Devastating price crash in the Diablo III hamburger-dagger market

The market for a virtual hamburger which can be used in as a dagger in a popular video-game plummeted over the last week

Keeping on the hamburger theme, here's a sentence which will make sense to about two of you: the economy of Diablo III has fallen through the floor after a glut of Horadric Hamburgers (a burger which is also a dagger) for sale on the game's real-money auction house pushed the average price from around £90 to just £7.50.

The Horadric Hamburger is a "legendary" item in Diablo III. It's hard to get, and can only be found in a secret level, "Whimsyshire". And yes, it's a Hamburger which is also a dagger. The game provides only the cryptic description:

The Horadrim wandered far and wide to gather the finest ingredients for their feast. Only the lone traveler sent to the Moo Moo farm failed to return. Diablo had laid a trap for the Horadrim, the Hell Bovine, who struck the traveler down before he could gather the final ingredient: cheese.

The problem with the Horadric Hamburger is that although it's classified as an extremely rare item by the game, it's actually a bit rubbish. The game models stabbing someone with a hamburger relatively faithfully. That is to say, it doesn't hurt very much. As a result, no player who is practiced enough to find the damn thing is actually going to use it. It's a bit like a solid gold tennis-racket.

So the natural reaction of all the players was to take this immensely rare, precious, thing which they didn't actually want and use a new feature of the game which debuted last Friday: the real money auction house. There, they could sell their valuable trinket for cash money, and use it to buy real hamburgers which they can eat, rather than stab NPCs with.

Unfortunately, it seems everyone else had the same idea. As PC Games Network reported, three hours after the auction house opened, the burgers were listed at an average price of £87.91, with 12 chancers going for the maximum price of £200. By Tuesday, it appeared that they had realised their folly. Although it's impossible to tell how many sold, the average price had plummeted to just £7.50.

Virtual economies are increasingly interesting to economists, because of the sheer wealth of data they can produce. Valve, the makers of the Half Life and Portal series, recently hired Yanis Varoufakis, who rose to fame analysing the eurocrisis, as their "economist-in-residence". The President of Valve, Gabe Newell, laid out his pitch to Varoufakis:

I have been following your blog for a while… Here at my company we were discussing an issue of linking economies in two virtual environments (creating a shared currency), and wrestling with some of the thornier problems of balance of payments, when it occurred to me "this is Germany and Greece", a thought that wouldn’t have occurred to me without having followed your blog. Rather than continuing to run an emulator of you in my head, I thought I’d check to see if we couldn’t get the real you interested in what we are doing.

The Diablo economy is far simpler than the one that Valve appears to be setting up, but there's still no shortage of teachable lessons. The key one from this story is the fallacy of the idea that goods have some "intrinsic" value. Produce - even a legendary hamburger-dagger - is worth what people are prepared to pay for it. No more, no less. In this case, the labeling of the item gave faulty signals, which convinced sellers that there would be more demand than their actually was. As time went on and none sold, they were forced to cut prices to a more realistic level.

The auction house has now settled down a bit. If it goes the same direction as the auction house in Blizzard's previous game, World of Warcraft, expect to see some very interesting case studies indeed.

A hamburger. Not a virtual hamburger. Certainly not a virtual hamburger-dagger. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.