Add on or Move on: Do in-game purchases help or hurt upgrading to newer game versions?
(A2024-119865)

AUTHORS

Olga Ungureanu, Vrije Universiteit Amsterdam; Rutger van Oest, BI Norwegian Business School; Nico Schauerte, Vrije Universiteit Amsterdam

ABSTRACT

Despite the high economic importance of video games, research on consumers’ spending behavior on video games is lacking. Two main revenue sources for video game publishers come from in-game purchases and upgrades to consecutive game versions. However, the incompatibility of in-game purchases across game versions bears important considerations. We draw from mental accounting theory to outline two potential paths through which a player’s accumulated in-game purchases at a given point in time may impact the likelihood they upgrade to an available, newer game version: (i) a negative path due to higher psychological cost, and (ii) a positive path due to intensified usage in the owned game version. We test our framework with a rich data on game purchases and play behavior over time. We find empirical evidence for the two paths and show that the effects depend on the amount of pre-launch buzz surrounding new game versions.