The Perils of In-Game Currency

You should be careful around gold coins. They’re dangerous.

Specifically, I mean gold coins like the ones often used by video games as in-game currency. You should also be concerned about purple diamonds, bucks, crystals, silver pieces, shards, or whatever else a game decides to call the fake currency it makes you invest in so that you can buy stuff. You know the drill: if you want to level up your battle pass or accelerate the construction on that barracks, you have to spend 100 gold coins. Only you can’t just buy 100 coins for one dollar. You have to buy 650 for five dollars. Now you’ve got 550 coins left and you’re minutes away from mortgaging your dog for more of those sweet, sweet in-app purchases.1

For sure, buying stuff isn’t necessarily bad. You should support the makers of the games you like. But I just wish more games let you spend directly with dollars or whatever local currency you use. Because there are a few psychological pitfalls to using fake money in games that may nudge you towards spending more than you’d like.

The first is that buying a bunch of in-game currency separates the pain of spending most of it from the pain of buying it. In their famous paper “The Red and the Black: Mental Accounting of Savings and Debt” Drazen Prelec and George Lowenstein2 argued that purchases involve displeasure (over losing money) and expected pleasure (over getting the thing). If we think the displeasure to be too great, we’ll avoid the purchase.

But there are ways to reduce the pain of purchasing and thus let the pleasure weigh more heavily in your decision. You can, for example, disconnect the act of paying from the act of receiving in the mind of the shopper and make them willing to spend more. Buying on credit does this. One study on this created a silent auction where people bid on tickets to popular sports events.3 But some people were told they’d have to pay cash if their bid ended up being the highest while others were told they would have to pay with a credit card. Same tickets, same auction rules otherwise, but those expecting to pay with credit bid twice as much on average.

Credit disconnects the pain of purchasing from the pleasure by separating the two in time (your bill comes later). And in the case of buying credit up front like in the case of a refillable gift card or a cache of in-game currency, the initial pain is there to buy the minimum amount, but spending the leftover credit or currency is almost entirely painless.4 You can’t spend it anywhere else, so it doesn’t feel like losing real money when you use it to buy that latte or that character skin.

Another reason why in-game currency can lead to overspending is through what’s called “transparency” which is basically the ease of tracking how much you’re spending. Spending cash is highly transparent. But spending with a credit card is less transparent, especially if you don’t keep track and the vendor doesn’t give you a receipt. Spending with an unfamiliar, foreign currency while traveling is not very transparent if you’re fumbling with exchange rates. Which is why we tend to overspend in such situations (or underspend, depending on the currency).5

And spending with in-game currency is even less transparent. How much did those 50 gold coins cost you? How much are the ones you have left worth? Who knows? Most of us don’t want to pause to do long division when it comes down to it.

So there are just a few reasons why in-game currencies can be psychologically slippery. Personally, I wish every platform and every game would move to a simple real money exchange where you pay 99 cents for something instead of 5 gold coins or whatever.

Should you swear off in-game purchases because of this chicanery? No! Or at least not necessarily! Support and spend money on the games you think deserve it. I do. But, hopefully, you’ll now be able to do it more on your own terms.

Footnotes:

1. Well, maybe not that extreme, but you get my point.
2. Prelec, D., & Lowenstein, G. (1998). The Red and the Black: Mental Accounting of Savings and Debt. Marketing Science, 17(1), 4–28.
3. Prelec, D., & Simester, D. (2001). Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay. Marketing Letters, 12(1), 5–12.
4. Soman, D. (2003). The Effect of Payment Transparency on Consumption: Quasi-Experiments From the Field. Marketing Letters, 14(3), 173–183.
5. Raghubir, P., & Srivastava, J. (2002). Effect of face value on product valuation in foreign currencies. Journal of Consumer Research, 29(December 2002), 335–347.

One thought on “The Perils of In-Game Currency

  1. it would be interesting to see an experiment in flexible exchange rate, where low demand would lead to decreasing prices of in-game currency. It could be a very volatile, cryptocurrency-like market, where the platform holder could actually make a lot of money on transaction commissions, should they make buying AND selling the currency available. That’s literally money out of thin air, innit? 🙂

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