Optimal pricing and livestreaming selling decisions under duopoly competition: an influencer marketing perspective

Considering market competition, this paper explores the optimal pricing and livestreaming selling decisions of two competing brands from the perspective of influencer marketing. Given the role of social influencers in activating high-value consumers (or their followers), we develop a modified vertical differentiation model to explore the optimal pricing and livestreaming selling decisions of duopolistic brands. Then, we analyze the impacts of the optimal decisions on consumer surplus and social welfare. Lastly, we relax relevant assumptions to explore more generalised scenarios. We find that when both brands use the same livestreaming selling strategies, the low-quality brand's cost-free quality improvement may harm both the competitor and itself, but with livestreaming introduced, it may stop harming the competitor and boost its own performance. The stronger marketing capabilities of social influencers directly benefit partner brands and conditionally help competitors. As social influencers' marketing capabilities improve, both brands will successively encounter three different livestreaming sales scenarios. That is, from the scenario where no brand adopts the livestreaming sales mode, to the scenario where only a single brand adopts this mode, and finally to the scenario where both brands adopt this mode. Livestreaming selling erodes base consumers' welfare by raising prices and reducing demand, but it boosts consumer surplus by attracting high-valuation additional consumers and enhances overall social welfare by softening competition and expanding demand.