Upfront Pricing or In-Game Purchases? Monetizing Content in Video Games

James Campbell

No c7ebt_v1, SocArXiv from Center for Open Science

Abstract: A video game developer can monetize its content (maps, themes, modes) in two ways: upfront pricing, a single high up-front price for the game with all content included, or in-game purchases, a free or cheap base with each content piece sold separately. We model this as a choice between bundling and separately selling a content stream and ask when in-game purchases dominate. Upfront pricing wins when content tastes are dispersed and weakly correlated; in-game purchases win when tastes are strongly correlated or pieces differ in appeal, when risk-averse players face uncertain content, and when players are present-biased or impulsive. A simulation with all forces active shows that bundling is the benchmark optimum and that each friction shifts the boundary toward in-game purchases, with behavioral forces moving it most. The framework explains why premium console and PC games are still sold up front, while long-lived games, especially mobile games, rely on in-game purchases.

Date: 2026-06-16
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:c7ebt_v1

DOI: 10.31219/osf.io/c7ebt_v1

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