The key opinion leader introduction and pricing strategy for live streaming e-commerce platforms considering the impact of network effects

Abstract

Live streaming e-commerce, as an emerging form of social media and platform, is developing rapidly in recent years. To realize rapid growth in user base, some live streaming e-commerce platforms are devoted to release positive cross-side network effects (CNEs) by introducing a key opinion leader (KOL). However, the KOL's strong ability in generating contents and promoting products would cannibalize the viewership and sales of small and medium-sized live-streamers (SMLs), leading to detrimental same-side network effects (SNEs) that hinder the growth of the user base. In this paper, we consider the joint influence of CNEs and SNEs to investigate the KOL introduction strategy and pricing decision of live streaming e-commerce platforms, and analyze the impacts of the KOL introduction on platforms' equilibrium decisions and user participation. Our finding indicates that network effects significantly affect pricing strategy only when platforms introduce the KOL. In this case, it could be more advantageous for platforms to subsidize SMLs with weak CNE intensity while charging the KOL with strong CNE intensity. Moreover, our paper also reveals an interesting result. Although the platforms improve (reduce) the entry fee on SMLs, the access quantities of SMLs still increase (decrease) when the KOL entries. Finally, our analysis reveals that the platforms may introduce the KOL even though its negative SNE intensity on SMLs is strong, while may not introduce when its negative SNE intensity on SMLs is weak.