The Impact of Virtual Currency Pricing Strategies on Player Spending Behavior: Using the Formula CNY1=10 Virtual Game Currency as an Example

Abstract

The global gaming industry is dramatically developing, and a major contributor of that success comes from mobile games. Much of this growth is encouraged by free-to-play games, which make money through in-games topped-up. This model has really taken over, driving both innovation and expansion across the market. This paper is an outcome of a unique experimental study which examines the pricing strategies of the virtual game currency in China and how this currency conversion effects the behaviors of monetizing through in-game transactions among game players. This research involves the conversion of CNY1=10 virtual game currency in which more than 50% of games use this conversion. Using “Demand estimation in digital goods” by Einav et al., “Monopoly pricing models” by Tirole and to interview about three-hundred players about their purchasing records, these mathematical contributions and results help to deduce the price which the profit curve peaks are at. The study also highlights the critical role of storytelling for the gaming business and its role in supporting new economic models.