Anyone who has played video games in the last decade or so will be familiar with the concepts of microtransactions and in-game purchases. The idea is to pay small amounts of real money for large amounts of fake money, which can then be used in-game to purchase premium digital content or power-ups.
It's a trend that makes many gamers crazy with impotent rage. But as Julian Huguet reports in today's DNews report, it's a successful model for game companies -- and there's very real science underneath the delayed pay-to-play model.
Dozens of major studies over the years have investigated the psychology of spending money. The bottom line: We absolutely have different spending habits depending on the form of payment. The most obvious for-instance: People are much more careful with cash than they are with a credit card. Broad swaths of the financial industry rely on this one fact.
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One MIT study auctioned off tickets to a sold-out basketball game. Students who showed interest in the tickets were given a worksheet that asked how much they were willing to pay -- one stipulated a cash payment, the other a credit card option. The result was the average credit card bid was more than twice as high as the average cash bid.
Another series of studies, published in the Journal of Consumer Research in 2015, showed that people place more value on goods that they buy with cash. Still another study suggest that, even when given free money to spend or donate, people place greater value on cash than more abstract currency like vouchers.
And that's where the video game purchase model comes in. The foggier the connection is between what we're buying and its real cost, the more likely we are to spend our money. By using virtual currencies, the designers are engaging in price shrouding, a psychological marketing technique than goes back decades.
Julian has more details in his report, including a game design concept called "the pinch" -- the critical point when players make the decision to pay real money within a free game. It's enraging fascinating. Or check our our related coverage on the hygienic concerns of cash.
-- Glenn McDonald
Wired: A Concept Gadget Gives Digital Currency That Real Money Feel
GameSparks: Looking at In-Game Currencies
Psychology Today: Spending and credit cards