Title paper

Chapter 3: Home Videogame Platforms
Robin S. Lee∗
March 2011

Abstract
This chapter provides an overview of the home videogame industry and discusses recent economic research on modeling the strategic interactions of involved firms and consumers. I primarily focus on empirical methods to estimate demand and supply for both videogame hardware and software, but also highlight other topics well suited for further exploration including richer models of platform competition and the impact of exclusive vertical arrangements on industry structure and welfare.

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Introduction

What began with a box called Pong that bounced a white dot back-and-forth between two “paddles” on a television screen has now blossomed into a $60B industry worldwide, generating $20B annually in the United States alone.1 Today, videogames are a serious business, with nearly three-quarters of US households owning an electronic device specifically used for gaming, and many predicting that figure to increase in the coming years.2 Given the widespread adoption of a new generation of videogame systems introduced in 2006 and the ever growing popularity of online and on-the-go gaming, videogames are also no longer strictly the stuff of child’s play: surveys indicate 69% of US heads of households engage in computer and videogames, with the average age of a player being 34 years old.3 As
∗

Stern School of Business, New York University. Contact: [e-mail]. All errors are my own.
DFC Intelligence, 2009. 2010 Essential Facts, Entertainment Software Association
2
Ibid.
3
Ibid.
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newer devices continue to emerge with even more advanced and immersive technologies, it is likely that videogames will continue to play an ever increasing role in culture, media, and entertainment. Owing no small part to this success, the videogame industry has been the subject of a growing number of studies and papers. This chapter focuses on research within a particular slice of

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