Exploring the Head Effect in Live Streaming Platforms: A Two-Sided Market and Welfare Analysis

TL;DR

This paper develops a theoretical framework to analyze the head effect in live streaming platforms, revealing how platform policies influence viewer concentration, content diversity, and social welfare, with implications for platform design and regulation.

Contribution

It introduces a comprehensive static and dynamic model of live streaming markets, highlighting the impact of platform policies on traffic concentration and welfare, and proposes targeted interventions to improve diversity.

Findings

Short-term utility benefits from viewership concentration.

Long-term diversity and welfare decline due to winner-takes-all dynamics.

Targeted policies can rebalance viewer distribution.

Abstract

We develop a comprehensive theoretical framework to analyze live streaming platforms as two-sided markets, focusing on the head effect where a small subset of elite streamers disproportionately attracts viewer attention. By constructing both static and dynamic models, we capture the interplay between network effects, content quality investments, and platform policies-such as commission structures and traffic allocation algorithms-that drive traffic concentration. Our welfare analysis demonstrates that although short-term consumer utility may benefit from concentrated viewership, long-term content diversity and overall social welfare are adversely impacted. Extensive simulations further validate our models and show that targeted policy interventions can rebalance viewer distribution and mitigate winner-takes-all dynamics. These findings offer actionable insights for platform designers and regulators in the digital economy.