Effects of Real-Money Trading on MMOG Demand: A Network Externality Based Explanation

Author
Huhh, Jun-Sok

Year
2006

Publication information
Unpublished manuscript

Suggested citation
Huhh, Jun-Sok (2006). Effects of Real-Money Trading on MMOG Demand: A Network Externality Based Explanation. Unpublished manuscript

Available online at:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=943368

Abstract from this paper

This paper is a theoretical exploration on the connection between real-money trading (RMT) and the demand of massively multi-players online game (MMOG). For network externality inherent in MMOG, demand function of the game has not normal downward-sloping shape. That gives the RMT more critical role in achieving a commercial success of a game. By simulated data from software Mathematica, the effects of changes in game-related variables are identified. The game with environment inducing more lively RMT could have more chance to hit critical mass. We also review the welfare effects of RMT. Contrary to the common belief, RMT could bring about Pareto-improving results at social level. In the strict economic sense, there is no welfare reducing consequence in RMT activities.

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