Valuation of Participation in Social Gaming

• Main Authors: KIM, Kwansoo, YOO, Byungjoon, KAUFFMAN, Robert J.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2013
• Subjects: Customer valuation; econometrics; field study; hedonic pricing; hedonic value; MMORPGs; online games; role-playing games; social gaming; Computer Sciences; E-Commerce
• Online Access: https://ink.library.smu.edu.sg/sis_research/2106; https://ink.library.smu.edu.sg/context/sis_research/article/3105/viewcontent/Valuation_of_Participation_in_Social_Gaming_afv.pdf
• Institution: Singapore Management University

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.