The Effect of Announcements on Forward Looking Behaviors for a Handheld Video Console Game Market

Abstract

During several decades, forward-looking behaviors for purchasing products have been actively discussed in marketing and demand forecasting literature. Forward-looking purchase behaviors basically stem from uncertainty of information. Particularly, uncertainty of future prices has been most frequently handled in literature as a key driver of the behaviors. However, in certain markets, such as mobile phone and console game markets, consumers’ forward-looking behaviors tend to dramatically change by an announcement about new product information. We point out this tendency; in this study, we propose a structural model to capture stepped changes caused by announcements. The model offers demand forecasts that reflect the stepped changes in forward-looking behaviors given an announcement plan. Moreover, we incorporate the indirect externality that innately exists in hardware and software markets of systematic goods, such as CD players and video console games, into the proposed model and apply it to handheld video console sales and superstar games of the consoles in Japan. We expect that the proposed model is helpful to practitioners who develop and manage marketing plans.