Pricing and Rarity Design of Blind Boxes with Random Items

Abstract

Blind box selling is a novel selling mechanism in which buyers purchase sealed packages containing unknown items, with the chance of uncovering rare or special items. To unravel the economic motivation behind blind boxes, we propose a stylized model encapsulating the core trade-offs a seller faces when designing a blind box package, including the price for each box and drawing probabilities of different items. The model distinguishes between two types of items: regular and special, with the latter valued higher by consumers due to its rarity. The consumers' expected valuation from opening the blind box decreases with each unique item received, whether regular or special, but remains unchanged if they receive a duplicate item. Naturally, consumers cease purchasing when the expected marginal utility becomes negative. We compare blind box selling with traditional separate selling under no supply rationing, in terms of the optimal prices, sales volume, and profit. Our findings indicate that item heterogeneity and moderate rarity are necessary for the success of blind box selling. Surprisingly, we show that blind boxes are more profitable in extreme scenarios where the manufacturing costs are either low or high. We also find that blind boxes perform better when consumers are highly status-seeking. However, our study also illustrates that blind boxes are not a panacea and that the seller has to deploy them carefully, especially when manufacturing costs are neither high nor low. To examine the robustness of our results, we consider cases such as separate selling with rationing, consumer heterogeneity, and lump-sum bonus upon collecting all items.