Pricing and design of pay-to-win add-ons
File(s)
Accepted version
Author(s)
Harutyunyan, Mushegh
Koca, Esma
Type
Journal Article
Abstract
In player-versus-player video games, players' natural desire to win and avoid losing has created an opportunity for game developers to sell ``pay-to-win'' add-ons, digital items that give buyers a competitive advantage against other players. In this paper, we investigate the pricing and design of a pay-to-win add-on, its effect on the base game and profit implications for the developer. When a large share of the players is less price sensitive and highly willing to buy the pay-to-win add-on, we find that, surprisingly, the developer may prefer not to introduce it. Further, when it is optimal to sell the add-on, the developer designs it to be less (more) powerful in games where players are highly (moderately) sensitive to losing. In practice, the developer may design rewards or penalties in the game to influence players' sensitivities to winning and losing, respectively. Our findings suggest that when selling a pay-to-win add-on, the developer ideally prefers players' loss-sensitivity to be neither too high nor too low, whereas high win-sensitivity tends to benefit the developer. The introduction of a pay-to-win add-on influences the optimal pricing and design of the base game. In particular, the developer decreases the base game price and may even sell it as a freemium. Despite the price reduction, investment in game quality may actually increase. From the players' perspective, our analysis shows that the introduction of a pay-to-win add-on can actually improve player surplus.
In an extension of our core model, we show that the developer may prefer to customize player-to-player matching probabilities based on ownership of the pay-to-win add-on, making players who own it more likely to be matched against non-owners. However, such customization is not always optimal, and under some market conditions, the developer may optimally abstain from customizing matching probabilities. In another extension, we show that the developer may benefit from setting a negative price for the base game; counterintuitively, player surplus does not increase from negative pricing.
In an extension of our core model, we show that the developer may prefer to customize player-to-player matching probabilities based on ownership of the pay-to-win add-on, making players who own it more likely to be matched against non-owners. However, such customization is not always optimal, and under some market conditions, the developer may optimally abstain from customizing matching probabilities. In another extension, we show that the developer may benefit from setting a negative price for the base game; counterintuitively, player surplus does not increase from negative pricing.
Date Issued
2026-06-01
Date Acceptance
2025-08-05
Citation
Management Science, 2026, 72 (6), pp.4569-5489
ISSN
0025-1909
Publisher
Institute for Operations Research and Management Sciences
Start Page
4569
End Page
5489
Journal / Book Title
Management Science
Volume
72
Issue
6
Copyright Statement
Copyright © 2025, INFORMS. This is the author’s accepted manuscript made available under a CC-BY licence in accordance with Imperial’s Research Publications Open Access policy (www.imperial.ac.uk/oa-policy)
License URL
Publication Status
Published
Date Publish Online
2025-09-26