Economy

Like most multi-player online games, Guild Wars has an ingame economy. Since there is no legal way to exchange ingame currency for real world currency, the economy is a closed one.

Currency
The in-game currency is gold. Almost all goods obtainable from NPCs require gold to buy. Similarly, most trades between players are handled using gold. At times, highly valued in-game items, like globs of ectoplasm, are used as an alternate currency to circumvent the trading system, which is capped at 1,000,000 gold in the storage vault plus 100,000 gold per character.

When trading via ectoplasm or using ectoplasm (or any other highly valued item) as a means of storing wealth, one needs to be aware that there is a exchange rate risk attached to that "alternate currency". Since the rate that ectoplasm is exchanged for gold in-game varies, so does the value of the wealth stored.

Inflation
Just like any real currency, Guild Wars gold can experience inflation. Inflation means that the prices for goods that are bought with gold rise. On the other hand, falling prices indicate deflation. Note that inflation/deflation describe the overall situation, prices for single goods can still fall during inflation or rise during deflation.

To determine whether the price of a good is likely to fall or to rise, one needs to take two facts into consideration:


 * The amount of gold in the economy
 * The amount of that good in the economy

As a rule of thumb, if the amount of gold in the economy rises faster than the amount of that good in the economy, the price will rise (and fall if it is the other way round).

Special case 1: Huge prices at the start of campaigns
This is most obvious at the start of new campaigns. Items introduced with the new campaign are very rare at first, while the amount of gold in the economy is determined by the amount of time Guild Wars has run so far. That means that at the start of any campaign, the number of high end weapons from that campaign, for example, is very small compared to the overall amount of gold in the game. Therefore prices are likely to be very high. As more players reach the end of the campaign, the number of high end weapons available tends to rise, while the amount of gold in the economy changes only very slowly. Therefore prices are likely to fall considerably.

Special case 2: Prices of items that can no longer be obtained
There exist some items in Guild Wars which can no longer be obtained ingame. That is, the amount of these items in the economy is static. The price of those items is therefore only determined by the amount of gold in the economy.

Gold sinks
Since by simply playing the game, users are bound to "create" gold from monster drops, Guild Wars would be doomed to have an ever raising amount of gold in the game (Note: This does not mean it would be doomed to have inflation! That would only happen if players accumulated gold faster than other items).

To prevent this from happening, ArenaNet introduced "gold sinks". That is, ways to remove gold from the economy again. These happen in the form of NPCs that exchange gold for other items or the boardwalk games.

Similarly, there exist sinks for other high valued "alternate currencies", like ectoplasm.

Items without sinks
Given that the drop rate of gold and all other items stays the same, one can provide a clear hypothesis about the price of items without a sink (e.g. green weapons). Relative to other goods with sinks, these are bound to fall forever, since they become ever more abundant compared to goods with a sink.