| Popis: |
The video game industry is a unique example of an industry with network goods. Firms can decide whether to produce a network good or a non-network good (i.e., a single-player or multiplayer game). In this paper, we show how this choice changes based on game quality and the strength of network effects. Using a Hotelling line with network effects, we find that if the difference in value is sufficient, the firm producing the lesser value game will choose to always produce a single-player game. Furthermore, with sufficient difference in value, an increase in network effect strength increases profits for the firm producing the higher value game. We conclude that competition can bar game developers from entering the multiplayer space if they are unable to produce games with sufficient quality relative to potential competitors. Using data from the video game platform Steam, we provide some insights into our model results, however significant issues in our datset prevent us from reaching a definitive conclusion. |
