Business Strategy
Price Differentiation in Video Games: A Closer Look at the Free-to-Play Segment

Article Details
Pub. Date : June' 2020
Product Name : The IUP Journal of Business Strategy
Product Type : Article
Product Code : IJBS30620
Author Name : Karl-Heinz Moritz, Timo Schober, Georg Stadtmann
Availability : YES
Subject/Domain : Strategic Journals
Download Format : PDF Format
No. of Pages : 13

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Abstract

Companies which offer 'free-to-play' video games have to optimize the in-game-shop in order to generate revenues. Price differentiation is one possibility to optimize the profitability of the game. For example, Fortnite-the most successful video game in terms of revenues-offers uniforms (skins) at four different prices. This attracts different segments of the market. The authors use a microeconomic approach in order to highlight the implications of price differentiation for the profit maximization problem.


Description

The success of a video game could be measured in several dimensions: One measure could be the overall number of players. Another measure tracked closely is the number of active players within one month (Wikipedia, 2019). In the light of this paper, a very important criterion is the economic success. In this respect, 'Fortnite' -developed by Epic Games-is outstanding (Goldman Sachs, 2018). In the years 2018 and 2019, Fortnite was leading the rankings of the 'free-to-play games' (SuperData, 2019 and 2020).


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