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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2022 Annual Theme: Stakeholder Capitalism
Market-Based Solutions to Vital Economic Issues
Jan 5, 2020

Do Larger Audiences Generate Greater Revenues under Pay What You Want? Evidence from a Live Streaming Platform


As live streaming of events (e.g., video games, political commentary, and makeup tutorials, among others) gains traction, pay-what-you-want (PWYW) pricing strategies are emerging as critical monetization tools. In this research, we assess the viability and efficacy of PWYW by examining the relationship between popularity (i.e., audience size) of a live streaming event and the revenue it generates under a PWYW scheme. On the one hand, increasing audience size may enhance voluntary payment/tips if social image concerns are important, because larger audiences amplify the utility pertaining to social image. On the other hand, increasing audience size can reduce tips if gaining broadcaster attention motivates tipping because larger audiences are associated with fiercer competition for attention. To examine these trade-offs in the relationship between audience size and revenue under PWYW, we manipulate audience size by exogenously adding fake viewers (with a control condition with no fake viewers) across broadcasters of live streaming shows on a platform in China. Furthermore, the experiment introduces randomization within live streaming sessions of each broadcaster, in which the number of fake viewers added at every minute (where a session is approximately an hour long) is randomly drawn from a distribution related to the audience size manipulation for the broadcaster. The results indicate an inverted U-shaped relationship between audience size and average tip per viewer, suggesting the coexistence of social image concerns and attention seeking for tipping. Adding fake viewers also increases the number of real viewers, which provides evidence of herding. Thus, social image concerns, attention seeking, and herding combine to yield an overall positive and nonlinear causal effect of audience size on tipping revenues. Adding one additional viewer improves the tipping revenue per minute by approximately 0.01 Yuan (1% of the mean level). Furthermore, famous female broadcasters who use recognition-related words frequently during the event benefit the most from an increase in audience size. Overall, the results show that revenues under PWYW do not scale linearly and support the relevance of social image concerns in driving individual payment decisions under PWYW.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.

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