Network externalities in online video games: an empirical analysis utilizing online product ratings

Yong - Liu, Enping Shirley Mai, Jun Yang

Research output: Contribution to journalArticle

9 Scopus citations

Abstract

Video games have become a major contributor to the USA 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—nonsignificant 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.

Original languageEnglish (US)
Pages (from-to)679-690
Number of pages12
JournalMarketing Letters
Volume26
Issue number4
DOIs
StatePublished - Dec 1 2015

Keywords

  • Massively multiplayer online role-playing games
  • Network effects
  • Network externalities
  • Online product ratings
  • User reviews
  • Video games

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Marketing

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