Value co-creation in the video game industry

Graziano Abrate, Anna Menozzi


Purpose. The process of value creation is rapidly shifting from a product- and firm-centric view to personalized consumer experiences. Networked and active consumers are increasingly co-creating value with the firm. This paper aims at contributing to the evidence on unpaid competing complementors and on network effects by asking how a form of creation that is user-driven and not motivated by sales incentives, impacts on producers’ sales. The video game industry, where the so-called “modders” provide free contents (“mods”) that improve the video game experience, provides an excellent field of study.

Methodology. The video games demand function and the supply of new mods, in the retail video game market, are modelled. A system of equations is estimated by applying an instrumental-variables approach to account for possible endogeneity biases and uncover causal relationship.

Findings. The creation of new mods increases video game retail sales. The more popular is a video game title, the higher are the sales. The video game demand elasticity is attenuated by the continuous creation of new mods.

Practical implications This paper shows that direct and indirect network effects between video games and mods take place even with unpaid competing complementors and that (even) traditional distribution outlets can benefit from them.

Originality/value. The paper quantifies the effect that the creation of mods exerts on sales and on price elasticity. Weekly (instead of monthly) time periods provide a period short enough to capture the short development cycles of mods and small and rapid responses of user demand.


co-creation; network effects; video games; mods; retailing

Full Text:



Arakji, R., Lang, K. (2007). Digital consumer networks and producer-consumer collaboration: Innovation and product development in the video game industry. Journal of Management Information Systems 24 (2), 195-219

Boudreau, K.J., Jeppesen, L.B. (2015). Unpaid crowd complementors: The platform network effect mirage. Strategic Management Journal 36 (12), 1761-1777

Comino, S., Manenti, F.M. (2011). Dual licensing in open source software markets. Information Economics and Policy 23, 234-242.

Cova, B., Dalli, D. (2009). Working consumers: the next step in marketing theory? Marketing Theory 9, 315-339

Economides, N. (1996). The economics of networks. International Journal of Industrial Organization 14, 673-699

Füller, J., Mühlbacher, H., Matzler, K., Jawecki, G. (2010). Consumer empowerment through internet-based co-creation. Journal of Management Information Systems 26 (3), 71–102

Gambardella, A., Raasch, C., Von Hippel, E. (2016). The User Innovation Paradigm: Implications for Markets and Welfare. Management Science, Article in advance, pp. 1-19, available at

Jeppesen, L.B. (2004). Profiting from innovative user communities. Working paper, Department of Industrial Economics and Strategy, Copenhagen Business School

Lee, G.K, Cole, R.E. (2003). From a firm-based to a community-based model of knowledge creation: the case of the Linux kernel development. Organization Science 14 (6), 633-649

Marchand, A., Hennig-Thurau, T. (2013). Value creation in the video game industry: Industry economics, consumer benefits, and research opportunities. Journal of Interactive Marketing, 141-157

Münch, M. (2013). Fooling the user? Modding in the video game industry. Internet Policy Review 2 (2)

Nieborg, D.B., Van der Graaf, S. (2008). The mod industries? The industrial logic of non-market game production. European Journal of Cultural Studies 11 (2), 177-195

Postigo, H. (2003). From pong to planet quake: Post industrial transitions from leisure to work. Information, Communication & Society 6 (4), 593-607

Rysman, M. (2009). The economics of two-sided markets. Journal of Economic Perspectives 23 (3), 125-143

Shankar V, Bayus B.L. (2003). Network effects and competition: an empirical analysis of the home video game industry. Strategic Management Journal 24(4), 375–384


  • There are currently no refbacks.