Economic cost–benefit analysis of the addictive digital game industry

ABSTRACT

This study attempts to estimate the economic costs and benefits of the addictive digital game industry. Addiction to digital games induces economic costs such as increase in crime, facilities investments for curbing addiction, increase in counselling costs and other welfare losses. As a case study, we investigate the digital game industry in South Korea which is known to have one of the highest rates of game addiction. According to our calculations, the annual cost of game addiction is estimated to be approximately $3.5B while the annual benefit is approximately $24.3B ($3.7B for addicted user market). The proportion of the total costs to total benefits from the game industry is an alarming 14% (95% for addicted user market). We offer some policy recommendations.

KEYWORDS:

• Digital game industry
• game addiction
• economic cost–benefit analysis
• policy recommendation

JEL CLASSIFICATION:

• D61
• L78
• M14
• M41

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ We omit US in front of the dollar sign for brevity throughout the article, but we are consistently referring to the US dollar when we are using the dollar sign ($).

² Recently, for example, the Ministry of Gender Equality and Family (MOGEF) in Korea has proposed taxing the game industry’s revenues by 6% or its profits by 10% to create a fund to deal with game addiction.

³ We use 2010 as our main year of analysis since the white papers on the game industry provide more data for 2010. We have no reasons to believe that 2010 is an outlier year both for the cost and for the benefit calculation.

Additional information

Funding

This work was supported by the National Research Foundation of Korea [2012031717] and the Kim Jung Woo Chair of Accounting Stipend at Solbridge International School of Business.