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Vertical Integration, Exclusivity and Game Sales Performance in the U.S. Video Game Industry

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  • Gil, Ricard
  • Warzynski, Frédéric

Abstract

This paper empirically investigates the relation between vertical integration and video game performance in the U.S. video game industry. For this purpose, we use a widely used data set from NPD on video game montly sales from October 2000 to October 2007. We complement these data with handly collected information on video game developers for all games in the sample and the timing of all mergers and acquisitions during that period. By doing this, we are able to separate vertically integrated games from those that are just exclusive to a platform First, we show that vertically integrated games produce higher revenues, sell more units and sell at higher prices than independent games. Second, we explore the causal effect of vertical integration and find that, for the average integrated game, most of the difference in performance comes from better release period and marketing strategies that soften competition. By default, vertical integration does not seem to have an effect on the quality of video game production. We also find that exclusivity is associated with lower demand.

Suggested Citation

  • Gil, Ricard & Warzynski, Frédéric, 2009. "Vertical Integration, Exclusivity and Game Sales Performance in the U.S. Video Game Industry," MPRA Paper 21049, University Library of Munich, Germany, revised Dec 2009.
  • Handle: RePEc:pra:mprapa:21049
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    References listed on IDEAS

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    4. Hiroshi Ohashi, 2005. "How does Ownership Structure Affect the Timing of New Product Introductions? Evidence from the U.S. Video Game Market," CARF F-Series CARF-F-026, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
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    8. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
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    Cited by:

    1. L. Aguzzoni & E. Argentesi & P. Buccirossi & L. Ciari & T. Duso & M. Tognoni & C. Vitale, 2013. "They Played the Merger Game: A Retrospective Analysis in the UK Videogames Market," Working Papers wp908, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. repec:kap:jculte:v:42:y:2018:i:1:d:10.1007_s10824-016-9276-7 is not listed on IDEAS
    3. Venkat Kuppuswamy & Carliss Y. Baldwin, 2012. "Risky Business: The Impact of Property Rights on Investment and Revenue in the Film Industry," Harvard Business School Working Papers 13-007, Harvard Business School, revised Aug 2012.
    4. Kim, Jin-Hyuk & Prince, Jeffrey & Qiu, Calvin, 2014. "Indirect network effects and the quality dimension: A look at the gaming industry," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 99-108.

    More about this item

    Keywords

    vertical integration; exclusivity; performance; video games;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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