certain period of time, you both get 50K?N: Yes. But if we complete and order individually, we just keep the profit, like a small order on the side.A: Ok, I have a few more questions.. How long have you been fishing / known that your partner fishes?N: I've been fishing for about 6-7 months now. For about 3 months on him.A: What was the main idea behind you teaming up?N: He needed money, I need 80 cooking.A: Anything you'd like to add?N: I'd advise a good fishing and cooking level is all. :) Both should have a good level if you're going for business.A: Ok, thanks.

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M0sdef and fullspeeda

They buy "unidentified herbs", then identify them (this requires a high herblore level) and later sell them for higher prices, or use some for themselves. Their chief strength: they share workers, and can buy more together than in a group than individually. Workers are retained longer. They recruit workers through occasionally posting a thread in the herblore forum.

(this interview was conducted after a small initial interview one week before)

A: First question, is your company still functioning?M: Yeah.A: Do you still have just one other partner?M: Yeah.A: Ok. How long have you collected herbs before you formed your company?M: Not long, maybe 3-4 weeks.A: What about your partner?M: He didn't collect he just bought.A: He's still just buying?M: Nah he collects now too. I'm only buying right now cuz I'm training.A: Interesting. Any clue as to what changed his mind?M: Herblore is the best money maker in the game.A: Did he say how he made his money before then?M: From other skills..A: Care to elaborate?M: He ranges... gets a high lvl clue. The clue reward - robin hood hat or any other rare.I have 32m cash now. [interview note: that's a lot of money]

A: How did you come up with the idea of forming the company and advertising in the forum?M: I always use forums.A: So once you started selling to him you figured you could get more people?M: [We started] after we became friends..A: I see. So the main profit is that you sell the higher level herbs. Is that correct?M: Yea.A: What about people selling herbs that they know are under Ranarr? Do you have any strategy to combat that?M: Yeah but that's too hard to explain.A: Try to explain it if you want to.M: Nah.A: I guess we can call it a company secret then?M: If you want to.A: What about competition: do you have any?M: There is none.A: Why do you think so?M: Wouldn't get that good of a response. I'm on almost every world and no one ever posts in forums.A: Let me take a stab at your secret. You buy from people who only started collecting herbs in edgeville dungeon. I imagine that's what you would do.M: Nope.A: You collect herbs in places other than Edgeville?M: Not really.A: So you mean that you have longtime herb collectors?M: That's another thing. I only buy 200+ herbs at 1 time.A: Why do you do that? Convenience?M: Yeah.A: Is it easier to collect herbs as partners, and what do you gain from it?M: Free herblore exp, triple your money, combat exp.---------------(this question was asked to M0sdef, but he logged out. It was then asked again to fullspeeda after telling him about the previous interview)A: But what's the advantage of working with another person? You can collect more herbs from people collectively? Perhaps, as you suggested, you can choose when to collect herbs, and get them whenever you need?F: I buy, he buys. It’s just a bigger business.A: Thanks..---------------

Interview with Agamemnus, a trader/merchant and a crafter. (Note: I’m interviewing myself)

A: Hi.A2: Hi.A: So how do you make money?A2: I craft, and trade items.A: What do you trade/craft?A2: Well, everything that's worth it of course. Expensive items or items relatively easy to sell. Really it's items worth selling, items with a high profit margin. Same with crafting. I trade bulk items and rare items. I stay away from inflating rare items. It’s not worth the mental anguish...A: Ok... How do you determine if an item is worth selling?

A2: You need a base, say how much you can earn if you did activity X. Then see if you're making more money than activity X. Ironically, as I make more money, it seems the base rises... and I force myself to make even more money.A: So let me get this straight. Trade: what do you mean? Is there any investment involved, timewise or moneywise?A2: Well, yeah. I buy targets of opportunity. The opportunity window is open for a long time if the upfront cost for an item is high, but the profit is often percenteage based. 10 percent on 1 mil is a lot less than 10 percent on 10 mil. Then there is the time you need to spend to buy AND sell everything. It does take some time to sell an item for a high price, but it takes a quick eye to see a bargain and grab it for a really cheap price...A: So how do you sell items? Find items? Advertise on the street? Forum? Other forums? A2: Generally I find connections through forum posts (mine or theirs) for my buyers or look for people buying in bulk on the street. I usually post when it's a one-time item that I'm selling, thus not much of a repeat customer base: especially for high-priced rares/armor. I also ask around my rich friends if they need anything or know anyone needing anything. I almost never advertise what I'm selling on the streets of Runescape. Too many items, and you can rarely find good customers. The only way I would be selling on the street is if I was in an area where people need that specific item. It's not random. You have to focus your efforts... For sellers, I do the same thing. [I rely] more heavily on actually getting to where they are making the stuff, but also the street is often a good deal, whereas in the forum things tend to be overpriced. I have tried other forums, but I don't get results. Not enough volume.A: Why do you think forum items tend to be overpriced?A2: Well because you’re in the forum, you’re competing against everyone now. That tends to drive the price higher than what I’d like it to be, since people can outbid me. :(A: Have you ever worked together in a company before?A2: Well I don’t know if you’d call it a company, but I have paid commissions to people for them to find stuff for me to buy on the forums and in the game. One time, I shared a 50/50 profit with a few lobster fishers and cookers. They’d fish cook, I’d sell. 50/50 split. It works out well that way because they don’t have to spend time selling and I don’t have to spend time fishing. I also run a tight ship when it comes to workers. I have hundreds of them. They do sometimes just drop off the radar screen, but generally they sell me stuff, which I then sell.A: Worker retention: is that a problem, then?A2: Yes it is a problem, as my workers get tired of RS, stop liking my prices, or do something else in RS. Usually, I am constantly recruiting new workers. Sometimes my workers get their friends to sell to me and I get a steady stream of new workers... sometimes. I do have a core of loyal workers and/or friends who would not stray from their agreements if they could help it.A: Ok, thanks.A2: No, thank you. :)

Interview with Runeking 53: a runecrafter

A: Do you sell anything in RS?R: Fire runes, yew longs, and magic longs.A: Have you ever worked with a partner(s) to sell anything?R: No.A: Why do you think that is?R: I can support myself and don’t need to work with other people.A: So would you say you sell your items quickly?R: Yeah.A: Where do you sell your items?R: Forums.

A: Thanks for your help.R: Sure.

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Interview with Apoc24: very rich merchant

A: Do you sell anything in RS?Ap: Do I sell anything? I think that answer is obvious. Lol.A: Can you describe what type of objects you sell and why you sell them?Ap: Well phats, god armor on occasion, dragon armor. Why... to make a profit of course.A: Have you ever worked with a partner to sell anything? Joint advertising, or any other form?Ap: I stand alone =0A: Why do you think that is?Ap: Life experience. From problems they face in their own life. [They want] me to help them with their own problems.A: What about advertising?Ap: In RS it’s a toss-up. One can use joint advertising to push prices up or lower them.A: Do you think it has any use, or is it just sell the product faster?Ap: In a way yes, if you’re selling for a friend then more people know about that sale.A: How applicable do you think this is to various markets in RS? Do you think it works just as well in all goods?Ap: Well yea RS is very much like the real world.A: Do you think there is a different effect, for say a high priced good versus something no one buys much, like say prayer potions.Ap: As everyone knows it’s all about supply and demand.If someone wants an item for a large value people will sell. If someone is selling an item no one wants, then he continues to lower his price till he finds a buyer.A: Two partners, one’s a fisher and one’s a cooker. They sell raw and cooked fish, and have set up a company to do so. Do you think any of that works with rares? Or is it just for the purposes of influencing the price?Ap: So if you are asking if two people sell a phat... does that influence the price?A: Yes.Ap: Yep it does.A: What about high volume commodity markets? Do you see any reason for a company to form there? No?Ap: Sure company does help.A: I know you aren’t in the business right now, but must have been at some point...?Ap: A company makes a decision... a high volume commodity can’t make decisions on their own, that’s what a company is for. To sell and make decisions.A: But can’t the individual make the decisions himself?Ap: He could but every individual would like another opinion.A: I see.Ap: There’s an “if”, an “and”, plus a “but” to everything.A: Do you think the fact that there are no fixed contracts in RS hinders the formation of large companies? Or would you say that most people carry out their contract? Ie, make 10000 units of X in Y days.Ap: Well on RS it’s simple. If they don’t get the stuff then you have no reason to buy it. So most people carry out their own contract.A: What about credibility? If someone doesn’t ask for something, and later asks for another job...

Ap: If the person can’t do one task... how can you be so sure they will do another?Ap: Why am I being the one being asked these questions. =PA: You have a lot of experience in RS and in trading.A: One more category, how do you sell your items? RS forums? Other forums? Public chat?Ap: RS forums, public chat... I have been on other forums but very rarely.A: Would you say most of your sales are finalized through private or public chat?Ap: Private or public.A: Would you say you deal in repeat customers or just random people?Ap: Hmm I’d say it’s 50/50.A: Ok, thanks for your help.Ap: Np.---------------

Interview with Styl3r about clans

A: Can you talk to me a little bit about it?S: Sure :) Around 100 membs, 83hp [combat] average.Good atmosphere, good leaders, and soon a war vs blacknightsA: What is the advantage of joining a clan such as yours?S: New nice ppl to meet, fun with pking, active boards =)A: Is there any increased accessibility for things you want made? Eg armor, weapons, cooked fish.S: Yep, although there isn't an active 99 smither, but many ppl buy and sell food, ores, etc.S: Are you looking to join a clan then? That would be a good choice, but there are few other nice clans.A: Just doing some research.S: That's good, you should consider many options before joining one. It's good to find a nice clan and be loyal to it =)

---------------

Interview with Ghofer Eeter about clans.

G: I've been in a clan.A: Can you describe?I used to be in a clan and my experience is a good one.A: What are the advantages of being in a clan?G: Well pk trips.A: That's it?G: No. Meetings. Friends. Lots of things.A: Is there any monetary advantage?G: Like for money? If so possibly.A: Yes or something that saves money. Or time.G: Yes all 3 of them. The clan will sell you stuff for less. And save you time.G: It helps but for you I would join a very good member clan. Like the crimson hunters, they would take you very fast.G: They are like the biggest. Other than that nothing. Well, they are extremely organized.G: And you would probably have a high rank, meaning a lot of people under your command.G: And in that clan the people under you have to listen.A: Why would people want to do that?G: Not sure.

A: Listen to higher ranked members?G: Lol, yes.A: Why?G: But they do. I don't know man! They just do lolz.A: How important is organization, and why is it important?G: It's just my opinion. If not organized then [the] clan doesn't work well. Like, they can't be as trusted. Stuff like that. But that's my opinion heh.G: So you gonna join one?A: Do people in clans tend to stay in them for months? weeks? years?G: Lol, I was in my clan for a while until I got hacked. I'm still in contact with a few of the members. And really good friends with them.G: I didn't choose a big clan though.A: Why aren't you -in- their clan now?G: I'm non-member. I didn't play for 3 months. And I could be in now if I wanted.A: Gotta be a member?G: Nope don't have to be. So much changed in the clan that I decided to rejoin.A: Like...G: Lol, just a lot of stuff about the clan I was in changed. Like when I joined it was a lot of high levels. Not a lot but like 10 people. So I knew everyone. But now it's a lot of ppl I don't know. And right before I got hacked I was 'bout to become a leader. And all that.A: I understand. Thanks for the input.

Private Income Survey

primary occupation

average incomeper week

time spent making this income / time spent playing

maximum income (for no more than time spent playing)

long termcooperative activity?

1 woodcutting magic logs

1 500 000 18/20 2 000 000 Yes, in selling logs for a long period of time.

2 woodcutting yew logs

250 000 8/14 437 500 (default)

Yes, in selling logs for a long period of time.

3 woodcutting, nature runecrafting, trade

4 000 000 15/40 20 000 000 No. Wood is used to create money by self, trade is short term

4 fighting fire giants

3 000 000 12 /21 4 250 000 No. Profits from monster drops are short term.

5 nature runecrafting.

6 000 000 21 / 27 12 000 000 No.

6 rare or semi rare trading

7 000 000 11 / 21 12 000 000 Yes. Profits vary, but are greater with long term cooperation.

7 lackey to Agamemnus

250 000 2/7 400 000 Yes.

8 warrior ranger 300 000 10/11 1 500 000 No.9 woodcutting

yews210 000 15/36 1 000 000 Yes, in selling logs

for a long period of time.

10 woodcutting magics

1 100 000 8/17 1 200 000 Yes, in selling logs for a long period of time.

11 trading valuable items

8 000 000 14/24 16 000 000 Yes. Profits vary, but are greater with long term cooperation.

Public Income Survey

primary occupation average incomeper week

average hourly income

maximum income

1 - 25 000 - -2 chest looting in

Mort’ton70 000 10 000 -

3 - 5 000 000 - 20 000 0004 - - - 5 000 0005 - 10 000 21 / 27 12 000 0006 making arrow shafts 350 000 - -7 - - 200 000 -8 mining and smithing 35 000 0 100 0009 treasure trails (luck) 1 400 00010 3 000 000 5 000 00011 rune mining 15 000 000 - -12 all secondary skills 2 450 000 - -13 law runecrafting - 200 000 -14 - 100 000 - -15 fishing 800 000 - -16 - - - 14 500 00017 - 10 000 - -18 woodcutting - - 10 000 00020 rune mining 14 000 000 - -21 - 1 000 000 - -22 selling big bones - 60 000 -23 - - 15 000 -24 smithing - 25 000 -25 - - 5 000 -26 all secondary skills 4 000 000 10 000 00027 - 1 400 000 - -28 - - 25 000 -29 drops from monsters 30 000 - -30 - - 100 000 -31 selling colored gloves - 50 000 -32 - 14 000 - -33 nature runecrafting 2 100000 - -34 - - 170 000 -35 - 1 000 000 - -36 fletching/woodcutting 500 000 - 1 000 00037 crafting, unspecific - 250 000 -38 mining,unspecific - 3 000 -39 essence mining - 100 000 -40 woodcutting 100 00041 - 200 000 - 2 000 00042 woodcutting yew logs 1 050 000 75 000 6 300 00043 - 750 000 - -44 - 5 000 - -45 - 300 000 - 2 100 000

46 blue hide and dragon bone collection

- 170 000 -

47 - 700 000 - -48 - 35 000 - -49 - 150 000 - -50 mining iron - 40 00051 - - - 2 000 00052 - - - 4 000 00053 chest looting in

Mort’ton1 000 000 - -

54 50 000 1 000 00055 fletching/woodcutting - 170 000 -56 runecrafting natures 1 137 500 - 5 687 50057 - 500 000 - -58 - 35 000 - -59 crafting, unspecific 600 000 - 1 200 00060 18 000 -61 trading, mining (for

max)1 000 000 - 3 500 000

62 - - - 3 000 000

Notes

1 dictionary.com definition of a firm: http://dictionary.reference.com/search?q=firm2 Story about oil pipeline damage: http://www.katc.com/Global/story.asp?S=26759993 The Wilderness online research paper.4 Modern Industrial Organization

References

Fragment from Paul L. Joskow, “Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets”.

Rachael E. Goodhue, Dale M. Heien, Hyunok Lee, Daniel A. Sumner (2003). “Contracts and Quality in the California Winegrape Industry” (2003) Review of Industrial Organization, 23, 267-282.

dictionary.comhttp://dictionary.reference.com/

Jagex Ltd., Runescape [the website that this paper is based on and where all interviews were conducted]

http://www.runescape.com

KATC 3 [a channel serving the Louisiana area]http://www.katc.com/

Dennis W. Carlton & Jeffrey M. Perloff (2005?) Modern Industrial Organization, Fourth Edition. Boston, MA Pearson Addison-Wesley.

His Lordship of the Wilderness Guardians (2004) “The Wilderness” [a guide of Runescape’s clan functions and an opinion on how they affect the economy]

http://www.runehq.com/RHQInn/index.php?showtopic=33408&st=0&p=163140&#entry163140