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Why dropping a game's price by $10 can sometimes triple its revenue.
Price elasticity describes how sensitive game sales are to price changes. Games are highly elastic products because there are always alternatives. A $60 game competing against free-to-play titles needs to justify every dollar. Steam sales proved that dramatic price drops generate more total revenue than full-price sales for most titles, because the volume increase more than compensates for the lower per-unit revenue. This is also why the $70 standard for new games is so controversial, because every dollar increase pushes more players to wait for a sale.
Example
Steam's seasonal sales routinely see games at 75% off outsell their launch week by multiples. The psychology is powerful: a $60 game at $15 feels like a steal even if you never play it. Helldivers 2 launched at $40 instead of the new $70 AAA standard and became one of 2024's best-selling games, proving that a lower price point can generate more total revenue.
Why it matters
Price elasticity shapes the entire game retail ecosystem, from Steam sale timing to the shift toward subscriptions. Understanding it explains why games lose value so quickly compared to other entertainment, and why the race to the bottom in pricing puts constant pressure on developers.
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