What drives demand for loot boxes? An experimental study

The market for video games is booming, with in-game purchases accounting for a substantial share of developers’ revenues. Policymakers and the general public alike are concerned that so-called “loot boxes” – lotteries that offer random rewards to be used in-game – induce consumers to overspend on video games. We provide experimental evidence suggesting that common design features of loot boxes (such as opaque odds and positively selected feedback) indeed induce overspending by inflating the belief of winning a prize. In combination, these features double the average willingness-to-pay for lotteries. Based on our findings, we argue for the need to regulate the design of loot boxes to protect consumers from overspending.