46 / 2024-04-16 21:27:23

Live Stream Selling and Pay-What-You-Want Tips

live streaming, pay-what-you-want pricing, reciprocity, influencer marketing, behavioral economics

Live streaming influencers entertain viewers with various content to receive tips while also promoting and selling products on behalf of firms to earn commissions. We model the microfoundation of viewers' joint tipping and buying decisions to expose unique viewer behaviors and the implications for influencers and firms. Interestingly, we show that rational viewers often make seemingly irrational and impulsive purchases. Driven by their excitement for the live streaming content, viewers buy products that they would not buy in stores. Furthermore, tipping and buying are substitutes (complements) for viewers with a low (high) valuation of the product. These viewer behaviors have important supply-side implications: First, selling products in live streams can reduce the influencer's tip income, and thus only influencers with enough viewership should sell products. Second, live streaming prices should be lower than prices in stores. Third, the firm's profit initially increases but eventually decreases with the number of viewers, indicating that selling through mega influencers can backfire. Lastly, the influencer can bargain for a lower price to increase tip income. Price bargaining benefits not only the influencer but also the firm and viewers, resulting in a win-win-win outcome. Empirical evidence gathered from the analysis of 1.3 million TikTok live streaming sessions supports our theoretical findings.