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- Title
Professionalization of Online Gaming? Theoretical and Empirical Analysis for a Monopoly-Holding Platform.
- Authors
Ribeiro, Vitor Miguel; Lei Bao
- Abstract
We analyze the private equilibrium of a two-sided market representing the online gaming industry under a principal-agent model. A monopoly-holding platform hires a manager to attract new members from both sides of the market while considering uncertainty on the adhesion of viewers and online gamers. First, we mathematically demonstrate that increasing cross-group network externalities can decrease the platform's profit, which contradicts a canonical result from the field of two-sided markets. Moreover, knowing that the intermediary's goal is aligned with the private interest of online gamers, machine learning models empirically show that the main theoretical outcome is observed in reality due to the presence of heterogeneous indirect network effects in online gaming activities. Second, we conclude that social welfare can be either harmed or improved for increasing cross-group network externalities, which means that the professionalization of online gaming may or may not be legitimized depending on the value taken by exogenous parameters related to the platform's uncertainty on the number of agents that get on board, risk aversion of viewers, and royalty rate applied to online gamers. Finally, a discussion based on 2020 facts is provided and several policy recommendations are formulated to ensure the persistence of best regulatory practices.
- Subjects
VIDEO games; VIDEO game industry; PROFESSIONALIZATION; SOCIAL services; NETWORK effect
- Publication
Journal of Theoretical & Applied Electronic Commerce Research, 2021, Vol 16, Issue 4, p682
- ISSN
0718-1876
- Publication type
Article
- DOI
10.3390/jtaer16040040