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Welfare and fairness in free-to-play video games

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  • Sánchez-Cartas, J. Manuel

Abstract

Are free-to-play (F2P) video games reducing consumers’ welfare? How do changes in the game balance affect players? Despite being the most relevant business model in the video game industry, no consensus exists on the welfare implications of free-to-play (F2P) video games. This work proposes a theoretical economic model that explains why companies prefer F2P to pay-to-play (P2P) in the long term and how game fairness is determined in the short term. In the long term, the consequences of player welfare depend on the quality and network effects of the video game. In the short term, the impact on welfare depends mainly on the relationships among in-game items. Thus, welfare implications are likely to change as new items are added/removed. Finally, we test the theoretical models by estimating the fairness level in three F2P video games and show preliminary evidence that this business model would have reduced welfare.

Suggested Citation

  • Sánchez-Cartas, J. Manuel, 2022. "Welfare and fairness in free-to-play video games," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
  • Handle: RePEc:eee:tefoso:v:180:y:2022:i:c:s0040162522002116
    DOI: 10.1016/j.techfore.2022.121683
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    References listed on IDEAS

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    Cited by:

    1. Miao, Ruomu & Li, Benqian, 2022. "A user-portraits-based recommendation algorithm for traditional short video industry and security management of user privacy in social networks," Technological Forecasting and Social Change, Elsevier, vol. 185(C).

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    More about this item

    Keywords

    Video games; Welfare; Nonprice competition; Freemium; Fairness; Online;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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