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The Impact of Acquisition on Product Quality in the Console Gaming Industry

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  • Shivam Somani

Abstract

The console gaming industry, a dominant force in the global entertainment sector, has witnessed a wave of consolidation in recent years, epitomized by Microsoft's high-profile acquisitions of Activision Blizzard and Zenimax. This study investigates the repercussions of such mergers on consumer welfare and innovation within the gaming landscape, focusing on product quality as a key metric. Through a comprehensive analysis employing a difference-in-difference model, the research evaluates the effects of acquisition on game review ratings, drawing from a dataset comprising over 16,000 console games released between 2000 and 2023. The research addresses key assumptions underlying the difference-in-difference methodology, including parallel trends and spillover effects, to ensure the robustness of the findings. The DID results suggest a positive and statistically significant impact of acquisition on game review ratings, when controlling for genre and release year. The study contributes to the literature by offering empirical evidence on the direct consequences of industry consolidation on consumer welfare and competition dynamics within the gaming sector.

Suggested Citation

  • Shivam Somani, 2024. "The Impact of Acquisition on Product Quality in the Console Gaming Industry," Papers 2406.02525, arXiv.org.
    • Handle: RePEc:arx:papers:2406.02525
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    1. Erdős, Katalin & Baczur, Roland & Kehl, Dániel & Farkas, Richárd, 2022. "When post-merger price effect becomes smoothed over time: A case of a gasoline market merger," Energy Economics, Elsevier, vol. 105(C).
    2. Timothy Derdenger, 2014. "Technological tying and the intensity of price competition: An empirical analysis of the video game industry," Quantitative Marketing and Economics (QME), Springer, vol. 12(2), pages 127-165, June.
    3. Kirill Borusyak & Xavier Jaravel & Jann Spiess, 2024. "Revisiting Event-Study Designs: Robust and Efficient Estimation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(6), pages 3253-3285.
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