In the past we have discussed playing RPGs, of course. We’ve also discussed reading RPGs, and collecting RPGs. One thing we haven’t discussed much, though, is buying RPGs. A tabletop roleplaying game is a creative work that can take up to hundreds of man-hours, not to mention the intellectual and emotional investment of almost everyone involved with bringing it to fruition. Despite this, there are plenty of people on the internet who deign to call RPGs overpriced. This is in spite of the fact that most indie RPGs cost $30 or less while D&D Monopoly, a monstrosity of branding that should pay me for having to know it exists, costs about $50.
The trouble with pricing is that people not trained in economics think it’s a science. I, however, am the Level One Wonk, with over five years of real actual economics experience and actual professional industrial economics training. All economics aligns to a popular aphorism by George Box: “All models are wrong, but some are useful”. The notion of an ‘invisible hand of the market’ is wildly incorrect, even something you consume every day, electricity, only can be sold in a carefully constructed market that is watched every day by engineers (and still fails wildly from time to time anyway). Similarly, creative goods, far from the ‘widgets’ of every dismal Econ 101 textbook, don’t follow nearly any of the rules proscribed by the masters of micro. So, in order to speak more clearly about RPG pricing, we’re going to talk about some of the economics that doesn’t really work for role-playing games, and then talk through some of the psychology that does.
Pricing, as an economics concept, is rooted in comparing what buyers are willing to pay for an item and what sellers are willing to accept as payment. These two concepts produce the backbone of undergraduate microeconomics, the ‘P-Q Chart’. P-Q charts, or price-quantity charts, are visual representations of the core problem microeconomics purports to solve: how much of something will be sold and for how much money.
Undergraduate level economics falls apart rather quickly in the real world, and digital goods, RPG PDFs included, handily demonstrate why. Digital media, including music, visual art, and games, fall into multiple economics corner cases that leave their price descriptions far outside what Econ 101 is capable of teaching. To defeat the classic P-Q chart, digital media is a perfectly unique good, with no direct substitutions. To blow past supply-side industrial economics, digital media has no marginal cost. Both of these are important to understanding why the concept of being ‘overpriced’ doesn’t apply to media in the same way it may apply to, say, a food item, or office supplies, or other goods sold in markets more accurately described with the microeconomic paradigm.
When I say digital media is a perfectly unique good, I simply mean that each individual piece of media, each song or book or game, is its own thing and has its own demand. When you want to buy Dungeons and Dragons, you do not necessarily want to buy, say, Forbidden Lands or Burning Wheel or any other fantasy RPG. You want Dungeons and Dragons. While there are specific circumstances where you may substitute one RPG for another, say in the week before a con game where you need anything at all to run for your time slot, for the most part consumers demand different RPGs completely independently from one another. The reason this is important is that substitutions, be they perfect substitutions (the exact same good or a good that does the same thing) or imperfect substitutions (a good that does some of the same things or does the same things but not as well) are one of the main groundings of how you discover price in a market.
Consider cars. As much as there is a massive Ford and Chevrolet rivalry, and many consumers claim that they would only buy one truck or the other, the fact is that the two have prices which are informed by each other. Cars in general have more constrained prices (mostly at the bottom end, because they are fairly expensive to produce), but the main thing keeping cars’ prices low and creating a notion of what a car is ‘worth’ is the rest of the market. A Subaru may have its price informed by the Honda or Toyota in the market not even directly, but instead incrementing higher for some reasons (like having all-wheel drive standard) and lower for others (like having interior design that is perceived as inferior by the automotive press). This doesn’t really work for RPGs. For one thing, the market can’t really agree on what ‘good’ looks like, and it’s difficult to find critical opinion that isn’t heavily couched in the reviewer’s play preferences. This means that, while a bad review could send the next Chrysler down a peg in MSRP, the same action doesn’t work for RPGs.
Digital media having no marginal cost is also important. A good’s marginal cost is the cost it takes to produce the next incremental unit. If we go back to cars, the marginal cost of a car may equal its variable cost, the cost of everything that must be consumed to make that car like steel and paint and electricity. At a certain point, though, that marginal cost will increase dramatically when an extra worker has to be hired or, in an extreme case, a new assembly line needs to be built. While in the classroom cost is depicted as a curve, the reality is that “cost curves” are mostly step changes, which industrial engineers and product planners examine closely for their employers. For a PDF, though, PDF copy #1 and PDF copy #10,000 cost the same amount to produce: nothing. Regardless of how much money and value (in the form of time) has been invested into a game, each incremental PDF costs nothing. This is also why businesses like DriveThruRPG structure their distribution pricing as a royalty percentage: Changing that marginal cost from zero would severely inhibit most designers from being able to move forward with selling their work.
Since the marginal cost of a game is zero, the amount sold has no bearing on pricing. The other constraint, revenue optimization, is something that designers could do but are generally hampered from doing. Revenue optimization is another exercise that, while it works in the classroom and for very specific types of goods, doesn’t work at all for creative goods. Revenue optimization depends on the concept of price elasticity. Price elasticity is the notion that as a price increases, a certain percentage of the market will no longer be willing to buy the good at that price (and that the reverse occurs if the price goes down). Goods can be inelastic, meaning it takes very large price changes to influence behavior, or highly elastic, meaning a slight change will produce a large change. If elasticity is able to be modeled or estimated, it’ll be possible to estimate the change in sales based on price changes. Price elasticity for RPGs doesn’t really exist, not in a usable way. What data that exists on pricing shows that demand changes from price changes are non-linear, arbitrary, and hard to predict. Some of this does have to do with the fact that RPGs are unique goods and completely discretionary purchases (i.e. the buyer doesn’t ‘need’ a game in the same way they’d need food, water, shelter, or healthcare). The rest, though, has to do with the psychology of RPG buyers, and the market opacity that makes these psychological tricks more effective.
Chances are, if your game is priced at $10 and you increase it to $20, sales will go up. Now, if this were consistent across all price points, then it would indicate that games are ‘Veblen Goods’, namely that they behave in a manner opposite what the supply and demand implies (the most prevalent type of rule in economics is one which proves basic economics wrong in certain circumstances). They are not; if you were to continue raising the price, then sales would go down in the manner we’d expect. But, there is a price point which, for certain length games, is more effective than lower price points. If the section heading didn’t imply this enough, the reason here is psychological. Game purchasers believe that cheaper games are less likely to be worth their time and more expensive games more so, and for PDFs this phenomenon centers around that $20 price point. Why $20? Probably just history. Historical memory for pricing is a bit problematic, as it doesn’t actually tell you anything about the value of the good and it tends to clash when there’s inflation, usually to the detriment of sellers. That said, it has a strong impact.
Historical memory is also the basis for why price complaints ratchet up significantly once you go beyond that $20 price point. This has almost nothing to do with the value of a digital game, and everything to do with the fact that that $30-40 range impinges upon the historical memory range for hardcover books. Some publishers use this to their advantage; the fact that Renegade Game Studios is pricing the Power Rangers PDF at $38 and the hardcover book at $55 is almost certainly to discourage people from buying the PDF. That $38 PDF ‘looks’ expensive, even though that $30-40 range is almost certainly a fair one for a professionally produced game, even in PDF.
Psychology is also why when games are labelled ‘free’ they’ll pretty much always move more copies than when they’re labelled ‘pay what you want’. The inability of the author to price their game discourages players from buying it. In fact, selling the game for $10 will make more money than Pay What You Want but it also may move more copies too. Setting a price does a lot to make a product look like it is worth buying.
This reveals an important fact about price complainers in reviews: they don’t have any quantitative basis to call a game ‘overpriced’. What they, an individual, can say is that they are unwilling to pay the listed price for that game. That’s fine; I won’t take a copy of Exalted Third Edition even for free but that doesn’t make it overpriced, it just means I’m not going to be a customer. The same goes for anyone who misuses the word overpriced in a review. Now, there are some cases where price can factor into a review. I tend to use price as a benchmark for my expectations of a trad game. I am more tolerant of typos and quality of art in a $20 PDF than a $40 PDF. I have much higher expectations for a supplement priced at $50 than at $30. When you’re looking at professionally published games as well as products that are not standalone, you begin to have the skeleton of what the car market has for pricing. When Edge Studio or Free League makes a supplement, there is a market expectation of what they can charge (and it’s wholly unsurprising that they tend to charge on the upper end of it). Professionally published games also have more substitutions, really.
This is a bit of a hot take, but I’d say that the games put out by Wizards, by Paizo, by Free League, by Modiphius and by others are more similar to each other and to their own product lines than many indie games are. If one of those companies really ratcheted up their prices, they’d need a good reason why. Indie games, on the other hand, at least the ones worth buying, tend to be more inventive and more unique. And the indie games that aren’t, that are still derivative and don’t present any new ideas, are likely also unpolished enough that they aren’t worth buying at all. That still doesn’t make them “overpriced”. The board game market is many times larger than the RPG market, and it’s driven by transaction prices that, for new games, are easily in the $80-100 range. D&D, the bestselling RPG in North America, has a complete transaction price of $150 (and even the Amazon prices still bottom out at $75), and refuses to provide a cheaper digital version. In addition to not having any solid quantitative basis, the comparable prices which exist indicate that a game capable of providing campaign play should easily be able to be sold for $50 or more. Arguments to the contrary (D&D has three books [at least one is redundant and there’s a lot of filler], hardcovers are ‘worth’ more [sales are slowly proving otherwise]) don’t have a strong economic basis.
The trouble with pricing is that economics works like primetime TV improv: everything’s made up and the points don’t matter. Once you get into a discussion of goods which don’t have quantifiable or logical demand, no amount of yelling makes microeconomic frameworks apply to them. This means that pricing an RPG, insofar as it has any rules at all, has to have rules based on experiences from that market specifically. When you consider sales volume, a fair assessment is that indie RPGs are usually priced too low, and mass market RPGs are usually priced either about right for what the market can bear or possibly a bit too high. What indie designers have to remember is (and I mean this in the best way possible) that they will never sell enough copies for it to matter what they price them at. If you’ve sold 1000 copies you’ve already exceeded the expectations of an indie designer fairly significantly…and at that $20 price point you’ve made maybe four months of a reasonable entry level salary (hopefully you didn’t have to pay for any editing or art or layout). The sales numbers which sustain a designer are high, and the numbers which make the whole thing ‘worthwhile’ as a full time job are higher still, think multiple releases all selling 3-5k each at a minimum. None of the chuds complaining about games being ‘overpriced’ on the internet matter or know what they’re talking about, and if you want to make a go at this, start at $20 and go up from there. If it’s a Kickstarter and the game isn’t finished, sure, start a bit lower. If it’s a zine or something quite short, only you know what you’re comfortable charging.
On the complete other hand, you the consumer have a right to determine whether or not you’re willing to pay a price point for any game. It’s perfectly OK to think that a game you read about isn’t worth the $20 it’s being sold for, even if you think some other game is. That’s how consumer choice works. What you shouldn’t do is mistake your consumer preferences for economic truths. This is barring the mass market; where there are rules and consistency and predictability, you can point out when someone is out of line. But even then, given how game design works and how economics works (or does not), it is not in the realm of an individual consumer, especially a biased individual consumer, to call any creative work ‘overpriced’.
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8 thoughts on “The Trouble with RPG Prices”
Good write-up. I have an M.S. in Applied Economics, I’ve worked as an economist in both the public and private sectors, and I’m a regular GM for RPGs as well.
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Oh nice! My MS is in engineering management but I worked in electric power market economics for five years. Actually rejoined energy finance and economics a few months ago, but focusing on energy storage. And yeah, in addition to writing about RPGs I do run a game regularly as well.
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My Master’s thesis was on the deregulation of electric power markets. I also worked for a public utilities commission and a municipal utility early in my career.
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Even more alignment! I’ve spent most of my career at research firms but was at an investor owned utility for about two years. At my first job I spent a lot of time specializing in capacity markets and now I’m diving deep into ERCOT and CAISO storage markets. Nice to hear from another RPG/energy nerd!
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Reblogged this on DDOCentral.
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Anyone who uses whose line to explain some aspects of econ is a true master in my book.
Signed – A behavioral economist
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