Channel strategies for competing retailers: Whether and when to introduce live stream?

Abstract

Live stream channel expands consumer awareness and resolves consumer valuation uncertainty. However, its public accessibility may trigger consumer freeriding (watching the live stream introduced by one retailer but buying from the other). This study examines the impacts and strategies of live stream channel introduction for competing retailers. The live stream may not increase the introducer's demand or benefit the retailer with freeriding consumers. The equilibrium strategy regarding who introduces the live stream channel, i.e., NN (no retailer introduces), LN/NL (one retailer introduces), and LL (both retailers introduce), depends on the commission rate and mismatch cost. Specifically, in the symmetric products case, a moderately high mismatch cost leads to LL equilibrium. A high (moderately low) mismatch cost and a high (low) commission rate lead to NN equilibrium; otherwise, LN/NL equilibrium occurs. In the asymmetric products case, the retailer of the high-fit product is more likely to introduce a live stream channel. Interestingly, the retailers may be trapped in a prisoner's dilemma under a low mismatch cost. Nonetheless, the likelihood of a prisoner's dilemma decreases if the live stream improves consumer valuation. Furthermore, an endogenous commission that guarantees the live stream channel introduction can prevent the prisoner's dilemma in the symmetric products case.