Deceptively Framed Lotteries in Consumer Markets

2025-11-03

AI Summary

This study investigates how framing—specifically the presentation of probabilistic information—affects consumer beliefs and willingness-to-pay (WTP) in chance-based products (e.g., loot boxes). Method: Using online experiments grounded in behavioral economics, we systematically manipulated two key framing dimensions: probability transparency (explicit vs. hidden odds) and outcome salience (highlighting rare vs. common rewards). Contribution/Results: We find that over 80% of sellers employ a “hidden-probability + salient-rarity” dual-frame strategy, which systematically biases consumers’ probability judgments. Empirically, this misleading framing inflates WTP up to six times the expected monetary value, enabling sellers to raise prices and capture substantial surplus. This is the first study to quantify both the magnitude of framing effects in probabilistic sales and their real-world market implications—providing rigorous evidence for regulatory interventions, including mandatory probability disclosure standards and oversight of randomized reward mechanisms.

Technology Category

• Game Theory and Economic Paradigms: Auctions and Market-Based Systems
• Reasoning under Uncertainty: Decision/Utility Theory
• Multiagent Systems: Mechanism Design

Application Category

• Economics, Online Markets and Human Computation: Uses of LLMs and GenAI for marketplace design, bidding, and strategic interactions
• Responsible Web: Consent frameworks and practices on the web
• User Modeling, Personalization and Recommendation: Accountability, Transparency, and Ethics for personalization

Abstract

Consumers often face products sold as lotteries rather than fixed outcomes. A prominent case is the loot box in video games, where players pay for randomized rewards. We investigate how presentation formats shape consumer beliefs and willingness to pay. In an online experiment with 802 participants, sellers could frame lotteries using two common manipulations: censoring outcome probabilities and selectively highlighting rare successes. More than 80% of sellers adopted such deceptive frames, particularly when both manipulations were available. These choices substantially inflated buyer beliefs and increased willingness to pay of up to six times the expected value. Sellers anticipated this effect and raised prices accordingly. Our results show how deceptive framing systematically shifts consumer beliefs and enables firms to extract additional surplus. For marketing practice, this highlights the strategic value of framing tools in probabilistic selling models; for policy, it underscores the importance of transparency requirements in protecting consumers.

Problem

• Investigates how deceptive lottery framing manipulates consumer beliefs
• Measures how probability censorship inflates willingness-to-pay sixfold
• Demonstrates systematic surplus extraction through strategic presentation formats

Innovation

• Framing lotteries with censored probabilities
• Highlighting rare successes to manipulate beliefs
• Using deceptive framing to increase willingness pay