Retail competition in the era of live streaming: multi-channel pricing and consumer surplus

Live streaming has rapidly become a major force in e-commerce, providing retailers with a new channel for aggressive promotions and differentiated pricing. This paper investigates its impact on retail competition between a traditional offline retailer and an e-tailer that operates both regular and live-streaming channels with differentiated pricing. We develop a game-theoretic model that incorporates consumer segmentation, channel competition, and demand expansion driven by live streaming. Our analysis shows that live streaming shifts demand toward the e-tailer and intensifies price competition, often forcing the offline retailer to decrease prices and lose profit. However, the e-tailer does not always benefit. Moderately effective live streaming can boost profits by expanding demand, whereas highly effective live streaming can trigger intense price competition and erode profits. Furthermore, live streaming increases total consumer surplus, with the distribution of surplus gains between online and offline consumers depending on consumers’ participation level in live streaming.