Design of Free-to-Play Mobile Games for the Competitive Marketplace

Dramatic improvements in high-speed and mobile connectivity have been changing the way people enjoy games. In-game purchases, virtual currency, game feature design for heterogeneous consumers, and strong competition are key challenges for game providers. This study addresses the determination of optimal game design strategies for game providers in the presence of heterogeneous players and copycat competitors. Specifically, the study incorporates pricing of virtual goods/currency into the free-to-play (F2P) mobile game design for both monopoly and duopoly cases and characterizes the optimal strategies for game providers in terms of pricing of virtual goods/currency and the game challenge level. In both cases, we derive optimal pricing and game challenge levels for game providers. In a monopoly setting, it is always in the game provider's best interest to make the game as challenging as possible. In a duopoly setting, a reasonable first mover advantage in the form of discounted value to copycat games is required for the original providers to create original games. Our results provide useful guidelines for mobile game developers facing a threat from copycat competitors.