Strategic live streaming choices for vertically differentiated products

Live streaming as a new shopping channel can disclose revealing information on quality preference. With this channel, viewers can obtain additional product details along with entertainment utility from streamers' product showcasing. This paper examines live streaming strategies for vertically differentiated firms that sell products of high or low quality. We obtain the optimal pricing strategies for the high-quality, low-quality firms under a particular live streaming strategy (i.e., (N,N); (S,N); (N,S); (S,S)). We identify how the competing firms should set their live streaming strategies. As the entertainment value increases, firms with a competitive edge are more willing to adopt live streaming. If the “quality-adjusted cost” is lower than 12, then the high-quality firm is prone to adopt live streaming; otherwise, the low-quality firm is prone to adopt live streaming. The entertainment value greatly influences the adoption decision. When the streamer is more popular and charges a medium fixed cost, the competitive firm (i.e., small marginal cost, high quality) should adopt live streaming to expand its marketplace. The other firm should refuse live streaming and emphasize improving its product quality and competitiveness. Interestingly, live streaming is not always beneficial to firms when the competitive advantages dominate the impact of live streaming and the informative degree is improved little.