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In-house publishing and competition in the video game industry

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  • Thomes, Tim Paul

Abstract

This paper analyzes two-sided competition in the video game industry. Video game platforms compete for software publishers and gamers and may invest into in-house publishing of own software (games) before they enter competition. Such investments affect the strength of the indirect network externalities between gamers and publishers in equilibrium. If publishers multihome, i.e., if they can release games for multiple platforms, and gamers singlehome, i.e., if they use only a single platform, in-house games reduce the profits obtained by platforms in equilibrium. Consequently, one may suppose that they refrain from investing into in-house games. However, the analysis reveals that an equilibrium where platforms credibly commit to do so cannot be sustained, transforming the game into a prisoner’s dilemma. This no longer holds if gamers also multihome, granting monopoly power to platforms on both sides of the market. The benefit obtained by gamers and the level of social welfare are always enhanced with in-house publishing.

Suggested Citation

  • Thomes, Tim Paul, 2015. "In-house publishing and competition in the video game industry," Information Economics and Policy, Elsevier, vol. 32(C), pages 46-57.
    • Handle: RePEc:eee:iepoli:v:32:y:2015:i:c:p:46-57
    DOI: 10.1016/j.infoecopol.2015.07.005
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    Cited by:

    1. Shekhar, Shiva, 2017. "Homing choice and platform pricing strategy," DICE Discussion Papers 247, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Cenamor, Javier & Frishammar, Johan, 2021. "Openness in platform ecosystems: Innovation strategies for complementary products," Research Policy, Elsevier, vol. 50(1).
    3. Qiang Li & Qing Liu & Xiaona Guo & Shuo Xu & Jingyu Liu & Heli Lu, 2019. "Evolution and Transformation of the Central Place Theory in E-Business: China’s C2C Online Game Marketing," Sustainability, MDPI, vol. 11(8), pages 1-19, April.
    4. Xi, Xun & Xi, Baoxing & Miao, Chenglin & Yu, Rongjian & Xie, Jie & Xiang, Rong & Hu, Feng, 2022. "Factors influencing technological innovation efficiency in the Chinese video game industry: Applying the meta-frontier approach," Technological Forecasting and Social Change, Elsevier, vol. 178(C).

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    More about this item

    Keywords

    Two-sided markets; Indirect network effects; Video game industry; In-house games;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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