560 / 2024-04-25 22:39:45

Top or regular influencer? Contracting in live-streaming platform selling

live-streaming,influencer,sale effort,contract,signaling

We analyze the contracting problem of a manufacturer who sells a product through an influencer on a live-streaming shopping platform. There are two types of influencers: regular and top. The regular influencer has less bargaining power and charges a per-unit commission. However, with more bargaining power, the top influencer can demand a fixed payment besides a per-unit commission. After contracting on commission, the manufacturer sets the retail price, and the influencer of either type exerts sales effort, which may or may not be specified in the contract. Influencers have an informational advantage about the product demand. The manufacturer, without direct access to the demand information, tries to infer it from the decisions of the influencer, which results in a signaling game.  We build a game-theoretic model. We build a game-theoretic model. We find that when contracting with a regular influencer, specifying effort benefits the influencer, reduces actual effort, and decreases the manufacturer's profit and system efficiency compared to when not specified. In contrast, when contracting with a top influencer, specifying effort in the contract increases the influencer's effort, increases demand, does not affect the manufacturer's profit, and benefits the influencer compared to when not specified. In summary, the manufacturer should not (resp., should) specify effort in the contract when collaborating with a regular (resp., top) influencer. Comparing the two settings, we find that contracting with a top influencer (without specifying effort) increases the system efficiency by lowering commission and increasing effort, and decreases the manufacturer's profit compared to when specified. We show that manufacturers should not mindlessly pursue collaborations with top influencers. Additionally, manufacturers should contract with regular influencers without specifying effort to increase their profit and the system efficiency. By contrast, manufacturers should specify effort when contracting with a top influencer, leading to a Pareto-optimal outcome for both parties.