Blizzard is taking a wildly unconventional step with its upcoming action/RPG. Diablo III will allow players to buy and sell items from each other using real money.
Each currency region will have its own auction house, accessible in-game. Players must pay a flat listing fee per item (though Blizzard is leaning toward giving everyone a small number of free listings per week), and set initial bids and buyout prices. Buyers can set their bids to automatically increase up to set levels rather than paying the buyout price, if they wish. When the item sells, Blizzard takes a flat cut of the sale, and the seller can choose to cash it out via a third-party payment processor (which will charge a percentage fee) or to leave it in their Battle.net account to use on any Blizzard digital product. These purchases could vary from full games to World of Warcraft subscriptions and sparkleponies.
Once you transfer your funds to Battle.net, though, you can't choose to cash it back out into currency. Getting money out of the system is a one-time opportunity at the time of the sale. Blizzard says that this is for legal reasons; apparently if the company lets players withdraw money at will, it would face many additional legal requirements just like a bank.
Any item in the game can be put up for auction, and you can set the price wherever you like. Blizzard expects prices to stabilize in the single-digit dollar range for most good items, with perhaps a few exceptional ones making it to double digits. That sounds about right as a back-of-the-napkin estimate, based on what we've seen in secondary markets for other games.
Blizzard says it will not sell items directly. The auction house is strictly a player-to-player market – not that players would have any way to tell if the company slipped a few items into the economy, since the auction house is anonymous both ways. You'll never know who sold you an item, or who bought one of yours. There is no reason to assume bad faith on Blizzard's part here, but the fact remains that there is no transparency.
All cash transactions must go through the auction house. You can still trade with your friends and give them items in-game just like in Diablo II, but you can't make any trades involving cash outside the auction house.
A parallel in-game gold auction house will function identically with gold as the currency instead of dollars, euros, or pounds sterling. All of the functionality is shared between both markets.
Hardcore characters – in Diablo terms, characters that are deleted upon death – are excluded from the real money auction house. They can still use the gold auction house, but all hardcore characters are permanently barred from the real money side.
We all know that the gold farmers and other grey marketeers will look at this as an opportunity. Blizzard's stance is that they would do that anyway, and it intends to police cheating and botting as aggressively as ever. In fact, you can only play the game online (see the gameplay preview for more details) – every single Diablo III character is stored on Blizzard's secure servers.
To hate, or not to hate
Before you fly off the handle (trust me, that was my first reaction too), consider the fact that the secondary market will exist whether Blizzard sanctions it or not. Heck, people still pay cash for Diablo II items. At least this way you're not giving your credit card to a shady gray market operator in China.
That said, I wish there were a way I could flag a character to ignore the real money transactions and only play with other non-RMT heroes. Hardcore characters are like that already, but I don't always want to play hardcore style.
Ultimately, Diablo isn't about competition nearly to the extent of World of Warcraft or a competitive shooter or RTS – game director Jay Wilson flat-out stated that he's not worried about achieving any kind of e-sport-viable balance in PvP. As long as I can still co-op with my buddies and have a good time taking down the prime evils (which is a question I'm not worried about the answer to, as my gameplay hands-on preview reveals), I'm not going to throw a huge fit over the RMT auction house.