Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9552581 | Information Economics and Policy | 2005 | 14 Pages |
Abstract
Playing computer games online is a fast growing, billion dollar industry which has received little academic attention. The industry exhibits a number of interesting economic features. The industry structure is determined by creative destruction as in Aghion and Howitt (1992) [Aghion, P., Howitt, P. 1992. A model of growth through creative destruction, Econometrica, 60(2), 323-351], with game makers experiencing market power within a genre until the game is superceded. Furthermore, the attractiveness of playing a game online depends on the existence of opponents (positive network externalities) while technical and reputational problems eventually arise (negative network externalities). We model the choice of two-part tariffs by a monopolist under creative destruction and network externalities and derive conditions for the multiple equilibria which currently exist in the industry.
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Management of Technology and Innovation
Authors
Kieron Meagher, Ernie G.S. Teo,