Thesis Corner: Lorraine Black on Video Games

Below I present an interview I had with our very own Lorraine Black, discussing her highly intriguing senior economic thesis. Let’s dive right in!

Okay, first couple questions: what was the topic of your thesis, and why did you pick that?

The topic of my senior thesis was the economic behavior of consumers that play free-to-play multiplayer online video games. I picked it because it struck me as pretty irrational behavior in a relatively new industry. Also I like video games.

Good a reason as any. What were your findings?

I conducted a survey of 300 League of Legends players for qualitative purposes. I found that aesthetics, altruism, and eSports seemed to be main drivers of the purchasing habits of LoL players. In short, viewing gamers as purchasing an experience made up of many items, rather than just one item, a game company can achieve perfect price discrimination – if a gamer has purchased the amount of in-game items he/she wants from the experience/game. if every gamer is paying their exact willingness to pay, the market is technically perfectly price discriminated. Since marginal cost is 0 for digital goods, companies can maximize producer surplus in this case.

My altruism argument hinged on the self-conception of consumer social responsibility and the impact of “free.” Gamers were more likely to value the game more if it was free, and thus have a higher willingness to pay overall – OR they treated the microtransactions as donation vessels (“giving back to the game”).

Finally, eSports is gaming’s attempt at making long-term investments out of you.

Care to explain how this is important?

Because of how informal my thesis is, and theory-heavy, I’m honestly not sure if it really is. However, eSports is exploding right now – and there isn’t a lot of even remotely academic material on this stuff. League of Legends is making bank off of gamers, and there are a lot of interesting consumer behaviors and heuristics at play here.

Totally, plus I think showing that these businesses are perfectly price discriminating is important too. Any advice for the imminently doomed?

I struggled with my thesis because it was so theory-heavy. I saw a lot of people with numbers and figures and felt that mine didn’t hold water because it wasn’t as quantitatively focused. Don’t do that. First of all, it’s an undergrad thesis, not your magnum opus or something. Calm down.

And secondly, sometimes theses don’t work out exactly the way you want them to. You might not find anything (like me) and just have to finagle economic theory to make it work. It was a challenge, but I’m glad I stuck to my original choice and didn’t back down. If you pick a topic that you don’t truly like AND have trouble making it work, you’re going to have a a bad time. Just pick something you’re interested in, and it’ll probably work out fine.

Thanks for that Lorraine, I’m glad you stuck it out it’s good stuff! This concludes the interview.

About Nicky Smit

Nicky Smit is a Senior Economics Major, meaning soon he'll be swallowed by economic reality! Thus, he spends his time shooting movies, singing a cappella and writing about things like this info box

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