EXPRESS: Commit on Effort or Sales? Value of Commitment in Live-streaming E-commerce

With rapid development of live-streaming e-commerce, an increasing number of firms are collaborating with live-streamers (e.g., online influencers, celebrities) to host online live-shows for selling their products. To reduce the firm’s risk and motivate it to stock more, live-streamers can commit a minimum sales volume and/or the effort devoted to attracting fans and promoting the upcoming live-show. In this paper, we study the roles of such sales and effort commitments on the performance of a “supply chain” in which a seller sells its product via a live-streamer. Product demand at the live-show is random while depending on the live-streamer’s pre-show effort and the seller needs to decide the amount of inventory for sale at the live-show. We consider three scenarios, in which the live-streamer makes sales-only, effort-only, and hybrid commitments, and compare the decisions and profits of both parties. We show that the commitment on sales volume or effort is mutually beneficial to the seller and the live-streamer. Nevertheless, either type of commitment can be more preferable to the live-streamer or the seller. Moreover, the hybrid commitment can motivate the seller to stock more inventory and induce more effort from the live-streamer compared to sales-only or effort-only commitment. The live-streamer always prefers the hybrid commitment whereas the seller may prefer the sales-only commitment, e.g., when the live-streamer pays a high penalty if failing to realize her commitment.