Intertemporal Demand Spillover Effects on Video Game Platforms

44 Pages Posted: 13 Oct 2017 Last revised: 23 Mar 2019

See all articles by Avery Haviv

Avery Haviv

University of Rochester - Simon Business School

Yufeng Huang

University of Rochester - Simon Business School

Nan Li

University of Rochester - Simon Business School

Date Written: March 19, 2019

Abstract

Many platform strategies focus on indirect network effects between sellers through platform expansion. In this paper, we show sellers on the console video game platform generate a positive intertemporal spillover effect and expand the demand for other sellers, holding the set of platform adopters fixed. We propose a novel identification strategy that leverages exogenous variation in the release timing of games exclusively available on a console platform, and examine how this variation affects the sales of games available on both platforms. We find a sizable intertemporal demand spillover effect between games: A 1% increase in total copies sold on a platform leads to a 0.153% increase in the sales of other games in the next month (i.e., an elasticity of 0.153). Additional analysis suggests this demand spillover effect is reminiscent of habit formation on the consumer side, in that past purchases keep end users active on the platform. Our finding provides a potential explanation for recent platform sales events and subscription services that provide free games to consumers every month.

Keywords: Demand spillover effect, Platform strategy, Natural experiment, Video game

Suggested Citation

Haviv, Avery and Huang, Yufeng and Li, Nan, Intertemporal Demand Spillover Effects on Video Game Platforms (March 19, 2019). Available at SSRN: https://ssrn.com/abstract=3048087 or http://dx.doi.org/10.2139/ssrn.3048087

Avery Haviv (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Yufeng Huang

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

HOME PAGE: http://https://sites.google.com/site/yufenghuangphd/

Nan Li

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
33
Abstract Views
190
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information