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Professionalization of Online Gaming? Theoretical and Empirical Analysis for a Monopoly-Holding Platform

1
CICET- FCVC (Economic Sciences and Tourism Research Center of Consuelo Vieira da Costa Foundation) at ISAG (Higher Institute of Administration and Management) and FEP-UP (Faculty of Economics of the University of Porto), 4100-442 Porto, Portugal
2
School of Economics and Management, Huaiyin Normal University, 223001 Huaian, China
*
Author to whom correspondence should be addressed.
J. Theor. Appl. Electron. Commer. Res. 2021, 16(4), 682-708; https://doi.org/10.3390/jtaer16040040
Received: 4 December 2020 / Revised: 3 January 2021 / Accepted: 7 January 2021 / Published: 11 January 2021
We analyze the private equilibrium of a two-sided market representing the online gaming industry under a principal-agent model. A monopoly-holding platform hires a manager to attract new members from both sides of the market while considering uncertainty on the adhesion of viewers and online gamers. First, we mathematically demonstrate that increasing cross-group network externalities can decrease the platform’s profit, which contradicts a canonical result from the field of two-sided markets. Moreover, knowing that the intermediary’s goal is aligned with the private interest of online gamers, machine learning models empirically show that the main theoretical outcome is observed in reality due to the presence of heterogeneous indirect network effects in online gaming activities. Second, we conclude that social welfare can be either harmed or improved for increasing cross-group network externalities, which means that the professionalization of online gaming may or may not be legitimized depending on the value taken by exogenous parameters related to the platform’s uncertainty on the number of agents that get on board, risk aversion of viewers, and royalty rate applied to online gamers. Finally, a discussion based on 2020 facts is provided and several policy recommendations are formulated to ensure the persistence of best regulatory practices. View Full-Text
Keywords: two-sided markets; monopoly; online gaming; salesforce compensation; machine learning two-sided markets; monopoly; online gaming; salesforce compensation; machine learning
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MDPI and ACS Style

Ribeiro, V.M.; Bao, L. Professionalization of Online Gaming? Theoretical and Empirical Analysis for a Monopoly-Holding Platform. J. Theor. Appl. Electron. Commer. Res. 2021, 16, 682-708.

AMA Style

Ribeiro VM, Bao L. Professionalization of Online Gaming? Theoretical and Empirical Analysis for a Monopoly-Holding Platform. Journal of Theoretical and Applied Electronic Commerce Research. 2021; 16(4):682-708.

Chicago/Turabian Style

Ribeiro, Vitor M.; Bao, Lei. 2021. "Professionalization of Online Gaming? Theoretical and Empirical Analysis for a Monopoly-Holding Platform" J. Theor. Appl. Electron. Commer. Res. 16, no. 4: 682-708.

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