DFG Project: Corporate Responses to Undirected Allocation of Attention

When an economic decision has to be made, a large amount of information about the options is usually available, whereas the human mental capacity to process all this information is very limited. Human attention is, at least in part, not actively directed, but automatically drawn to the salient aspects of the decision environment. Little is known, however, about what incentives companies have to exploit such attention effects. Markus Dertwinkel-Kalt from the University of Münster and Hans-Theo Normann from the HHU Düsseldorf investigate in this four-year project non-directed attention effects on the basis of a rapidly growing market, which is currently attracting the attention of competition authorities worldwide: the gaming market. Today, many successful video games include so-called loot boxes, which, like gambling games, offer random rewards that can be used within the games (related to the "FIFA" game, such a reward would be a virtual Lionel Messi, for example). In 2020 alone, such lootboxes generated $15 billion in revenue. The public is now increasingly concerned that game developers are using lootboxes to make players pay excessively to achieve such in-game benefits with tiny probabilities. We highlight three criteria that cause players to overestimate the probabilities of winning and ultimately be willing to pay too much. First, developers typically do not specify the probabilities with which each win is realized, but probabilities are only named for certain intervals of wins. Secondly, many games give a public award to those players who were able to achieve an exceptionally high profit. Thirdly, such lucrative winnings are presented graphically in a particularly spectacular way. In a series of articles, we would like to investigate three aspects in particular: (i) In laboratory and field experiments, we would like to identify those features that make lootboxes successful. The key question here is to what extent these features are exploitative in nature. (ii) We would also like to investigate to what extent firms can strategically use these features to increase players' willingness to pay. (iii) Finally, we would like to use a model and market experiments to investigate how different regulatory approaches (for example, those that increase the transparency of bids or those that increase the intensity of competition in the market) can be welfare enhancing. This project is a project within the DFG Research Group on "Consumer:Internal Preferences, Consumer:Internal Failures, and Corporate Response."