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Serious strategy for the makers of fun: Analyzing the option to switch from pay-to-play to free-to-play in a two-stage optimal control model with quadratic costs

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  • Seidl, Andrea
  • Caulkins, Jonathan P.
  • Hartl, Richard F.
  • Kort, Peter M.

Abstract

This paper addresses the problem of a video game producer who starts out with a subscription-based business model but considers when, if ever, to switch to a free-to-play model, which price discriminates between typical users, who play for free, and heavy users who pay for acquiring extra features. The videogame producer has the possibility to advertise the game, where advertising costs are quadratic. Furthermore, he can influence the outflow of players by pricing.

Suggested Citation

  • Seidl, Andrea & Caulkins, Jonathan P. & Hartl, Richard F. & Kort, Peter M., 2018. "Serious strategy for the makers of fun: Analyzing the option to switch from pay-to-play to free-to-play in a two-stage optimal control model with quadratic costs," European Journal of Operational Research, Elsevier, vol. 267(2), pages 700-715.
    • Handle: RePEc:eee:ejores:v:267:y:2018:i:2:p:700-715
    DOI: 10.1016/j.ejor.2017.11.071
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    Cited by:

    1. Thomas Newham & Nicolas Scelles & Maurizio Valenti, 2022. "The Consequences of a Switch to Free-to-Play for Overwatch and Its Esports League," JRFM, MDPI, vol. 15(11), pages 1-16, October.
    2. Erin Cottle Hunt & Frank N. Caliendo, 2024. "Dynamic Optimization with Timing Risk," Mathematics, MDPI, vol. 12(17), pages 1-18, August.
    3. Seidl, Andrea, 2019. "Zeno points in optimal control models with endogenous regime switching," Journal of Economic Dynamics and Control, Elsevier, vol. 100(C), pages 353-368.
    4. Li, Han & Gupta, Ashish & Zhang, Jie & Flor, Nick, 2020. "Who will use augmented reality? An integrated approach based on text analytics and field survey," European Journal of Operational Research, Elsevier, vol. 281(3), pages 502-516.
    5. Mohit Tyagi & Nomesh B. Bolia, 2024. "Optimal pricing of subscription services in the restaurant industry," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(3), pages 262-273, June.

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