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Demand Heterogeneity and the Adoption of Platform Complements

Listed author(s):
  • Rietveld, J.
  • Eggers, J.P.
Registered author(s):

    This paper offers a demand-based theory of how platform maturity affects the adoption of platform complements. We argue that differences between early and late adopters of the platform include willingness to pay for the platform-and-complement bundle, risk preferences, preference for novelty, and search behavior. These differences create heterogeneous demand conditions for complements that affect both average complement performance and variance in the types of complements that are more or less successful. Using a novel dataset of 2,921 sixth-generation console video games, we find that platform maturity has a negative relationship on video games’ unit sales. Furthermore, as the platform matures, we find that the sales disparity between new intellectual property (IP) games and games based on existing video game properties or media tie-ins grows to the detriment of new IP games. We find that the sales disparity between superstar games and flops also widens as the platform matures. These effects are accentuated by the introduction of a next generation platform, which further skews the complement’s customer pool as early adopters migrate away from the current generation platform. Robustness tests that control for unobserved heterogeneity help rule out alternative explanations and support our argument that these performance implications are truly driven by heterogeneity in demand.

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    File URL: https://repub.eur.nl/pub/79494/ERS-2016-003-STR.pdf
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    Paper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam in its series ERIM Report Series Research in Management with number ERS-2016-003-STR.

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    Length: 37
    Date of creation: 12 Jan 2016
    Handle: RePEc:ems:eureri:79494
    Contact details of provider: Postal:
    RSM Erasmus University & Erasmus School of Economics, PoBox 1738, 3000 DR Rotterdam

    Phone: 31-10-408 1182
    Fax: 31-10-408 9020
    Web page: http://www.erim.eur.nl/
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