Pricing of Games as a Service: An Analytical Model for Interactive Digital Services with Hedonistic Properties

Abstract

This study explores optimal pricing strategies in games and other interactive digital goods under incomplete information, when bundling is an option. Drawing from research on the pricing of information goods, we propose a pattern of optimal pricing strategies in which hedonic characteristics affect the utility of interactive digital goods and services. This is a new approach to games, to treat them as a service to determine pricing strategies. Findings reveal that there is an optimal pricing solution for firms in the gaming industry. This finding holds both in bundling and non-bundling cases. Utilizing analytical modeling methodology, we propose pricing-inspired business strategies to the firms operating in the digital gaming industry. Our findings could also be applied to other hedonic interactive digital goods and services. Overall, this study contributes to the existing pricing theories in digital services and information goods.