The Social Dynamics of Economic Activity in a Virtual World

This paper examines social structures underlying eco- nomic activity in Second Life (SL), a massively multi- player virtual world that allows users to create and trade virtual objects and commodities. We find that users con- duct many of their transactions both within their social networks and within groups. Using frequency of chat as a proxy of tie strength, we observe that free items are more likely to be exchanged as the strength of the tie increases. Social ties particularly play a significant role in paid transactions for sellers with a moderately sized customer base. We further find that sellers en- joying repeat business are likely to be selling to niche markets, because their customers tend to be contained in a smaller number of groups. But while social struc- ture and interaction can help explain a seller's revenues and repeat business, they provide little information in the forecasting a seller's future performance. Our quan- titative analysis is complemented by a novel method of visualizing the transaction activity of a seller, including revenue, customer base growth, and repeat business. through social practices. In this paper, we analyze the pat- terns in trade of goods and services, both free and paid, within the SL community. We specifically examine the value of operating within groups, chatting with customers, align- ing with fellow sellers, and other structural and social mech- anisms.