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Console Price and Software Availability in the Home Video Game Industry

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  • Richard Gretz

Abstract

Using hedonic results from a unique data set covering the U.S. home video game industry (1976–2003) the interaction between software provision and console price is analyzed. Increased software provision negatively effects console price. This is contrary to many empirical pricing studies in the network effects literature greater software provision makes hardware more valuable and this should be reflected by increased hardware price. However, the main result from the paper is consistent with the recent theoretical literature on two-sided markets. Also, findings suggest the two-sided pricing strategy employed by hardware firms is dynamic. The percent of price decrease accredited to game provision decreases over time. Copyright International Atlantic Economic Society 2010

Suggested Citation

  • Richard Gretz, 2010. "Console Price and Software Availability in the Home Video Game Industry," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(1), pages 81-94, March.
    • Handle: RePEc:kap:atlecj:v:38:y:2010:i:1:p:81-94
    DOI: 10.1007/s11293-009-9209-3
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    References listed on IDEAS

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    Cited by:

    1. Gretz, Richard T. & Basuroy, Suman, 2013. "Why Quality May Not Always Win: The Impact of Product Generation Life Cycles on Quality and Network Effects in High-tech Markets," Journal of Retailing, Elsevier, vol. 89(3), pages 281-300.
    2. Marchand, André & Hennig-Thurau, Thorsten, 2013. "Value Creation in the Video Game Industry: Industry Economics, Consumer Benefits, and Research Opportunities," Journal of Interactive Marketing, Elsevier, vol. 27(3), pages 141-157.
    3. Gretz, Richard T., 2010. "Hardware quality vs. network size in the home video game industry," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 168-183, November.

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    More about this item

    Keywords

    Hedonic prices; Indirect network effects; Two-sided markets; Video games; L16; L14; C23; L82;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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