Estimating The Effect Of Subscription based Streaming Services On The Demand For Game Consoles

TL;DR

This paper estimates the impact of subscription-based streaming services on game console demand using BLP demand estimation, finding a positive effect consistent with the theory of complementary goods.

Contribution

It applies the BLP demand model with 2SLS estimation to quantify how streaming services influence console demand, offering a novel empirical analysis.

Findings

Streaming services positively affect console demand

2SLS regression provides convincing estimates

Supports the theory of complementary goods

Abstract

In this paper, we attempt to estimate the effect of the implementation of subscription-based streaming services on the demand of the associated game consoles. We do this by applying the BLP demand estimation model proposed by Berry (1994). This results in a linear demand specification which can be identified using conventional identification methods such as instrumental variables estimation and fixed-effects models. We find that given our dataset, the two-stage least squares (2SLS) regression provides us with convincing estimates that subscription-based streaming services does have a positive effect on the demand of game consoles as proposed by the general principle of complementary goods.