The Impact of an Augmented Reality Game on Local Businesses: A Study of Pokemon Go on Restaurants

Abstract

Pokemon Go, a mobile game that utilizes the augmented reality (AR) technology, garnered tremendous public interest upon release with an average of 20 million active daily users. The game combines geo-spatial elements with gamification practices to incentivize user movement in the physical world. In this study, we examine the potential externalities that such incentives may have on associated businesses. Particularly, we study the impact of Pokemon Go on local restaurants by using online reviews as a proxy for consumer engagement and perception. We treat the release of Pokemon Go as a natural experiment and study the post-release impact on associated restaurants. We find that restaurants associated with Pokemon Go do indeed enjoy a higher level of consumer engagement and more positive consumer perception. In addition, we find that the characteristics of a restaurant moderate these effects significantly. To the best of our knowledge, our study is the first to examine the economic implications of augmented-reality applications. Therefore, our research lays the foundations for future studies that examine how augmented-reality applications affect consumer economic behavior. Our study also provides insights for business owners and policymakers regarding the potential value of being associated with AR-based applications.

Keywords: Pokemon Go, Augmented Reality, Hedonic Utility, Natural Experiment, Economics of IS,