scholarly journals An Empirical Analysis of Indirect Network Effects in the Home Video Game Market

2006 ◽  
Author(s):  
James E. Prieger ◽  
Wei-Min Hu
Keyword(s):  
Empirical Analysis ◽  
Video Game ◽  
Network Effects ◽  
Home Video ◽  
Indirect Network Effects

Intertemporal Demand Spillover Effects on Video Game Platforms

2020 ◽  
Vol 66 (10) ◽  
pp. 4788-4807 ◽  
Author(s):  
Avery Haviv ◽  
Yufeng Huang ◽  
Nan Li
Keyword(s):  
Video Game ◽  
Network Effects ◽  
Habit Formation ◽  
Spillover Effect ◽  
Spillover Effects ◽  
End Users ◽  
Potential Explanation ◽  
Indirect Network Effects ◽  
Release Timing ◽  
Identification Strategy

Many platform strategies focus on indirect network effects between sellers through platform expansion. In this paper, we show sellers on the console video game platform generate a positive intertemporal spillover effect and expand the demand for other sellers, holding the set of platform adopters fixed. We propose a novel identification strategy that leverages exogenous variation in the release timing of games exclusively available on a console platform, and examine how this variation affects the sales of games available on both platforms. We find a sizable intertemporal demand spillover effect between games: A 1% increase in total copies sold on a platform leads to a 0.153% increase in the sales of other games in the next month (i.e., an elasticity of 0.153). Additional analysis suggests this demand spillover effect is reminiscent of habit formation on the consumer side, in that past purchases keep end users active on the platform. Our finding provides a potential explanation for recent platform sales events and subscription services that provide free games to consumers every month. This paper was accepted by Eric Anderson, marketing.

EXPRESS: Halo or Cannibalization? How New Software Entrants Impact Sales of Incumbent Software in Platform Markets

2021 ◽  
pp. 002224292110178
Author(s):  
B.J. Allen ◽  
Richard T Gretz ◽  
Mark B. Houston ◽  
Suman Basuroy
Keyword(s):  
Video Game ◽  
Network Effects ◽  
Direct Impact ◽  
Video Game Industry ◽  
Indirect Network Effects ◽  
Game Industry ◽  
Empirical Tests ◽  
Direct And Indirect Impacts ◽  
Indirect Impacts ◽  
Positive Effect

Platform markets involve indirect network effects as two or more sides of a market interact through an intermediary platform. Many platform markets consist of both a platform device and corresponding software. In such markets, new software introductions influence incumbent software sales. New entrants may directly cannibalize incumbents. However, entrants may also create an indirect halo impact by attracting new platform adopters, who then purchase incumbent software. To measure performance holistically, this article introduces a method to quantify both indirect and direct paths and determine which effect dominates and when. The authors identify relevant moderators from the sensations–familiarity framework and conduct empirical tests with data from the video game industry (1995–2019). Results show that the direct impact often results in cannibalization which generally increases when the entrant is a superstar or part of a franchise. For the indirect halo impact, superstar entrants significantly increase platform adoption, which can help all incumbents. Combining the direct and indirect impacts, only new software that is both a superstar and part of a franchise increases platform adoption sufficiently to overcome direct cannibalization and achieve a net positive effect on incumbent software; all other types of entrants have a neutral or negative overall effect.

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