A student described her summer job at an arcade. In the “crane” game you win prizes by manipulating a claw to grab stuffed animals or basketballs, but the arcade owner can and does manipulate the odds of winning. If a new crane machine is played rapidly, the crane is automatically adjusted from its normal settings to make the odds longer because the player is signaling an addiction to the game. If the machine lies idle for a while, the odds are made more favorable than normal. This three-tier price discrimination takes advantage of implied differences in players’ demand elasticities. This is the first example I’ve come across of price discrimination based on manifestations of individual-specific differences in demand elasticities rather than those based on the demographic or timing characteristics of demand. (HT: S)
What’s Really Going on at the Arcade
TAGS: price discrimination
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Here in Canada some of these cranes are “Play ’till you win”. You know, quite socialist, trying to be “fair” to everybody. In the end, I guess it’s a win-win for the crane owner (exchanging cheap toys for dad’s dollars), the kid and the parents.
I think in gambling-type game there is no such thing because the house always has odd advantage. They don’t have to tweak the machine since the trick is right there in the payout rate (e.g odd of winning is 1/20 and they pay only 18 times the bet). Hence slot machine is considered ‘never-win’ type of game, yet so many people are still addicted with it.
In the same way, crane machine owner can always profitable without the trick to change the winning chance of the machine. So this is more like a marketing strategy? However if the customers don’t know about it, it seems not fair.
HOW IT WORKS….
At least per some online videos I’ve seen, the way these claw games work is that the claw is basically totally useless except for every nth play (which can be customized). Then, on that play, the claw actually allows someone to grab something.
The supposed way to win is to observe how many plays between wins. If it’s, say, every 20th try, then as soon as losing 19 finishes, you step up, play, and–viola!–the claw works for you.
Another case of America’s greed. These are CHILDREN being conned now.
http://www.philstockworld,.com
One counter intuitive thing with the poker machines is that they often have a double or nothing stage after you win some small prize. i.e. a card is shown face down and you need to select whether it is red or black.
Common says suggests you have a 50% chance of winning. However in practice the machine determines whether you would win or not based on chance but including its payoff rate e.g. 98% and then decides what card to show after you have selected.
John Scarne in his Complete Guide to Gambling devotes a chapter to “Carnival Games” and how they’re contrived to lure the mark — setting up milk bottle pyramids so they’ve impossible to topple with a single throw, etc. I don’t remember any crane game grifts, but this computer-operated scam obviously extends from similar carnival angles.
@ Adrian Meli – its not a video game, its a mechanical crane game. They’ve been around for a hundred years!
Isn’t thus just “behavior based pricing”? For example, magazines charge different prices to new customers and current subscribers. See the survey by Fudenberg and Villas Boas.