Trade-in marketing strategies in gaming industry: The effect of digital transformation

Abstract

The gaming industry is undergoing a significant digital transformation. Gaming firms are thus incentivized to reassess the key areas in their business operations, such as the trade-in marketing offerings. We investigate two primary trade-in marketing strategies adopted by gaming firms, namely, trading physical copies of old games for physical copies of new games (TON) and trading physical copies of old games for digital copies of games (TOD). We employ multi-objective mathematical optimization models incorporating consumer preferences, government interventions, and impacts of digital transformation. Key findings include (1) when the publisher cannot observe digital-preferred consumers in the game market, enhancing the acceptance of digital copies and increasing service efforts for ordinary consumers are beneficial for boosting demand; (2) government-subsidized trade-in options can drive both gaming firms and consumers toward TOD; (3) when facing a high proportion of digital-preferred consumers, if government subsidies are low or require additional service efforts, the publisher may consider abandoning the TON or TOD strategies; and (4) when government identified a large proportion of digital-preferred consumers, providing a certain amount of government subsidies aimed at nudging the digital transformation can both increase consumer surplus and publishers’ profit. Our study enriches the literature by shedding light on the interplay between digital transformation, consumer preferences, and regulatory frameworks and offers valuable insights for policymakers and managers seeking to promote sustainability on the digital economy.