Signaling Quality with Live Streamers : The Role of Platform Regulation

Live streaming commerce (LSC) has been booming recently, especially during the COVID-19 outbreak. However, negative news about live streamers also accompanies the boom. Does the LSC platform have incentives to regulate live streamers? Can firms on the platform signal product quality through live streamers? We construct an analytical model based on signaling theory to answer the above questions. Unlike traditional signaling games, our model incorporates the interaction between consumers and live streamers, and the signaling costs also relate to the extent to which the platform regulates live streamers. Results indicate: (1) Strict regulation on live streamers can be a dominant strategy for the platform if more consumers interact with live streamers. Low marginal costs for regulation do not necessarily induce the platform to regulate live streamers rigorously, especially when there is a lack of interaction between consumers and live streamers. (2) When consumers do not consider the interaction with live streamers, the firms cannot convey informative messages if the platform heavily regulates live streamers. (3) When consumers accept LSC and can participate in the live streaming if they find the live streamers attractive, the separating equilibrium requires strict regulation. Our paper contributes to LSC and signaling theory literature and provides practical guidance on platform regulation