HOW SHOULD BRAND MANUFACTURER COOPERATE WITH INFLUENCER IN LIVE STREAMING E-COMMERCE?

With the flourishing of live streaming e-commerce, many brand manufacturers have sought to increase product sales and profits through live streaming. However, a high return rate, mainly caused by substandard product quality, is a thorny issue for the live e-commerce industry. In this study we develop game-theoretic models to explore the optimal cooperation strategies for a brand manufacturer and an influencer that improve profits and reduce the return rate by considering heterogeneous consumers’ purchase and return behaviour. We also conduct a sensitivity analysis on the proportion of followers and consumers’ sensitivity to product quality. In addition, we extend the models to explore other issues. We find that the cooperation between the influencer and brand manufacturer to improve product quality will lead to a lower return rate, and higher product quality, sales, and profits. Specifically, when the commission rate is relatively high and the percentage of the influencer’s quality investment is relatively low, both the brand manufacturer and influencer will gain more profits. When the influencer endogenously determines the quality of the product, quality cooperation increases the influencer’s profit but decreases the brand manufacturer’s profit. Long-term cooperation increases the influencer’s profit, while the impact on the brand manufacturer’s profit is influenced by the live streaming spillover effect.