Strategic implications of consumer overconfidence for pricing and live-streaming in a platform service supply chain

Abstract

This paper investigates how consumer overconfidence affects pricing and live-streaming decisions within a Platform Service Supply Chain (PSSC) and examines the effects of decision timing on the profitabilities of both the Service Provider (SP) and the online Platform Retailer (PR). Specifically, we explore the SP-led, PR-led, and same-time decision timing scenarios. The research findings reveal that consumer overconfidence and decision timing significantly impact firms’ pricing and live-streaming decisions. In particular, the SP-led decision timing always yields the highest profit for the SP. By contrast, the PR achieves the highest profit under the SP-led decision timing when consumer overconfidence is sufficiently low, and achieves the highest profit under the PR-led decision timing when consumer overconfidence is higher. This suggests that the first-mover advantage is not universally applicable, which diverges from conventional wisdom. Moreover, we demonstrate that both the PSSC and consumers benefit the most under the SP-led decision timing when consumer overconfidence is lower, whereas the same-time decision timing brings the highest profits and surplus for them as consumer overconfidence increases. Importantly, this paper proposes innovative coordination mechanisms to enhance the profits of all chain members and achieve optimal PSSC performance.

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