Influencer Marketing and Product Competition

59 Pages Posted: 7 Dec 2021 Last revised: 26 Jan 2024

See all articles by Lin William Cong

Lin William Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)

Siguang Li

Hong Kong University of Science and Technology, Guangzhou Campus, Society Hub

Multiple version iconThere are 3 versions of this paper

Date Written: December 1, 2023

Abstract

With the rise of social media and (live)streaming platforms, firms and brand owners increasingly depend on influencers to attract consumers, who care about both product quality and consumer-influencer interaction. Sellers thus compete in both influencer and product markets. We develop a theory to understand the influencer labor market and its interaction with product competition. We find: (i) more powerful influencers sell better quality products for sellers with weaker direct-sale capacity, facilitating seller competition; (ii) advances in the intermediation technology can lead to non-monotonic changes in influencers' payoff and income inequality; (iii) style pluralism mitigates market concentration by horizontally differentiating the consumer experience but serves as either complements (intermediate dispersion) or substitutes (small or large dispersions) to vertical product differentiation; and (iv) influencers may inefficiently under-invest in consumer outreach and unidirectional exclusivity can improve welfare in less competitive markets. Together, our findings highlight the novelty of the influencer economy and establish its theoretical baselines for future studies.

Keywords: Creator Economy, Digital Economy, Internet Celebrity, IO, Streaming.

JEL Classification: M31, M37, L11, L20, L51

Suggested Citation

Cong, Lin and Li, Siguang, Influencer Marketing and Product Competition (December 1, 2023). Available at SSRN: https://ssrn.com/abstract=3975727 or http://dx.doi.org/10.2139/ssrn.3975727

Lin Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://www.linwilliamcong.com/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Siguang Li (Contact Author)

Hong Kong University of Science and Technology, Guangzhou Campus, Society Hub ( email )

Room 508, Building W1, HKUST (Guangzhou campus)
Guangzhou, Guandong 510000
China

HOME PAGE: http://www.siguangli.com

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