Discount preannouncement in the digital supply chain era

Abstract

Digital technologies enable new business models to promote products. One example is livestreaming commerce where consumers can choose whether to engage in livestream and purchase immediately or playback and purchase later. Such strategic decision of consumers on purchasing challenges the manufacturer's decision on price discount and the influencer's decision on discount preannouncement. We consider a supply chain in which a manufacturer resorts to an influencer who can strategically preannounce the discount in price (set by the manufacturer) before the livestream. The consumers purchase products through either the livestream or the playback, and they differ in their valuations of the product and time sensitivities. Results deliver several novel findings. First, discount preannouncement may prohibit consumers from watching the livestream when the market expansion effect is less significant and the commission rate is low. Second, the manufacturer gives no discount for products sold in the livestream when the regular price is low. This decision is regardless of whether the influencer preannounces the discount or not. As the regular price increases, the manufacturer sets a regular price-related discount to induce more consumers to purchase from the livestream. Third, a higher regular price coupled with a higher market expansion effect drive the influencer to have more incentives to preannouncing the discount. Whereas, a higher commission rate prevents the influencer from preannouncing the discount. Fourth, the manufacturer, in optimality, sets a regular price that entices the influencer to preannounce the price discount when the market expansion effect is significant.