Consumer preferences for network liquidity and opponent quality in online poker

ABSTRACT Several online gambling platforms use marketplace business models where the operator facilitates wagers between players instead of directly banking games. There is a large theoretical literature on marketplace business models, but there is little empirical evidence that suggests how it may apply to gambler preferences or behavior. This study contributes to the understanding of consumers in gambling markets by testing multi-sided market theory in online poker. Using data collected from a diverse sample of online poker players (n = 719), this study empirically demonstrates how players value game availability and product quality. Our results show evidence of diminishing marginal returns to scale and benefits from product differentiation across a range of conditions found in the market. Consumers prefer that operators grow their networks when size is sufficiently small but would prefer more focus on the types of players added to games as the network grows. From a policy perspective, these findings provide support for using multi-sided market theory as a framework for taxation and licensure in gambling products.