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Managers of emerging platforms must decide what level of platform performance to invest in at each product development cycle in markets that exhibit two-sided network externalities. High performance is a selling point for consumers, but in many cases it requires developers to make large investments to participate. Abstracting from an example drawn from the video game industry, we build a strategic model to investigate the trade-off between investing in high platform performance versus reducing investment in order to facilitate third party content development. We carry out a full analysis of three distinct settings: monopoly, price-setting duopoly, and price-taking duopoly. We provide insights on the optimum investment in platform performance and demonstrate how conventional wisdom about product development may be misleading in the presence of strong cross-network externalities. In particular, we show that, contrary to the conventional wisdom about \"winner-take-all\" markets, heavily investing in the core performance of a platform does not always yield a competitive edge. We characterize the conditions under which offering a platform with lower performance but greater availability of content can be a winning strategy.

This paper measures the impact of vertically integrated and exclusive software on industry structure and welfare in the sixth-generation of the US video game industry (2000-2005). I specify and estimate a dynamic model of both consumer demand for hardware and software products, and software demand for hardware platforms. I use estimates to simulate market outcomes had platforms been unable to own or contract exclusively with software. Driven by increased software compatibility, hardware and software sales would have increased by 7 percent and 58 percent and consumer welfare by $1.5 billion. Gains would be realized only by the incumbent, suggesting exclusivity favored the entrant platforms.

In this article, we study the formation of network ties between firms along the life cycle of a creative industry. We focus on three mechanisms that drive network formation: (i) network endogeneity which stresses a path-dependent change originating from previous network structures, (ii) five forms of proximity (e.g. geographical proximity) which ascribe tie formation to the similarity of attributes of firms and (iii) individual characteristics which refer to the heterogeneity in the capabilities of firms to exploit external knowledge. The article employs a stochastic actor-oriented model to estimate the – changing – effects of these mechanisms on the formation of the interfirm network in the global video game industry from 1987 to 2007. Our findings indicate that, on average, the direction of the effects of the three mechanisms are stable over time, but that their weights change with the degree of maturity of the industry. To an increasing extent, video game firms tend to prefer to partner over short distances and with more cognitively similar firms as the industry evolves.

This paper empirically examines how consumers react when a company marks a product with a gay label. The company under scrutiny is one of the largest video game developers in the world, and the labeled product is a popular video game character. We use a regression discontinuity design to exploit the quasi-experimental setting. The main finding was significant drop in demand for this character and a return to previous levels after approximately 3 months. Possible mechanisms and dynamics were explored by analyzing demand for other characters and by surveying consumers. The results are consistent after performing robustness checks based on grid search, subsampling, and placebo tests.

In this article we develop and test the hypothesis that social capital, defined as a regional characteristic, discourages entrepreneurship in a new and contested industry. The argument follows the logic that high levels of social capital reinforce conformity in values and ideas, and inhibit deviant entrepreneurial activity. Once an industry becomes more legitimized-as a result of an increase in the number of firms present in a region-social capital becomes less restrictive on entrepreneurship and can even have a positive effect on the subsequent number of firms founded in a region. We find evidence for our thesis using data on 1,684 firm entries in the US video game industry for the period 1972-2007.

We analyze mixed bundling in two-sided markets where installed base effects are present and find that the pricing structure deviates from traditional bundling as well as the standard two-sided markets literature-we determine prices on both sides fall with bundling. Mixed bundling acts as a price discrimination tool segmenting the market more efficiently. Consequently, as a by-product of this price discrimination, the two sides are better coordinated, and social welfare is enhanced. We show unambiguously that platform participations increase on both sides of the market. After theoretically evaluating the impact mixed bundling has on prices and welfare, we take the model predictions to data from the portable video game console market. We find empirical support for all theoretical predictions. This paper was accepted by J. Miguel Villas-Boas, marketing.

NOABSTRACTThe paper aims to explore the negative impacts of social relationships (SR) on business activity. As a research context, the video game industry (VGI) and the video game developers’ (VGDs) relationships are analyzed.17 semistructured in-depth interviews and 1 focus group interview with Polish VGDs were conducted.(1) support for five negatives of SR previously discussed in the literature (2) recognition of the four original negatives (i.e., employee turnover, buying up employees, inefficiency/termination of interorganizational cooperation, and confidential information leakage); and (3) recognition of the harmful results of SR as an industry-dependent issue.(1) Analyzing the negative consequences of SR for business, which is less frequently considered compared to the positive consequences of these relationships for business; (2) identifying dark sides previously unidentified in the literature; and (3) using the VGI as the research context.

This paper develops and estimates a structural model of two-sided markets with durable platform intermediaries and affiliated products. It models buyers’ purchase decisions of platforms and affiliated products and sellers’ decisions of price setting and entry, accounting for the dynamic interaction between the two distinct groups of platform participants. To estimate the proposed model, this paper develops a Bayesian Markov chain Monte Carlo estimation approach that incorporates nonparametric approximation and interpolation methods. The proposed model and estimation method are applied to the 32/64-bit generation of the U.S. video game industry. The results of counterfactual experiments show that the dynamic behavior of platform participants has significant impacts on platform adoption and the affiliated product market, and that a failed platform could have survived if it had priced the two sides properly in a dynamic two-sided market environment. This paper was accepted by Matthew Shum, marketing .

The Croatian video game industry demonstrated substantial growth amid the challenges posed by the COVID-19 pandemic. A descrip- tive statistics approach was utilized, encompassing all enterprises in the Croatian video game industry. Statistical tests for proportions sig- nificance were then applied to assess player satisfaction on the Steam platform with video games developed and/or published by the Croa- tian video game industry. The analysis indicated a concentration of the industry in Zagreb, accounting for 50% of enterprises and 77.4% of employees in 2022. Over the period from 2018 to 2022, total net profit surged from e4.95 million to e12.37 million. However, the av- erage net profit per enterprise experienced a modest increase from e0.12 million to e0.15 million during the same period. Notably, 21% of enterprises maintained the highest AAA rating. County-level com- parisons revealed insights into net profit, total revenue, and expenses. On Steam platform, players recommended remarkable 89% of video games developed or published by the Croatian industry.

•We examine how product generation lifecycle impacts the relative influence octs on market share.•We replicate and confirm prior results that both quality and network effects are critical drivers of market share.•Most importantly, we show that in the Growth and Maturity phases of the product generation life cycle, network effects can trump quality effects. Marketing literature has recently witnessed major debates about the critical drivers of success – namely, the quality versus network effect, in high-tech markets as well as the efficiency of such markets. Extant research suggests that both quality and network effects are significant factors determining market share in these markets, but that quality effect is more important. Based on surveys of several retail managers and a new dataset on the US video game industry from 1995 to 2007, we replicate and extend this research in several directions: (1) we replicate and confirm prior results that both quality and network effects are critical drivers of market share; (2) network and quality effects vary over the product generation life cycle, and hence, quality does not always win; and (3) in the Growth and Maturity phases of the product generation life cycle, network effects can trump quality effects. Our empirical results provide some practical insights for retail managers.