This research project investigates the pricing dynamics and market perceptions of user innovations, focusing on the rapidly evolving computer games industry. As more consumers become innovators, understanding how they set prices and how these prices are perceived by buyers is critical. This project explores two key questions: How do consumer innovators determine the prices for their products? And how do these prices influence consumer perception and demand compared to firm-generated products?

In the first study, we analyze over 4,200 games on the Steam platform to understand the pricing strategies of consumer innovators. Our findings reveal that these innovators typically set lower prices than traditional firms, often prioritizing perceived value over cost. The second study delves into how these user-set prices are perceived by consumers, revealing that buyers tend to form lower reference prices for consumer-developed games and are less sensitive to price deviations compared to firm-generated products.

This research employs a mixed-methods approach, combining large-scale quantitative analyses with qualitative experiments. The implications are significant: consumer innovators can optimize their pricing strategies to enhance market success, while firms must recognize the competitive pressure from lower-priced, consumer-generated alternatives. Additionally, the findings provide valuable insights for digital marketplaces, suggesting that effectively communicating the consumer origin of products can positively influence buyer perception and demand.