How to stand out in the “lemon market”? application of signaling theory in live streaming commerce

¹ College of Business and Economics, Australian National University, Canberra, ACT, Australia
² College of Engineering and Computer Science, Australian National University, Canberra, ACT, Australia
³ School of Communication, Fujian Normal University, No. 8, Xuefu South Road, Minhou Town, Fuzhou, China

^* Corresponding author: moli@fjnu.edu.cn

Abstract

Live streaming commerce innovatively combines e-commerce and live streaming, and it is booming. However, like traditional e-commerce, live streaming commerce is facing challenges from “lemon market”. The article applies signaling theory from a perspective of game theory and finds that high-quality sellers can stand out in the market by releasing two kinds of additional signals, which are signals that increase cost and signals that increase risk, and proposes relevant research hypotheses. Then, the researcher designs an experiment to explore how the additional signals affect the audiences’ purchase intention. The data collected shows that additional signals increasing cost can improve audiences’ purchase intension through improving the product quality and sellers’ credibility perceived by the audience while additional signals increasing risk cannot achieve the same effect. At the end, possible explanations for the unproven hypothesis and further research directions are provided.