Oh man, you all, I’ve been playing a LOT of Diablo III lately. ((click click click click click click click click click click click click click click click click click click click click click click click click click)) I’m sure that many of you who have played have been through the same scenario I have time after time. After running around avoiding AOE attacks, dashing in to rez fallen teammates, and swatting aside trash mobs, you and your co-players finally deplete some end boss’s health and immediately gather around the newly created digital corpse to answer that all-important question: did anything good drop?

In some of the most important ways, Diablo III is a game about hitting monsters with weapons until other, hopefully better, weapons pop out of them. That is, it’s a game where you try to maximize the outputs of a system through optimal combinations of your character’s skills and equipment. This puts acquiring new gear first and foremost ((Especially once you hit the level cap of 60 and start running Hell or Inferno difficulties)) but unlike previous games in the franchise this one complicates that process by having auction houses where you can buy and sell equipment so that killing stuff isn’t the only way to deck yourself out with phat lewts.

As is my habit I’ve been thinking about how different psychological theories explain our willingness to buy things in the auction house and grind for new equipment from in-game drops. The game’s developer, Blizzard, probably has two goals among others: one, to get people to spend their in-game gold to keep the game’s economy moving (or real money in the real money auction house), and two to keep us playing the game over and over again in order to find stuff the old fashioned way. In pursuit of these goals, I have three suggestions for Blizzard (or anyone else developing a similar system) based on well established psychological phenomena. Instead of dumping everything at once, I’ve split things into a series of three articles, the first of which follows.

Let’s look first at how Blizzard can inflate prices in the auction house to keep money moving through that part of the conomy.

To start, consider these two questions:

1. Is the height of the tallest redwood more or less than 1,200 feet?
2. What is your best guess about the height of the tallest redwood?

What do you think? These are questions that researchers ((Jacowitz, K. and Kahneman, D. (1995). Measures of Anchoring in Estimation Tasks. Personality and Social Psychology Bulletin, 21, 1038-1052.)) asked of some visitors to the San Francisco Exploratorium. Other visitors were asked a similar pair of questions, except that the first one asked whether the tallest redwood was more than 180 feet instead of 1,200.

Both limits are pretty extreme, in that 180 feet is obviously way too short for the tallest redwood and 1,200 feet is crazy tall. Nonetheless, the answers to the second question, which was consistent across both groups, were pretty amazing. On average, those who had been primed by the 1,200 feet figure said the tallest tree in the forest had to be 844 feet, while those who heard 180 feet off the bat thought the tallest had to be only 282 feet. These were all random visitors looking at the same trees; the only difference between the two groups was the figure in that first question.

This is a clear cut example of what psychologists call “anchoring,” one example of which is presenting us with a number to change our estimates of an other, possibly unrelated number. Simply seeing the numbers 1,200 or 180 caused people to anchor on that number and to then adjust their estimates of the tallest tree instead of picking a more sensible starting point. This kind of effect shows up everywhere once you know to look for it. It’s the basis of lowball sales pitches that get you to anchor on a low price and then negotiate up. It’s the reason why many fast food restaurants list bigger, more expensive drink prices first on their menu. It’s why the “But wait! There’s more!” brand of infomercials list absurdly high prices for their wares first before slashing them down for a limited time if you act now.

2 bajillion gold for a rare two-hander? Pffft. I won’t pay over …half a bajillion.

And anchors can still have an effect if they’re nonsensical or random. Behavioral economist Dan Ariely and his colleagues conducted a study ((Ariely, D., Loewenstein, G., & Prelec, D. (2003). Coherent arbitrariness: Stable demand curves without stable preferences. Quarterly Journal of Economics, 118, 73-105.)) where they used anchoring in an auction simply by having bidders write down the last two digits of their social security number at the top of their bid sheets. Those whose numbers ended in the 80s and above actually were willing to pay up to 346% more for things like wine and chocolates than were those whose social security numbers ended in the 20s or below.

This is why I think that if Blizzard wants more money spent in the auction houses, one way to effect this is to pre-sort the buyout prices so that we see the big fat numbers first in our search results. Even absurd ones like where that one numbskull obviously just held down the “9″ key for 30 seconds. Seeing larger numbers will prime us to inflate our estimates of what that item is worth to us. If Blizzard wanted to get really sly about it, the company could show you the most that an item ((Or similar item, given that attributes vary a bit across items with the same name.)) has sold for over the last 7 days.

Of course, savvy auction house shoppers can use this information to avoid the anchoring effect. Setting price limits in the auction house filters would mitigate it, for example. Me, what I typically do is set some price limits with the filtering tools, then sort by ascending price rather than descending. That way, I anchor on the low prices instead.

But what about getting loot the old fashioned way –by grinding for it? Read about that in part 2, or skip ahead to a discussion of what effects the auction houses have on dopamine rushes and loot hunting in part 3. Finally, there’s a bonus part 4 about the effect of item history on auction house prices.