Working Paper: CEPR ID: DP17939
Authors: Tomomichi Amano; Andrey Simonov
Abstract: In 2020, gamers spent more than $15 billion on loot boxes, lotteries of virtual items in video games. Loot boxes are contentious. Regulators argue they constitute gambling, while game producers maintain they complement gameplay. In a prototypical mobile puzzle game we show that gameplay complementarity accounts only for 3% of loot box value for high-spending players. In contrast, the majority of players open loot boxes predominantly for gameplay complementarity. The company designs the game trading off revenue from high-spending players and engagement from other players. Our estimates challenge a debated blanket ban on loot boxes and support spending caps.
Keywords: Product Design; Lotteries; Gambling; Dynamic Demand Models; Video Games
JEL Codes: D12; D18; D61; D91; L82; L83; M31; M38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high-spending players (whales) (L83) | direct thrill utility from loot boxes (H27) |
| spending caps on loot boxes (H27) | player welfare for non-whales (Z22) |
| blanket ban on loot boxes (H27) | consumer surplus for non-whales (D69) |
| behavioral biases (self-control problems) (D91) | impulsive consumption patterns in whales (E21) |
| loot box value (D46) | implications for regulation and product design (G18) |
| functional value of loot boxes (D16) | players' likelihood to open loot boxes when losing a game stage (C73) |
| players' inventory states (P31) | players' tastes for loot boxes (C72) |
| timing of loot box openings (C41) | players' tastes for loot boxes (C72) |