Deliberate shortage in live-streaming commerce

Abstract

Live-streaming commerce has gained significant traction in recent years as an additional channel employed by online retailers to engage consumers in real-time interactions. However, it is essential to highlight the growing prevalence of limited sales as a popular marketing strategy within these live-streaming channels, resulting in an inability to fulfill all consumer demands. Surprisingly, this phenomenon has gone largely unnoticed in previous literature. This paper aims to bridge this gap by delving into the impact of product shortages within the realm of live-streaming commerce. To accomplish this objective, we introduce a stylized model that captures the strategic interactions between online retailers and consumers within live-streaming channels featuring rationed product availability. Our findings reveal that the online retailer’s profit exhibits a unimodal trend concerning the quantity of products offered in the live-streaming channel when the product value falls within a non-extreme range. In simpler terms, deliberately limiting product availability in live-streaming commerce can lead to significantly higher profits, incentivizing retailers to implement rationing strategies. Moreover, contrary to conventional expectations that consumers anticipate a greater supply of products than the retailer intends to provide, we uncover that consumers expect a lower quantity when the potential product value is relatively small. Finally, our research highlights that while live-streaming channels attract consumers with high patience, encouraging their engagement, impatient consumers who favor traditional online channels may face long-term adverse effects due to the retailer’s strategic pricing response. We validate the robustness of our main findings by exploring various extensions, such as the influence of strategic waiting behavior, advertising effects and enhanced perceived product value.