Profit Analysis for Video Game Releasing Strategies: Single-player vs. Multiplayer Games

A video game publisher may release a game in a multi- and/or a single-player version. The major difference between these two versions is that, unlike its single player counterpart, a multiplayer game allows its players to cooperate and/or compete with other human players, thus bringing them additional fun from social interactions. This study examined the game publisher’s strategies on which version(s) of the game should be released and how their prices may be affected when different versions are available. We drew insights from psychology literature on why people play games and used three important factors to analyze players’ adoption of video games. Based on these factors, we built a two-dimensional Hotelling model to analyze product differentiation strategies for a game publisher and studied how a player might adopt appropriate game versions based on factors associated with their intrinsic characteristics. We then derived the optimal pricing strategies for a game publisher to target the intended group of players when she releases (i) only the single-player version, (ii) only the multiplayer version, or (iii) both versions. The profits for the three releasing strategies were then compared and the optimal strategies associated with different cost parameters were identified. Published in an open access journal.