Optimal manufacturer strategy for live-stream selling and product quality

Abstract

With the development of online platforms, live streaming has become an influential option for manufacturers' sales models. Manufacturers can choose to sell their products on their own or through live streaming platforms. Manufacturers' choices are influenced by their customer base choices. Customer groups have different valuations of products and different levels of patience (waiting costs). In this paper, we construct a two-period game model to analyze the impact of product quality on the sales patterns of manufacturers considering strategic customer behavior. We find that when product quality is relatively low, the manufacturer chooses the live streaming platform to sell the product in the early stage and chooses to sell the product directly in the later stage. When the quality of the product is relatively high, the manufacturer chooses to sell the product directly in both periods. Selling products through live streaming platforms leads to an upgrade in product pricing and may result in higher product pricing in the later period than in the earlier period. Furthermore, we analyze the impact of the manufacturer's livestreaming behavior on the firm's endogenous choice of product quality. We find that a manufacturer's short-term (one period) live streaming reduces product quality, while long-term (two periods) live streaming improves product quality.