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Sure, the cost of making games has gone up, but the price is really determined by how many consumers are interested in gaming. It's weird that we discuss this price tag going up, but yet (at least from my perspective), the cost of games has been on a downward trend, many being free to play.

That's just based on what I have noticed. But that doesn't answer your question.

I own double or triple copies of quite a few games, so I have had no issues in dropping $120 for a game at launch. If all games were priced at $120, I would buy fewer games, that's for sure, but it would be hard to pass up on Zelda's and Mario's. If there were a modest increase, like $60 -> $65, or $60 -> $70, it would likely not impact my purchase.