Pinball Economics

image-44Because I was trying to understand virtual items and micro-transactions, I researched the trading card industry. It made sense to me to consider the fundamentals from an industry that has been around for a while as a yard stick to relatively new terrain. (Yes, yes, looking forward through the rearview mirror. Thanks McLuhan. Now go back to bed.)

Today I found a similar parallel between the incentivized game design so common in social games (e.g. Farmville) and pinball machines.

In “The Economics of Pinball,” economics professor Jeff Ely discusses how pinball machine designers gained the ability to use software (read: algorithms) to “to monitor, incentivize, and ultimately exploit the players.” Like arcade machines, playing pinball revolves for a large extent around getting a high score and, consequently, earning a free game. In my pinball days I always thoroughly enjoyed the hard click sound that tells you (and the rest of the bar) you just earned another go. There are two ways to win a free game: by reaching a predetermined high score and by having the last two digits of your score match a, seemingly random, number after your play is over.

Ely explains:

The early versions of this algorithm were crude, essentially targeting a weighted moving average.  But later implementations were more sophisticated.  The goal was to ensure that a fixed percentage, say the top 5% of all scores would win a free game.  The score level that would implement this varies with the machine, location, and time.  The algorithm would compute a histogram of scores and set the replay threshold at the empirical cutoff of 5%.  Later designs would allow the threshold to rise quickly to combat the wizard-goes-to-the-cinema problem.  The WGTTC problem is where a machine has adjusted down to a low replay score because it is mostly played by novices.  Then anytime an above average player gets on the machine, he’s getting free games all day long.

The other tool is the match probability: you win a free game if the last two digits of your score match an apparently random draw.  While adjustments to the high-score threshold is textbook price theory, the adjustments to the match probability is pure behavioral economics.  Let’s clear this up right away. No, the match probability is not uniform and yes, it is strategically manipulated depending on who is playing and when.  For example, if the machine has been idle for more than three minutes, the match probability is boosted upward.  You will never match if you won a free game by high score.  And it gets more complicated than that.  Any time there are two or more players and they finish a game with no credits left, one player (but only one) is very likely to match.  Empirically, the other players will more often than not put in another quarter to play again.

(The tilt tolerance, by contrast has always been controlled by a physical device which is adjusted manually and rarely in response to user habits.)

The implications for more contemporary game play are the following: as we all play asynchronously on social media platforms and so on, a reasonable reward-structure needs to be in place that at once incentives hard-core players and new entrants alike. Particularly in response to recent Scamville calamities and the emergence of new business models that hinge on people to pay for their play, I believe this is an insightful snippet of game theory.

In the comments on the article, I also found this article, which talks about the economics of pinball maintenance. Although less relevant, because online game play does not present the same physical obstacles, it does give a good sense of how and where people play, and the challenges this poses for designers and game companies. Of course, digital games do not need to be serviced “on location.” But my guess is that, as the retailing side of video games will go through an imminent transition (more on this later), capitalizing on the newly emerging marketing potential will benefit from understanding the overall behavioral patterns of players.

Of course, the first thing you need to go right now, is check out the silver balled robot that ate my quarters.


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About Waffler

Joost is fascinated by games and human behavior. His research explores video games as an entryway to contemporary media culture. After completing a Master's degree in Media studies in Amsterdam, he continued his research in New York. There he was project manager on a landmark investigation of three decades of ownership trends in the American media landscape, the results of which were part of a congressional testimony, a series of articles and a book. In 2010 he received his doctorate from Columbia University for his dissertation titled "Social Gaming and Communicative Exchange." Joost currently teaches at the NYU Game Center.

In addition to his academic pursuits, Joost is also founder and CEO of an online games research firm called SuperData. In early 2010 the company secured multi-year seed funding, and today employs five people. Clients include publishers such as Electronic Arts, SEGA, Wargaming.net and Pokémon as well as all the major Wall street firms.

Joost lives in the East Village with his wife Janelle and son Maximus.

Selected Presentations
  • Video Game Data & Trends, Ottawa International Game Conference, Canada, 2013.
  • Business Principles and Market Trends for Multi-Platform Games, Festival of Games, Amsterdam 2013.
  • 2013 Game Changers: How Will Devices Impact Your Future Growth? (keynote), Game Developer Conference, 2013.
  • Free-to-Play State of the Industry, Game Connection Paris, 2012.
  • Online Games Research: Getting Publishers to Play Nice, New Media, New Demand Measurement Methodologies, 2012 Columbia University.
  • The Great Unboxing: Major Trends in the Transition to Digital and Free-to-Play Gaming, DCM East, 2012.
  • The Rise of Free-to-Play, moderator and co-organizer, Re:Play - The Theory, Practice, and Business of Video Games, 2012, NYU.
  • Trading Card Games: Delivering the Digital Promise, PAX East, 2012.
  • From Asteroids to Zynga: Three Decades of Game Design and Revenue Models, GDC Online, 2011.
  • Video Game Industry, 2010 Fordham University, 2010.
  • Social Media and TV, LATVfest, 2010 Los Angeles.
  • Top 5 Trends in Gaming, NY Games Conference, New York, 2009.
  • Kids, Tweens & Teens, State of Play IV, New York Law School, New York, 2009.
  • Game Theory, Play Money, Columbia Business School, New York, 2008. (event organizer)
  • Media Economics: The Question of Ownership, Hunter College, New York, 2008.
  • On Game Mod Communities, 106th Annual Meeting of American Anthropological Association, Washington, DC, 2007.
  • Game Mods & Post-Industrial Play, CITI Visiting Scholar’s Brown Bag Lunch Seminar Series, Columbia Business School, New York, October 2007.
  • The Video Game Vocabulary and the Production of Meaning, MiT5: Creativity, Ownership and Collaboration in the Digital Age, Massachusetts Institute of Technology, Cambridge, April 2007. (abstract)
  • Cities, Games and Media: Playing with and in the Urban Setting, Time|Space Dynamics in Urban Settings, Technishen Universität, Berlin, May 2007.
  • The Aesthetic Vocabulary of Video Games, Seventh Annual Convention of the Media Ecology Association, Boston College, Chestnut Hill, November 2006.
  • Haussmann’s Media Environment (revised), Sixth Annual Convention of the Media Ecology Association, Fordham University, New York, May 2005.
  • Media Technology & Society: Video Game Theory, Dissertation outline, Columbia University, New York, April 2005.
  • Good Day New York, Fox Television, aired August 20th, debate with Attorney Sanford Rubenstein on videogame violence, August 2004.
Contact: joost at waffler dot org

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