An Empirical Analysis of Virtual Goods Permission Rights and Pricing Strategies

With the rapid development of the virtual world industry in the past few years, trading of virtual goods and services has grown significantly. Virtual goods creators can set different permissions to their creations, such as the length of usage, the ability to copy or modify a virtual good, or the ability to give the good to others. The permissions of virtual goods endow their creators with additional power to control the allocation and exchange of virtual goods in a virtual world. We examine how the unique virtual goods permission settings (copy, modify, and transfer) and other factors are associated with virtual goods prices. Using data from a Second Life marketplace, we find that permissions of virtual goods are not random, as creators strategically set the permissions for their virtual creations. Our results show that the copy and transfer permissions are significant factors associated with virtual goods prices. The impact of other factors on virtual goods prices is analyzed and managerial implications are discussed. [Submitted: October 17, 2011. Revised: April 30, 2012. Accepted: May 25, 2012.]