Are Video Game Industry Revenues Recession-Proof?

The aim of this thesis is to evaluate the hypothesis of whether the videogame industry is „recession-proof“, based on its revenues. This hypothesis was put forward by many leading economic publications during the times of the Great Recession. For this purpose, author utilizes concepts from the fields of business cycle theory and neoclassical economics such as innovation, competition, technological advancement, income and substitution effects etc. Theoretical foundation is further supported by concepts from behavioral economics, including the sunk costs fallacy, anchoring and present bias. Based on these terms, a unified theoretical framework is presented, that could explain the possible resiliency of revenues against recession within the US videogame market. Thesis further includes theoretical models, which in author’s view shed light on some of the processes that create the unique character of the videogame industry. In the empirical part of this essay, the fundamental hypothesis is tested via regression analysis, taking advantage of the OLS method. To achieve this, both global and US videogame sector revenue data between 1971-2022 is used. Based on empirical analysis, the null hypothesis was not rejected, therefore US video game sales do exhibit signs of resiliency toward recessions. This conclusion is in line with some of the previous studies on the matter.