Network Externalities in Online Video Games: An Empirical Analysis Utilizing Online Product Ratings

Marketing Letters, Forthcoming

18 Pages Posted: 6 Sep 2015

See all articles by Yong Liu

Yong Liu

University of Arizona

Enping Mai

East Carolina University

Jun Yang

University of Houston - Victoria - School of Business Administration

Date Written: July 1, 2015

Abstract

Video games have become a major contributor to the US and global economy. This paper studies network externalities in the online video game industry. Even though network externalities are recognized as a major driver of new product diffusion, testing the existence and the impact of network externalities at the individual level has been a challenge. By employing online product ratings in the estimation, we find that for online video games: (1) a larger installed base generates higher product ratings by individuals; (2) network externalities exhibit nonlinear dynamics over product life-cycle — non-significant initially, highly significant next, and less significant in the later period; and (3) network externalities differ across consumer segments: the impact of the installed base is stronger on less-experienced consumers than on more-experienced ones. Our results suggest that network externalities should be treated as a dynamic rather than a time-invariant phenomenon, and heterogeneous rather than homogeneous across consumers.

Keywords: Network externalities · Network effects · Online product ratings · User reviews · Video games · Massively Multiplayer Online Role-Playing Games.

Suggested Citation

Liu, Yong and Mai, Enping and Yang, Jun, Network Externalities in Online Video Games: An Empirical Analysis Utilizing Online Product Ratings (July 1, 2015). Marketing Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2655793

Yong Liu (Contact Author)

University of Arizona ( email )

1130 E Helen Street
Tucson, AZ 85721
United States

HOME PAGE: http://https://eller.arizona.edu/people/yong-liu

Enping Mai

East Carolina University ( email )

Greenville, NC 27858
United States

Jun Yang

University of Houston - Victoria - School of Business Administration ( email )

14000 University Blvd.
Sugar Land, TX 77479
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
107
Abstract Views
979
Rank
457,076
PlumX Metrics