Contracting in live streaming e‐commerce retailing under dual information asymmetry: the role of competition

Abstract In the live streaming e‐commerce market, heterogeneous live streamers compete over a cooperation contract to promote a manufacturer's product interactively. Considering the small live streamer's selling ability information and the manufacturer's product quality information are private, we develop a principal–agent model to screen the private information. Since the big live streamer is stronger while the small live streamer is weaker than the manufacturer, the contract decision authority of the manufacturer (i.e., the principal) would shift to the big live streamer when cooperating with the big live streamer (i.e., the agent). After analyzing the impacts of competition and information asymmetry on the manufacturer, we find that information advantage could hurt the high‐quality manufacturer in some conditions, which is contrary to the common sense that information advantage always generates non‐negative information rent for its owners. Moreover, with the increase of quality differentiation, the manufacturer first suffers greater losses and then suffers smaller losses and then benefits more revenues and then benefits less revenues from its information advantage under a low‐commission separating strategy. In addition, we find that the manufacturer can benefit from the competition among heterogeneous live streamers. The higher the quality of the manufacturer, the more capable they are of benefiting. This result underscores the urgency for manufacturers to cultivate their own live streamers to compete with the big ones in practice.