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

40 Pages Posted: 15 May 2017 Last revised: 26 Jun 2019

See all articles by Vandith Pamuru

Vandith Pamuru

Purdue University - Krannert School of Management

Warut Khern-am-nuai

McGill University - Desautels Faculty of Management

Karthik Natarajan Kannan

Purdue University

Date Written: January 25, 2018

Abstract

Upon release, Pokemon Go, an augmented reality technology based game garnered tremendous interest in the public, with an average of 20 million daily active users. The game combines geo-spatial elements along with gamification practices to incentivize it's users movement in the physical world. Such incentives can have potential externalities to businesses associated with them. Using online reviews of restaurants as a proxy for sales and quality, we study the impact of Pokemon Go on local restaurants. We treat the release of Pokemon Go as a natural experiment and study the post-release impact for the associated restaurants. We find that restaurants that are located near PokeStops indeed observe a higher number of customers compared to restaurants that do not have PokeStops nearby. However, there is no significant difference in terms of the perception of customers between restaurants that have PokeStops nearby and those that do not. In addition, the average menu price of the restaurants play an important role in moderating the effect of PokeStops on the foot traffic. Interestingly, restaurants with higher average menu price enjoy a higher increase in the number of customers who visit the restaurant after Pokemon Go was released. Being the first research to study economic implications of augmented reality applications, the research lays theoretical foundations of how the augmented-reality games affect the consumer economics behavior. It also helps to build insights into potential value of such associations for business owners as well as policy makers.

Keywords: Pokemon Go, Pokestop, Natural Experiment, Economics of IS

Suggested Citation

Pamuru, Vandith and Khern-am-nuai, Warut and Kannan, Karthik Natarajan, The Impact of an Augmented Reality Game on Local Businesses: A Study of Pokemon Go on Restaurants (January 25, 2018). Available at SSRN: https://ssrn.com/abstract=2968221 or http://dx.doi.org/10.2139/ssrn.2968221

Vandith Pamuru

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Warut Khern-am-nuai (Contact Author)

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

Karthik Natarajan Kannan

Purdue University ( email )

Krannert School of Management
West Lafayette, IN 47907
United States

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