Protecting Consumers from Themselves: Assessing Consequences of Usage Restriction Laws on Online Game Usage and Spending

Abstract

Given the rise of the online gaming industry, consumer protection laws have been implemented to restrict excessive gaming on the internet. This research evaluates one such consumer protection policy and its effectiveness from both marketing and public policy perspectives. Specifically, we investigate the impact of usage restriction in South Korea on both gamers and the industry using individual-level game usage and spending data. Combining the difference-in-differences approach with a regression discontinuity design and propensity score matching, we show that although the regulation reduces overall game usage, the effects vary depending on past behaviors; that is, counter to expectations, the regulation effect, although negative for average gamers, is less so for heavy gamers and in fact directionally flips for the heaviest gamers. Furthermore, we find that its revenue impact is negligible, suggesting that gamers do not change spending patterns because of the intervention. Thus, usage restriction laws may deter light gamers from potentially excessive gaming but do not work well to dissuade heavy gamers, suggesting that a more nuanced approach (as opposed to a blanket usage restriction law) may be called for. Finally, we discuss the implications of such usage restriction laws as a vehicle to control overconsumption and protect consumers.