Technological tying and the intensity of price competition: An empirical analysis of the video game industry

Derdenger, Timothy

doi:10.1007/s11129-014-9143-9

Cited by 41 publications

(13 citation statements)

References 18 publications

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“…In addition to these primary findings, our results indicating a larger effect for high-quality software on hardware sales serve to complement dynamic structural papers analyzing this industry, e.g., Lee (2013) and Derdenger (2012). Lee (2013)'s hardware model uses a single variable representing the software side, the expected utility of software, which is derived from a structural model of game purchases.…”

Section: Introductionsupporting

confidence: 54%

Indirect Network Effects and the Quality Dimension: A Look at the Gaming Industry

Kim

Prince

Qiu³

2012

SSRN Journal

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We present theoretical and empirical analyses of indirect network effects for a hardware market with vertically differentiated complementary goods. We demonstrate that the heretofore typical use of aggregate software counts can mis-measure the presence and/or magnitude of indirect network effects. We show this is true when there is correlation along the quality dimension between the marginal utility of software and either 1) the response of software supply to an increase in installed base, or 2) conditional variation in software availability. We illustrate this idea using a simple monopolistic competition model, and through empirical analysis of the 7 thgeneration console market.

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Section: Introductionsupporting

confidence: 54%

Indirect Network Effects and the Quality Dimension: A Look at the Gaming Industry

Kim

Prince

Qiu³

2012

SSRN Journal

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“…Even consumer packaged goods can display signicant dynamics due to learning or inventory eects, as is well known from individual-level models estimated from household panels. Another important setting includes the purchase of technology products, which causes signicant interdependencies between hardware and software [Melnikov, 2013, Derdenger and Kumar, 2013, Derdenger, 2014. Thus, intertemporal eects are highly important across a wide variety of settings in marketing and economics, and our aim is to provide a method that enables a highly tractable approach to such settings, which includes incorporating both observable and unobservable states evolving over time, and the exibility to model evolution for each product separately, unlike the current state-of-the-art approach for aggregate data.…”

Section: Models For Aggregate Datamentioning

confidence: 99%

“…Due to its advance in dealing with a challenging problem, the approach has been recently used across a range of dynamic settings, including an investigation of how consumers tradeo between new and used cars [Schiraldi, 2011], the dynamic impacts of bundling as a product strategy Derdenger and Kumar [2013], and consumer hardware and software purchases in settings with technological tying [Derdenger, 2014], as well as in storable CPG goods with individual-level data [Hendel and Nevo, 2006a].…”

Section: The Inclusive Value Approach (Iva)mentioning

confidence: 99%

Economic Value of Celebrity Endorsements: Tiger Woods' Impact on Sales of Nike Golf Balls

2013

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We present a new methodology to estimate dynamic discrete choice models with aggregate data; the estimation allows for a multi-dimensional state space, but still retains signicant computational benets. We specically build upon the literature pertaining to the dynamic single-agent models with conditional choice probabilities by including both observed and unobserved population state variables in estimation. We demonstrate that the approach performs well in accurately recovering the estimated parameters via Monte Carlo simulations, and that it compares favorably with the current state-ofthe-art methods. We illustrate with an empirical application to assess the impact of dynamics in the digital camera market.

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“…Seamans & Zhu [] study the effect of Craigslist, a substitute for classified advertisements, on newspaper pricing. Lee [], Derdenger [] and Corts & Lederman [] evaluate exclusive contracting in the video‐game market. Cantillon & Yin [] study tipping in financial exchanges.…”

Section: Introductionmentioning

confidence: 99%

Platform Pricing at Sports Card Conventions

Jin

Rysman

2015

The J Industrial Economics

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Using a new data set of US sportscard conventions, this paper extends and tests the pricing theory of two-sided markets. Since most sportscard conventions are local and convention organizers must set fees to attract both consumers and dealers, we have detailed information on consumer price, dealer price and platform competition. Consistent with the theory, we present two findings: first, consumer pricing decreases with competition at any reasonable distance, but pricing to dealers is insensitive to competition and in longer distance even increases with competition. One consistent explanation is that dealers multi-home within a short distance but single-home across longer distance. Second, when consumer price is zero (and presumably cannot go beyond zero), dealer pricing is more likely to decrease with competition. These two findings confirm a link of pricing between the two sides of the market. * We thank Mark Armstrong for guidance at an early stage, and to John List, Glen Weyl, Julian Wright, and seminar participants at the conference on the Future of Academic Communication at the University of Michigan for advice and comments. David Rapson, Haizhen Lin, Supatcha Mahathaleng and Lauren Moon provided excellent research assistance. All errors are our own.

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Technological tying and the intensity of price competition: An empirical analysis of the video game industry

Cited by 41 publications

References 18 publications

Indirect Network Effects and the Quality Dimension: A Look at the Gaming Industry

Indirect Network Effects and the Quality Dimension: A Look at the Gaming Industry

Economic Value of Celebrity Endorsements: Tiger Woods' Impact on Sales of Nike Golf Balls

Platform Pricing at Sports Card Conventions

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