IDEAS home Printed from https://ideas.repec.org/a/spr/elcore/v25y2025i1d10.1007_s10660-023-09684-7.html
   My bibliography  Save this article

Proportional incentive contracts in live streaming commerce supply chain based on target sales volume

Author

Listed:
  • Yanfen Zhang

    (Donghua University)

  • Qi Xu

    (Donghua University)

Abstract

It is critical to investigate new contract cooperation mode to deepen the cooperative relationship between brand suppliers and streamers as the live streaming commerce industry is gradually approaching standardization. In this paper, we discuss the proportional incentive contract based on target sales volume and study contract design optimization based on principal-agent theory in the context of the live streaming commerce supply chain. Then we compare the incentive effect of the proportional incentive contract and the linear contract on the streamer’s sales effort. The results show that the optimal solutions of the proportional incentive contract exist under certain conditions and are the first-best solutions. In contrast, the linear contract cannot achieve the first-best solution. When the proportional threshold is less than a certain fixed value, the existence of the optimal proportional incentive contract can always be guaranteed, and there are multiple pairs of contract menus to make the contract reach the optimal state. Furthermore, while the fixed service fee and the commission rate in the proportional incentive contract both have an incentive effect on the streamer, only the commission rate does so in the linear contract. As a result, the proportional incentive contract can help the live streaming commerce supply chain system to achieve higher performance than the linear contract.

Suggested Citation

  • Yanfen Zhang & Qi Xu, 2025. "Proportional incentive contracts in live streaming commerce supply chain based on target sales volume," Electronic Commerce Research, Springer, vol. 25(1), pages 241-269, February.
    • Handle: RePEc:spr:elcore:v:25:y:2025:i:1:d:10.1007_s10660-023-09684-7
    DOI: 10.1007/s10660-023-09684-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10660-023-09684-7
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10660-023-09684-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wongkitrungrueng, Apiradee & Assarut, Nuttapol, 2020. "The role of live streaming in building consumer trust and engagement with social commerce sellers," Journal of Business Research, Elsevier, vol. 117(C), pages 543-556.
    2. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-641, June.
    3. Xianming Zhou & Peter L. Swan, 2003. "Performance Thresholds in Managerial Incentive Contracts," The Journal of Business, University of Chicago Press, vol. 76(4), pages 665-696, October.
    4. Can Sun & Yonghua Ji, 2022. "For Better or For Worse: Impacts of IoT Technology in e‐Commerce Channel," Production and Operations Management, Production and Operations Management Society, vol. 31(3), pages 1353-1371, March.
    5. Fangruo Chen & Guoming Lai & Wenqiang Xiao, 2016. "Provision of Incentives for Information Acquisition: Forecast-Based Contracts vs. Menus of Linear Contracts," Management Science, INFORMS, vol. 62(7), pages 1899-1914, July.
    6. Elisabetta Iossa & David Martimort, 2011. "The Theory of Incentives Applied to the Transport Sector," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 29, Edward Elgar Publishing.
    7. Ma, Xuejing & Wang, Zetao & Liu, Hongju, 2022. "Do long-life customers pay more in pay-what-you-want pricing? Evidence from live streaming," Journal of Business Research, Elsevier, vol. 142(C), pages 998-1009.
    8. Liu, Haoyu & Tan, Kim Hua & Pawar, Kulwant, 2022. "Predicting viewer gifting behavior in sports live streaming platforms: The impact of viewer perception and satisfaction," Journal of Business Research, Elsevier, vol. 144(C), pages 599-613.
    9. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
    10. Wang, Xin & Tao, Zhiying & Liang, Liang & Gou, Qinglong, 2019. "An analysis of salary mechanisms in the sharing economy: The interaction between streamers and unions," International Journal of Production Economics, Elsevier, vol. 214(C), pages 106-124.
    11. Hanyang Luo & Sijia Cheng & Wanhua Zhou & Sumin Yu & Xudong Lin, 2021. "A Study on the Impact of Linguistic Persuasive Styles on the Sales Volume of Live Streaming Products in Social E-Commerce Environment," Mathematics, MDPI, vol. 9(13), pages 1-21, July.
    12. Eun‐Soo Park, 1995. "Incentive Contracting Under Limited Liability," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 477-490, September.
    13. Sappington, David, 1983. "Limited liability contracts between principal and agent," Journal of Economic Theory, Elsevier, vol. 29(1), pages 1-21, February.
    14. Haoyu Liu & Shulin Liu, 2021. "Optimal decisions and coordination of live streaming selling under revenue‐sharing contracts," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(4), pages 1022-1036, June.
    15. Philippon, Thomas & Schnabl, Philipp, 2011. "Informational Rents, Macroeconomic Rents, and Efficient Bailouts," CEPR Discussion Papers 8216, C.E.P.R. Discussion Papers.
    16. Shijie Lu & Dai Yao & Xingyu Chen & Rajdeep Grewal, 2021. "Do Larger Audiences Generate Greater Revenues Under Pay What You Want? Evidence from a Live Streaming Platform," Marketing Science, INFORMS, vol. 40(5), pages 964-984, September.
    17. Kang, Kai & Lu, Jinxuan & Guo, Lingyun & Li, Wenlu, 2021. "The dynamic effect of interactivity on customer engagement behavior through tie strength: Evidence from live streaming commerce platforms," International Journal of Information Management, Elsevier, vol. 56(C).
    18. Tinglong Dai & Kinshuk Jerath, 2013. "Salesforce Compensation with Inventory Considerations," Management Science, INFORMS, vol. 59(11), pages 2490-2501, November.
    19. Park, Eun-Soo, 1995. "Incentive Contracting under Limited Liability," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 477-490, Fall.
    20. Oyer, Paul, 2000. "A Theory of Sales Quotas with Limited Liability and Rent Sharing," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 405-426, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhang, Yanfen & Xu, Qi & Zhang, Guoqing, 2023. "Optimal contracts with moral hazard and adverse selection in a live streaming commerce market," Journal of Retailing and Consumer Services, Elsevier, vol. 74(C).
    2. Yang, Xiaolin & Gou, Qinglong & Wang, Xin & Zhang, Juzhi, 2022. "Does bonus motivate streamers to perform better? An analysis of compensation mechanisms for live streaming platforms," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 164(C).
    3. Tinglong Dai & Kinshuk Jerath, 2019. "Salesforce Contracting Under Uncertain Demand and Supply: Double Moral Hazard and Optimality of Smooth Contracts," Marketing Science, INFORMS, vol. 38(5), pages 852-870, September.
    4. Yi He & Lidong Chen & Jingjing Mu & Azmat Ullah, 2024. "Optimal contract design for live streaming shopping in a manufacturer–retailer–streamer supply chain," Electronic Commerce Research, Springer, vol. 24(2), pages 1071-1093, June.
    5. Inés Macho-Stadler & David Pérez-Castrillo, 2018. "Moral hazard: Base models and two extensions," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume I, chapter 16, pages 453-485, Edward Elgar Publishing.
    6. Kräkel, Matthias & Schöttner, Anja, 2016. "Optimal sales force compensation," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 179-195.
    7. Doug J. Chung & Thomas Steenburgh & K. Sudhir, 2014. "Do Bonuses Enhance Sales Productivity? A Dynamic Structural Analysis of Bonus-Based Compensation Plans," Marketing Science, INFORMS, vol. 33(2), pages 165-187, March.
    8. Jian Chen & He Huang & Liming Liu & Hongyan Xu, 2021. "Price Delegation or Not? The Effect of Heterogeneous Sales Agents," Production and Operations Management, Production and Operations Management Society, vol. 30(5), pages 1350-1364, May.
    9. Qiang Wang & Nenggui Zhao & Xiang Ji, 2024. "Reselling or agency selling? The strategic role of live streaming commerce in distribution contract selection," Electronic Commerce Research, Springer, vol. 24(2), pages 983-1016, June.
    10. Zhaolin Li & Samuel N. Kirshner, 2021. "Salesforce Compensation and Two‐Sided Ambiguity: Robust Moral Hazard with Moment Information," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 2944-2961, September.
    11. Tinglong Dai & Kinshuk Jerath, 2016. "Technical Note—Impact of Inventory on Quota-Bonus Contracts with Rent Sharing," Operations Research, INFORMS, vol. 64(1), pages 94-98, February.
    12. Anja Schöttner, 2017. "Optimal Sales Force Compensation in Dynamic Settings: Commissions vs. Bonuses," Management Science, INFORMS, vol. 63(5), pages 1529-1544, May.
    13. Binqing Xiao & Wenqiang Xiao, 2020. "Technical Note: Optimal Salesforce Compensation with Supply–Demand Mismatch Costs," Production and Operations Management, Production and Operations Management Society, vol. 29(1), pages 62-71, January.
    14. Tinglong Dai & Kinshuk Jerath, 2013. "Salesforce Compensation with Inventory Considerations," Management Science, INFORMS, vol. 59(11), pages 2490-2501, November.
    15. Alida Volkmer, Sara & Meißner, Martin, 2024. "Beyond livestreaming: The rise of social media gifting and paid memberships − A systematic literature review and future research agenda," Journal of Business Research, Elsevier, vol. 185(C).
    16. Ulbricht, Robert, 2016. "Optimal delegated search with adverse selection and moral hazard," Theoretical Economics, Econometric Society, vol. 11(1), January.
    17. Leon Yang Chu & David E.M. Sappington, 2009. "Implementing high‐powered contracts to motivate intertemporal effort supply," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 296-316, June.
    18. Zhang, Yanfen & Xu, Qi, 2024. "Consumer engagement in live streaming commerce: Value co-creation and incentive mechanisms," Journal of Retailing and Consumer Services, Elsevier, vol. 81(C).
    19. Kadan, Ohad & Swinkels, Jeroen M., 2013. "Minimum payments and induced effort in moral hazard problems," Games and Economic Behavior, Elsevier, vol. 82(C), pages 468-489.
    20. Leon Yang Chu & Guoming Lai, 2013. "Salesforce Contracting Under Demand Censorship," Manufacturing & Service Operations Management, INFORMS, vol. 15(2), pages 320-334, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:elcore:v:25:y:2025:i:1:d:10.1007_s10660-023-09684-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.