Hunger Gaming

Thursday, October 19, 2017

When the augmented reality (AR) game Pokémon Go made its debut in 2016, it quickly became the most popular mobile game in U.S. history with more than 20 million active users daily. It’s now at the top of the menu in an industry that last year generated more than $1 billion in revenues. According to research from Purdue University’s Krannert School of Management, however, tech companies aren’t the only businesses getting a taste of the profits.

The study, titled “The Impact of an Augmented Reality Game on Local Businesses: A Study of Pokémon Go on Restaurants,” was coauthored by Krannert PhD student Vandith Pamru; Karthik Kannan, Purdue’s Thomas Howatt Chaired Professor in Management; and Warut Khern-am-nuai, who earned both his master’s and doctoral degrees at Purdue’s Krannert School and is now an assistant professor at McGill University’s Desautels Faculty of Management.

“As an AR-based game, Pokémon Go incentivizes users to move around in the physical world and visit PokéStops as they play,” Pamru says. “We wanted to explore if virtual world incentives are strong enough to create business implications in the real-world.”

The researchers considered restaurants as the representative set of businesses and used online reviews as the measure for footfall and quality perception.

“Using data collected from a leading online review site for food businesses, we employ difference-in-difference methodology to answer the question,” Pamuru says. “The setting was a straightforward choice because not all businesses have PokéStops near them.”

Pamru and his colleagues found that restaurants located near PokéStops observed a higher number of customers compared to restaurants that do not have PokéStops nearby. However, there was no significant difference in terms of the perception of customers between restaurants with PokéStops nearby and those without.

Pamru says the research will contribute to the field of economics of information systems by establishing the theoretical connections between the AR technology and consumer economics behavior.

“From a managerial perspective, it also will help businesses develop appropriate policies to govern potential gaming partnerships by providing empirical insights on the economic implications of such associations.

An electronic copy of “The Impact of an Augmented Reality Game on Local Businesses: A Study of Pokémon Go on Restaurants” is available at https://ssrn.com/abstract=2968221.