FUNDAMENTALS OF GAME DESIGN, SECOND EDITION
Avatar Death
In any persistent world that includes combat, you must decide whether it's possible for the player's avatar to die and what will happen if it does. As in other games, avatar death must be accompanied by a disincentive of some kind or combat will not be a meaningful part of gameplay. The trick is to find a disincentive that is proportional to the likelihood of the avatar's death. It is a question of balance: If the avatar can easily be killed through no fault of the player (such as through ignorance or bad luck), then the cost of dying—the disincentive—should be low, but if the player really has to be stupid to get his avatar killed, the cost should be high. Some examples follow.
In the most extreme case, the avatar dies and cannot be resurrected. The player loses all property that he owns (in which case you must decide what happens to that property) and must start over from scratch with a new avatar. This makes sense in games of short duration, but seldom in persistent worlds. Players in persistent worlds put too much time and effort into building up their avatars for you to ask them to start over.
RESURRECTION WITH REDUCED ATTRIBUTES
Designers commonly penalize the player for letting her avatar die by bringing the avatar back to life with reduced functional attributes—with less strength or perhaps fewer skills. In effect, you give the player a bit of a setback in her quest to grow a powerful avatar. Players find this irritating, so fear of incurring such a setback discourages risky play, but the penalty makes a certain amount of sense. If a gang of club-wielding trolls beats the avatar to death, the avatar ought to feel pretty lousy for a while when she comes back to life!
RESURRECTION WITH SOME PROPERTY MISSING
Another classic disincentive for dying involves loss of money, gear, clothes, and other items in the avatar's inventory at the time. How much of his property he loses and what becomes of it can vary considerably from game to game. You can also allow players to have a vault in the game in which they can keep items that they're not carrying with them, and these items can remain safely in the vault for
use by their resurrected avatar. You might as well include this feature because, if you don't, the players will create a second character that they never play with, known in MMOG parlance as a mule, to hold their primary avatar's things for them.