How to ensure streamers tell the Truth? Compensation design for E-commerce streamers

Abstract

To address the moral hazard stemming from exaggerated product claims by streamers in live e-commerce, this study proposes a rational compensation mechanism aimed at incentivizing and guiding streamer behavior. The analytical framework integrates product return volume as a key parameter and employs mathematical modeling to systematically explore the dynamic interactions between two principal market participants: the company (as the employer) and the streamer. The model evaluates consumer purchasing decisions, company profitability, and streamer utility under two contrasting scenarios—exaggerated versus truthful product descriptions—and identifies the conditions under which streamers promoting low-quality products are incentivized to report product quality truthfully. Satisfying these conditions encourages streamers to prioritize honest communication. The findings demonstrate that for both experience goods and credence goods, a commission structure linked to product return volume can enhance sales effort—particularly when such effort effectively reduces return volume. Both sales-based and return-based commission schemes significantly influence streamer behavior during live streaming. Crucially, when the ratio of return-based to sales-based commissions falls below a certain threshold, streamers working with low-quality firms are more likely to provide truthful product information. These results offer theoretical guidance for firms to refine their streamer compensation strategies, promoting greater transparency and more sustainable practices in the live e-commerce ecosystem.