ReportTitle:
Price Skimming and Resale Market Strategies for Durable Goods: A Dynamic Equilibrium Model of the Video Game Market
Reporter(Institution):Jason Duan ( McCombs School of Business,The University of Texas at Austin)
Time:02:00.pm,24th May, 2016
Location:B-201, Building of Economics & Management, JiulonghuCampus
Abstract:
We develop a dynamic structural model that incorporates dynamic demand, price skimming, and used-goods markets to study how prohibiting resale influences profits for durable goods producers. We estimate demand in the context of video games, using contemporary data from online marketplaces. Through policy simulations, we find that the used-game market concentrates
sales toward the early periods. This is because the used-game market not only reduces sales of new games in the later periods by providing additional competition, but also incentivizes consumers to buy early by increasing their willingness to pay. Because prices in earlier periods are higher than in later periods, the presence of the used-game market can increase a game producer’s profits. We find this is the case for most games in our sample. The direction of profit changes depends on demand characteristics, suggesting that firms should use different optimal strategies regarding the used-game market.
