A double-edged sword? Information externalities and channel conflict in live-streaming retailing

Abstract

The booming live-streaming retail has transformed consumer buying behavior and commercial business models. However, existing research pays limited attention to live-streaming unique attributes and rarely explores how information externalities and purchase costs affect dual-channel equilibrium. This study aims to investigate their joint impacts on pricing, profit and channel coexistence decisions. This paper builds a Stackelberg game model for a manufacturer running traditional offline and live-streaming dual channels. Based on consumer utility maximization, we derive equilibrium solutions through backward induction and adopt numerical sensitivity analysis to verify theoretical results. Information externalities exert an inverted-U effect on the traditional channel's profit within the dual-channel system and yield significant positive benefits only when consumers' live-streaming preference and purchase costs are both moderate. Higher live-streaming purchase costs consistently reduce profits of both channels. We further identify threshold conditions for profitable dual-channel coexistence and derive optimal pricing strategies. This study enriches the theoretical understanding of live-streaming inherent characteristics. It provides practical operational guidance for manufacturers to balance offline and live-streaming businesses and stabilize wholesale pricing under low purchase cost scenarios.