Title

On the Valuation of Social Gaming Participation

Publication Type

Journal Article

Publication Date

2013

Abstract

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.

Keywords

Customer valuation, econometrics, field study, hedonic pricing, hedonic value, MMORPGs, online games, role-playing games, social gaming

Discipline

Computer Sciences | E-Commerce

Research Areas

Information Systems and Management

Publication

International Journal of Electronic Commerce

Volume

18

Issue

2

First Page

11

Last Page

50

ISSN

1086-4415

Identifier

10.2753/JEC1086-4415180201

Publisher

Taylor and Francis

Additional URL

http://dx.doi.org/10.2753/JEC1086-4415180201