Manufacturer encroachment through live streaming considering consumer disappointment aversion

Abstract

Live streaming (LS) sales are increasingly popular, leading many manufacturers to adopt the LS channel to encroach on the online market. Three characteristics of the LS channel are identified: (1) Real-time interaction reduces product matching uncertainty. (2) The increase in product matching probability mitigates consumer disappointment aversion (CDA). (3) Increased entertainment and trust enhance consumers valuation of products. Considering a supply chain that includes a manufacturer and an online retailer, we investigate the manufacturer’s LS channel encroachment strategies for both centralized and decentralized scenarios. We find that LS channel encroachment always occurs in the centralized scenario but may not necessarily take place in the decentralized scenario. Specifically, if CDA intensity is strong and product matching probability is small, the manufacturer adopts replacement encroachment. If product matching probability is moderate, the manufacturer employs competition encroachment. However, if product matching probability is large and LS’s valuation enhancement effect is low, the manufacturer avoids encroachment in the centralized scenario but chooses threatening encroachment in the decentralized scenario. Finally, although CDA can promote encroachment, it always makes the manufacturer worse off. Intuitively, CDA weakens the online retail channel’s competitiveness, thereby harming the retailer. However, our study reveals an interesting finding: When product matching probability is sufficiently large and LS’s valuation enhancement effect is low, CDA makes the retailer better off.