Real Money For Virtual Smurfberries

It’s a classic parental scenario: the kid gets the parents’ credit card and buys stuff with it. But today, the “stuff” exists only in virtual world. Parents are up in arms about kiddy game iPhone apps that cost them real money:

Over the winter break from school, 8-year-old Madison worked to dress up her simple mushroom home on the iPhone game Smurfs’ Village. In doing so, she also amassed a $1,400 bill from Apple.

The Rockville second-grader didn’t realize the Smurfberries she was buying on the popular game by Capcom Interactive were real purchases, much like buying a pair of shoes from Zappos or movie tickets from Fandango. After all, lots of children’s games require virtual payments of pretend coins, treasure chests and gold to advance to levels.

But like a growing number of parents, Madison’s mom, Stephanie Kay, was shocked to find very real charges from iTunes show up in her e-mail box days later.

“I thought the app preyed on children,” she said. “Note that the Smurf app states it is for ages 4-plus.”

The games are part of a category of applications on Apple’s iTunes store that are free to download but let companies charge users for products and services when the application is launched. Following Apple, Google this week introduced these so-called “in-app purchases” for Android mobile phones and tablets, which experts say could create a new economy for newspapers, record labels and movie studios that have been struggling with ways to thrive online.

The in-app purchases have also catapulted children’s games such as Smurfs’ Village and Tap Zoo, by San Francisco-based Pocket Gems, into the ranks of the highest-grossing apps on iPods, iPhones and iPads.

But the practice is troubling parents and public interest groups, who say $99 for a wagon of Smurfberries or $19 for a bucket of snowflakes doesn’t have any business in a children’s game. Though a password is needed to make a purchase, critics say that the safeguards aren’t strong enough and that there are loopholes.

via In-app purchases in iPad, iPhone, iPod kids’ games touch off parental firestorm.

The article gives more horror stories. But it raises in my mind a host of questions.

First of all, an eight-year-old has an iPhone? And the apps are designed for children as young as four, and they have iPhones?

And a wagon of Smurfberries costs $99 and a bucket of snowflakes costs $19? Where do those show up on the consumer price index? Is the demand for those commodities so high that it is bidding up the cost? Is there any way we could give parents relief by working on the supply side, say, by manufacturing more of them? Are Smurfberries generated by a program in China?

Is there an economics model that accounts for the pricing of commodities that do not actually exist?