Haiyang Yang


Digital goods: What drives consumer behavior in the metaverse?

Why it matters:

In the metaverse, consumers strongly favor the unused versions virtual items over used versions of identical items, according to new research by Haiyang Yang. His study sheds light on the psychology of consumer behavior in the metaverse.

Thanks to dramatic advances in technology, consumers today enjoy ever-expanding opportunities to live a digital life in the metaverse, “opening a new era of digital consumption,” notes Haiyang Yang, an associate professor at Johns Hopkins University’s Carey Business School.

Whether it’s shopping at a digital mall to dress up one’s avatar or visiting a virtual furniture store to purchase a digital sofa, buyers have enormous choice when it comes to digital goods in the virtual environments of the metaverse, he says. 

“But despite the growing economic significance of digital goods, our understanding of this form of consumption is relatively limited,” Yang notes.

In a series of studies Yang describes in a forthcoming article in the Journal of Consumer Research, he sheds light on the psychology of consumer behavior in the metaverse.

The ‘genesis effect’

Though “used” and unused digital goods can be completely identical in every pixel and functionality, Yang found in analyses of large-scale field data on purchase transactions in the metaverse that consumers strongly favor the unused version. And they are willing to pay substantially more for it. He describes this as the “genesis effect,” or the desire to be at the very beginning of a product’s ownership history.

Yang notes that we are hardwired to perceive items that have been used by others to be potentially “contaminated.” 

“When we are in the metaverse, this cognitive process about the physical world is still activated even though it should not be,” he says. “For example, when we know that a pair of digital shoes has been worn by someone else, a sense of ‘virtual contamination’ is activated. We often can’t help ourselves.” This can influence people’s preference for unused items, Yang says.

Yang’s research also found that being the first owner can also confer a sense of status. Blockchain technology that underlies a growing number of metaverse platforms is a game changer. 

“With blockchain technology, the ownership history of any item is easily and instantly accessible,” he explains. 

In the real world, it can be difficult and time-consuming to track down the ownership history of a product. While it might be possible to find the ownership history of a large-ticket item like a house or car, “when it comes to a used shirt on sale at a thrift shop, it will probably take a team of CSIs and a lot of resources to identify all the prior owners,” Yang jokes. “But anyone can easily access the entire ownership record of any product transacted via blockchain technology.”

The ownership record can show who is the first owner, who is the second, and so on. This record is immutable — if you are the first owner, you will be “ranked first” forever. If you are the fourth owner, you will be publicly shown as such forever, he says. The sense of status in being the first can increase the desirability of the new digital goods in the metaverse.

Still in its nascency

Buoyed by the findings of his recent work, Yang is eager to continue his research on consumer behavior in the metaverse. The potential for future study is vast, with many questions to be answered, he says, but the metaverse is still very new.

For example, unlike in the physical world, a flawless diamond in the metaverse can cost the same to make as a chunk of glass. A gold bullion can be produced at the same cost as a red brick. They are all comprised of pixels. Given the lack of differences in the inherent preciousness in the “materials,” how might people perceive value, rarity, and luxury in the metaverse? 

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As another example, “Unlike in the physical world, people, through their avatars, can manifest themselves as anything,” he notes. “Research is needed to understand how the different manifestations may impact behavior.”

Finding answers to these and other questions will have important implications for individuals, organizations, businesses, and society at-large, Yang believes. He has been watching in fascination over the past decade as the metaverse has grown, in terms of sophistication and usage, from being very rudimentary to today’s amalgamation of extended reality, blockchain, artificial intelligence, and other technologies. With ongoing technological breakthroughs, Yang predicts the coming decades will see advances that we cannot even dream about today. 

“I am very optimistic,” he says, “that the metaverse will be a force that substantially transforms human existence.”


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