On the Valuation of Social Gaming Participation
This study examines the value of the time that a user spends to participate in a social game. We focus on how a massive multiplayer online role-playing game (MMORPG) vendor can establish prices to encourage participation and retain its players. We estimate value through an application of the hedonic pricing model and analyze a data set for an MMORPG in Korea. The results permit us to estimate the value of game-playing time in monetary terms. Based on our empirical results, we propose an economic model and conduct numerical simulation to show how a game vendor can apply differential pricing in this context. This enables us to design a pricing scheme to maximize a game vendor’s profit. Our study affirms the long-standing finding that building network effects associated with other game players’ participation is a critical source of benefits for the vendor. Going beyond this, we also find it is appropriate to use differential pricing, by subsidizing a participant’s game play initially and then charging more aggressively to extract the available consumer surplus over the player’s life cycle in the game, in order to reinforce a vendor’s ability to maintain a healthy number of game participants.
Customer valuation, econometrics, field study, hedonic pricing, hedonic value, MMORPGs, online games, role-playing games, social gaming
Computer Sciences | E-Commerce
Information Systems and Management
International Journal of Electronic Commerce
Taylor and Francis
KIM, K. S.; Yoo, B. Y.; and Kauffman, Robert J..
On the Valuation of Social Gaming Participation. (2013). International Journal of Electronic Commerce. 18, (2), 11-50. Research Collection School Of Information Systems.
Available at: http://ink.library.smu.edu.sg/sis_research/2106