Moving Consumers from Free to Fee in Platform-Based Markets: An Empirical Study of Multiplayer Online Battle Arena Games

Le Wang (), Paul Benjamin Lowry (), Xin (Robert) Luo () and Han Li ()
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Le Wang: School of Management, Xi’an Jiaotong University, Xi'an 710049, China
Paul Benjamin Lowry: Business Information Technology, Pamplin College of Business, Virginia Tech, Blacksburg, Virginia 24061
Xin (Robert) Luo: Department of Marketing, Information Systems, Information Assurance, and Operations Management, Robert O. Anderson School of Management, The University of New Mexico, Albuquerque, New Mexico 87106
Han Li: Department of Marketing, Information Systems, Information Assurance, and Operations Management, Robert O. Anderson School of Management, The University of New Mexico, Albuquerque, New Mexico 87106

Information Systems Research, 2023, vol. 34, issue 1, 275-296

Abstract: Companies in platform-based business markets have widely embraced freemium business models where profit primarily depends on a minority of paying customers. However, the key challenge of these models is transitioning participants from free users to paying consumers. To encourage paid consumption, companies often rely on product differentiation such as providing consumers who pay for products or services with enhanced features. However, limited research has addressed how such product differentiation may convert consumers from “free” to “fee.” Our research examines the multiplayer online battle arena (MOBA) game as a compelling example of a freemium platform-based business model. We contribute to the freemium literature by introducing three new MOBA-specific differentiations—character competency, character variety, and character-appearance differentiation. We also extend consumption values theory into a dual-path model to unveil the underlying mechanisms through which product differentiation influences in-game purchase. We empirically validate our dual-path model using data from a two-wave longitudinal experiment and three cross-sectional experiments. Our findings support opposing mediating paths for product differentiation in character competency and variety and indicate that these two types of differentiation can indeed undermine perceived game fairness. Conversely, character-appearance differentiation exerts only a positive influence on players’ purchasing of in-game items. Consequently, the findings of this study have important potential implications for platform-based companies leveraging freemium business models that seek to increase their share of paying customers.

Keywords: Freemium markets; vertical differentiation; horizontal differentiation; fairness; consumption values theory; longitudinal experiment; difference-in-difference model; MOBA game (search for similar items in EconPapers)
Date: 2023
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