When should manufacturers introduce live broadcast channels? Impact of asymmetry network externality

Abstract

The emergence of new distribution channels presents both opportunities and challenges for manufacturers. We compare the live broadcast dual channel with the agency dual channel in the presence of information symmetric and information asymmetric of network externalities. Our analysis shows that the manufacturer's optimal channel strategy is related to the network externality, the proportion of potential consumers in the direct channel and spillover effects. The manufacturer may adopt the live broadcast channel only if the proportion of potential consumers is small and the network externality is strong. Moreover, stronger positive spillover effects will incentivize the manufacturer to choose the live broadcast channel, while stronger negative spillover effects will drive the manufacturer to use the agency channel. This suggests that the direction of spillover effects also affect manufacturers' preferences. By comparing profits under different information structures, we show that the asymmetry of network externality can weaken the manufacturer's incentives to adopt the live broadcast channel. These new findings underscore the need for manufacturers to take various factors into account when selecting a distribution channel. These findings offer novel insights into the adoption of the live broadcast channel by manufacturers.