Price and Quality Strategy in Live Streaming E-Commerce With Consumers’ Social Interaction and Celebrity Sales Agents

In the era of digital commerce, live streaming has tremendously changed the way retailers and marketers communicate with online customers. Consumers are increasingly keen on live streaming shopping. This study develops a game-theoretical model to analyze the optimal price and quality decisions of merchants in live streaming commerce. Specifically, it considers consumers’ social interaction effects caused by the celebrity sales agent (CSA) selling. The social interaction effects are classified into two types: the value-added effect (VAE) and the market expansion effect (MEE). This study also considers two quality schemes, namely, the responsible quality scheme (where the quality on the CSA channel is the same as that on the traditional online channel) and the discriminatory quality scheme (where the quality on the CSA channel is changed). The equilibrium outcomes of the two quality schemes are derived, and how VAE and MEE affect equilibrium outcomes in the two-period case is explored. The extended model studies the combined effect of VAE and MEE. Several insights are uncovered. First, MEE always generates reduced prices on the CSA channel, whereas VAE may increase the prices on the CSA channel. Moreover, merchants have incentives to decrease the quality level on the CSA channel. Finally, compared with the responsible quality scheme, the discriminatory quality scheme offers more benefits for merchants, but it does not increase consumer surplus. Considering MEE, the discriminatory quality scheme generates a high consumer surplus.