Gil, Ricard and Warzynski, Frédéric (2009): Vertical Integration, Exclusivity and Game Sales Performance in the U.S. Video Game Industry.
Download (223Kb) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Vertical Integration, Exclusivity and Game Sales Performance in the U.S. Video Game Industry|
|Keywords:||vertical integration, exclusivity, performance, video games|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships; Contracts and Reputation; Networks
D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L20 - General
|Depositing User:||Frederic Warzynski|
|Date Deposited:||03. Mar 2010 18:29|
|Last Modified:||11. Feb 2013 16:28|
Chiou, L. 2009. Empirical Analysis of Competition between Wal-Mart and Other Retail Channels, Journal of Economics and Management Strategy, Vol. 18.
Coase, R. 1937. The Nature of the Firm, Economica, Vol. 4, No. 16, pp. 386-405.
Clements, and Ohashi, Hiroshi, 2005. Indirect Network Effects and the Product Cycle: Video Games in the U.S., 1994-2002, Journal of Industrial Economics, 53, 515-542.
Corts, Kenneth S. and Lederman, Mara, 2007. Software Exclusivity and the Scope of Indirect Network Effects in the U.S. Home Video Game Market, mimeo, Rothman School of Management, University of Toronto.
Derdenger, T., 2008. Vertical Integration and Two-Sided Market Pricing: Evidence from the Video Game Industry, mimeo.
Grossman, S. and O. Hart, 1986. The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration, The Journal of Political Economy, Vol. 94, No. 4, pp. 691-719.
Hart, Oliver 1995. Firms, Contracts, and Financial Structure. Oxford: Oxford University Press, 1995.
Holmstrom, B., and Milgrom, P., 1991. Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design, Journal of Law, Economics, & Organization, Vol. 7, pp. 24-52.
Holmstrom, B., and Milgrom, P., 1994. The Firm as an Incentive System, The American Economic Review, Vol. 84, No. 4, pp. 972-991.
Klein, B., R. Crawford and A. Alchian, 1978. Vertical Integration, Appropriable Rents, and the Competitive Contracting Process, Journal of Law and Economics, Vol. 21, No. 2, pp. 297-326.
Lafontaine, Francine and Slade, Margaret, 2007. Vertical Integration and Firm Boundaries: The Evidence. Journal of Economic Literature 45, 629-685.
Lee, Robin, 2007. Vertical Integration and Exclusivity in platform and Two-Sided Markets, mimeo, Harvard Business School.
Ohashi, Hiroshi, 2005. How Does Ownership Structure Affect the Timing of New Product Introductions? Evidence from the U.S: Video Game Market, mimeo, University of Tokyo.
Prieger, James E. and Hu, Wei-Min, 2006. An Empirical Analysis of Indirect Network Effects in the Home Video Game Market, NET Institute Working Paper #06-25.
Williams, Dmitri, 2002. Structure and Competition in the U.S. Home Video Game Industry, International Journal on Media Management, 4, 41-54.
Williamson, O., 1975. Markets and Hierarchies, New York: Free Press.
Williamson, O., 1985. The economic institutions of capitalism: Firms, markets, relational contracting, New York: Free Press.