Business World

The rise of the gaming industry

In the classic economic model, the measure of utility is presumed to be the key to understanding agent’s decision-making. However, most factors concerning the study of utility are assumed to be exogenous. The emergence of the field of behavioural economics has sought to challenge that by drawing insights on the endogenous factors that affect that the emotional decision making of an agent. One of the most prominent field of studies in BE is that of happiness. While the modern economic framework has allowed for human emotions to be commoditised – thorugh figures such as Edward Barynes – the entertainment industry has prospered exponentially in its ability to deliver to the emotional, or rather, irrational states of individuals.

The key proponent of the entertainment industry that is currently valued at USD $18.4 billion and projected to grow to USD $230 billion by 2022[1] is the gaming industry; on track to becoming the largest market in the world. The digital gaming fever took off in 1970s with arcade games and since then has made its way across PCs, gaming consoles and mobile phones. As a sub sector of the entertainment industry, it is important to understand how gaming industry has managed to capture such a fanatic appeal.

Applying some BE insights could be helpful in this case.

Elizabeth Dunn, Daniel Gilbert and Timothy Wilson published a paper titled, “If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right” published in the Journal of Consumer Psychology.[2] In their research, they were able to pinpoint 8 factors that analyse how individual’s spending habits can be tailored to maximise the utility they can gain from a purchase. What is fascinating to note is that the gaming industry has managed to incorporate a good number of these factors into their model.

One of the key principles of happiness backed decision-making is: ‘people want to buy experiences not goods’. The key takeaway from this principle is that humans establish their identity on the story their experiences follow. Currently, first-person shooter and battle royale games such as Fortnite, Apex legends and PUBG are the most popular. The design of such games is consolidated with customizable characters, construction mode, multiple servers and first-person navigation control all of which allow for a highly engaging and immersive experience. It is also important to note that most video game players fall within the age range of 17-25 years[3]. During this age range, most young adults feel the need to consolidate their identity and sense of self. The sheer abundance of stimulating experiences that gaming can provide might be one key explanation to the appeal of modern gaming. Moreover, a key principle stated by the paper that adds to the immerse experience of modern-day gaming is: ‘happiness is in details’. Essentially, an affective experience is shaped by local features of a user’s current situation. Through first-person vantage point, display of weapons available and coordinates of players’ nearby, a user is induced to receive information through compartmentalised display. The localisation of information aids in making the gaming experience evermore affective.

Another principle that is key to persuade individuals to make happier decisions is: ‘happiness is found in small pleasures instead of few big ones’. This is well incorporated within in-game economic model of some of the most popular games presently. Happiness is more strongly associated with frequency rather than intensity of people’s positive affective experiences. Noting this idea, games like Fortnite, PUBG and Minecraft are designed with an ‘early access’[4] system. These games are released on a prototypal mode and are then regularly updated. In this way, users are unsystematically shocked with updates and need to adjust to new circumstances within the game, thus making the gaming experience more engaging. Smaller pleasures like an updated battleground or greater customization are less susceptible to diminishing marginal utility, allowing for a gradual increment in total user satisfaction. Additionally, the principle of, ‘buying less insurance’, is well accounted for as most gamers (regardless of age or nationality), overwhelmingly prefer using the mobile app version for gaming[5], which are free to download. In contrast to loss aversion – the concept that owning something makes you fear its loss more – new research has found that people overestimate how emotionally reactive they truly are and have the master ability to spin events positively. The debunking of loss aversion has profited the gaming industry as gamers recognise this and opt for the low-cost model of mobile app gaming as the detachment to gaming consoles and the issues that gaming on those devices brings is forgone.

Lastly, another rather interesting feature of the gaming community is the emergence of live streaming gamers, through platforms like twitch. This sub sector of the gaming industry chronicles another key principle regarding gamers and their utility derived from gaming: ‘follow the herd, not your heart’. According to this principle, the best way to predict how much one will enjoy an experience is to see how much someone else enjoyed it. Live streaming games allows for gamers to experience via proxy what they might enjoy or not in a game. Additionally, the viability of being a professional gamer or live streamer is ostensible as a future career path for young gamers[6]. This pinnacles another principle of happiness backed decision making: ‘happiness stems outwards’. Research has shown that people report greater levels of happiness when they are able to help other as this allows for positive self-presentation. With this is in mind, it is not surprising that a good proportion of young gamers wish to join the live streaming community as they gain the added utility of viewers concurringly enjoying the experience of a game with them.

While it may seem that the model incorporated by the gaming industry is designed purely to heighten the happiness a player can derive from the experience, it is important to question the sustainability of these models. The gaming industry is in a constant upheaval but could there possibly reach a point where players’ are accustomed to the constant updates and possible excess supply of live streamers, given their initial success? These are some of the pivotal questions that developers in the gaming industry need to address in order to consolidate the industry as prominent figure in the world economy.

Isha Induchudan

[1] (wikipedia, n.d.)

[2] (Dunn, 2012)

[3] (Limelight Networks, 2019)

[4] (Freeman, 2018)

[5] (Limelight Networks, 2019)

[6] (Slane, 2018)

Credit for featured image: Anurag Sharma on

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