Demand for in-app purchases in mobile apps -- A difference-in-difference approach

Andreea Enache (Stockholm School of Economics)
Richard Friberg (Stockholm School of Economics)
Magnus Wiklander (MAG)

Abstract

Using five “freemium” mobile app games on six European markets we examine the effect of price changes on conversion rate, number of users and viewing of rewarded videos. Our difference-in-difference estimation relies on games being available on both the Apple and Google platforms with price changes on only one platform. Our main identification comes from exogenous adjustments of Apple’s prices in 2021. Own-price elasticities of conversion are in the -1 to -4 range. Watching of rewarded videos decreases as in-app prices decrease with an average elasticity of around .5, but overall play is not affected by changes in in-app prices.