Optimal contracts with moral hazard and adverse selection in a live streaming commerce market |
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| Affiliation: | 1. Glorious Sun School of Business and Management, Donghua University, Shanghai, China;2. Supply Chain and Logistics Optimization Research Centre, Department of Mechanical, Automotive & Materials Engineering, University of Windsor, Windsor, Ontario, Canada;1. Department of Marketing, Stetson-Hatcher School of Business, Mercer University, Macon, GA, 31207, USA;2. Department of Marketing, Arthur J. Bauernfeind College of Business, Murray State, Murray, KY, 42071, USA;3. Department of Marketing, College of Business, Bryant University, 1150, Douglas Pike, Smithfield, RI, 02917, USA;4. Department of Marketing and Supply Chain Management, Fogelman College of Business and Economics, University of Memphis, 3675 Central Ave, Memphis, TN 38152, USA;1. School of Management, Shandong University, Jinan, 250100, China;2. School of Business, Qingdao University of Technology, Tsingtao, 266071, China;1. Swinburne University of Technology, Australia;2. Charles Sturt University, Australia;1. School of Economics & Management, Southwest Jiaotong University, Chengdu 610031, Sichuan, China;2. Antai College of Economics & Management, Shanghai Jiao Tong University, Shanghai 200052, China;1. Department of Clothing and Textiles, Hanyang University, Seoul, Republic of Korea;2. School of Fashion and Textiles, The Hong Kong Polytechnic University, Hong Kong;3. Center for Happiness Studies, Seoul National University, Seoul, Republic of Korea |
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| Abstract: | Live streaming commerce, as a new online selling channel, is increasingly gaining popularity and creating a vast market worth. Many brand suppliers are entrusting streamers to recommend their products via this channel. However, the cooperation between brand suppliers and streamers may not always achieve a win-win situation due to moral hazard and adverse selection problems, which has largely been ignored in previous studies. To address this gap, we develop two game models based on the Principal-agent theory to design incentive contracts under the streamer's influence and recommendation effort information asymmetry and investigate the price discount decisions in a live streaming commerce supply chain. The findings revealed that the equilibrium contracts depend on the prior beliefs that the brand suppliers hold on the streamers' influence. The information rent held by the high-influence streamers is unavoidable because of the information gap between the brand suppliers and streamers. Under double information asymmetry, brand suppliers maintain the unit commission and price discount for high-influence streamers unchanged while decreasing the unit commission and increasing the price discount for low-influence streamers. An important implication for brand suppliers is that they can obtain more benefits by cooperating with high-influence streamers who require low-price discounts. |
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| Keywords: | Live streaming commerce Price discount Moral hazard and adverse selection Contract design Information asymmetry |
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