Going Live, Staying Hidden: How Streamers Exploit the Information Gap

 

Livestreaming platforms such as Twitch, YouTube Live and Kick have grown to where creators broadcast in real time to millions of viewers worldwide. However, beneath the entertainment lies a fundamental economic problem: asymmetric information, where there is an imbalance of information across participants in an economic transaction. In this blog, we explore three branches of this issue - principal-agent problem, moral hazard and adverse selection - within the livestreaming industry.

 

In 2024, a live stream by Johnny Somali sparked fierce criticism across South Korea. While visiting the country, he kissed a statue of a "comfort woman," widely perceived as an insult to the victims of Japan's wartime atrocities (BBC, 2026). While many have condemned this act as outrageous, an uncomfortable question has emerged: why do creators engage in such actions?

 

To answer this question, you must understand one economic concept: the principal-agent problem. Platforms like YouTube and Twitch act as the principal, while content creators serve as the agent. Ideally, both parties can benefit from working together: creators produce content, and platforms provide exposure and revenue.

 

However, their incentives often conflict. Creators are rewarded for generating short-term attention. Platforms, on the other hand, prioritise long-term goals such as user trust, brand reputation, and content that appeals to advertisers. This conflict of interest creates tension. While harmful content can damage a platform's image, it can also generate high engagement in the short term. Feelings of anger lead to increased view counts, higher engagement, and ultimately, greater revenue. Therefore, his immoral strategies could be seen as economically rational from a content creator's perspective.

 

Furthermore, creators are not the only ones bearing the full cost of such behaviour. The repercussions, including public backlash, cultural harm, and damage to reputation, often fall on the community and the platform. Because creators do not face commensurate consequences, they take greater risks. As long as revenue is tied to view counts and engagement, the incentive to push the boundaries will not disappear. Why don't platforms simply put a stop to such behaviour? Whilst it is possible to impose bans or suspensions, doing so strictly risks reducing content supply and user engagement.

 

Ultimately, this highlights a fundamental contradiction in the digital economy: while platforms rely on creators for user engagement, they cannot fully control their behaviour. As long as attention remains the primary currency and the incentive structure stays unchanged, controversial content will continue to proliferate. This stems from a broader issue of asymmetric information, moral hazard, a situation that arises when one party in an economic transaction cannot observe another party's behaviour, leading to one party taking on excessive risk (Goolsbee, 2024).

 

The mechanism for this starts with revenue, which is a product of views, donations, and subscribers. In this current media climate, the most effective way to stand out in streaming is to do things outside the norm: extreme stunts, large-scale activities, or controversial content driving viewership. However, some streamers take this to the extreme.

 

Take Twitch streamer Kai Cenat, one of the platform's biggest streamers, with 19.8M followers and a peak concurrent viewership of 1M. In 2023, he did a PS5 giveaway in New York, livestreaming the event (BBC, 2023). Due to a lack of planning and coordination with the city, thousands of people rampaged through Union Square, hurling bottles, stones, and tins of paint. This caused the NYPD to declare a level four mobilisation with one thousand officers dispatched, assaulting police and resulting in sixty arrests. This suggests that Kai Cenat’s marginal private benefit was high through global viewership of this event, but his marginal private cost was moderately low, such as soft legal consequences, despite inciting a riot. The main costs were imposed on the public through property damage and injuries, the police, emergency services, and the platform. In microeconomics, this is called negative externalities, from the production of the live-streamer. As streamers do not internalise these external costs, risky behaviour exceeds the socially optimal level where marginal social cost is greater than marginal private cost.

 

After discussing the streamers, let’s turn our attention to the products they sell during their livestreams.

 

Have you ever wondered whether the products promoted by liverstreamers are genuine? They appear convincing on screen, and the discounts seem too good to resist.

 

In fact, such doubts are justified. A report by Reuters states that live-stream shopping makes it more difficult to identify counterfeit or substandard goods, as real-time video and rapid transactions limit effective verification (Reuters, 2024). This can also be attributed to asymmetric information. In the livestreaming market, sellers and streamers often know more about the products themselves than consumers do.

Consequently, consumers rely more on signals such as the streamer’s reputation to judge product quality. However, this often does not reflect the true quality of the goods. Whilst some streamers might promote high-quality products to safeguard their reputation, most streamers are typically incentivised to promote best-selling products to maximise commissions, rather than to recommend genuinely high-quality products. As a result, low-quality products can exploit the streamer’s reputation to be presented as equally trustworthy.

 

From the consumer’s perspective, products begin to appear similar in quality. When consumers are unable to distinguish product qualities, they might assign a price based on their perceived average quality. This might result in an unfair price for high-quality sellers, leading these sellers to exit the market. Thus, the average quality of remaining products declines, consumers become willing to pay even lower prices, and more high-quality sellers are driven away. This is known as adverse selection, a situation where there are stronger incentives for “bad” types of a product to be involved in a transaction than “good” types of the product (Goolsbee, 2024).

 

Overall, the livestream platform can highlight how asymmetric information can distort incentives across a wide range of areas, from creators’ behaviour to product markets. Unless these information gaps and misalignments of incentives are addressed, the market will remain inefficient, with society bearing costs that benefit only individual streamers.

References

 

Ng, K. (2026). ‘Johnny Somali: South Korea jails US YouTuber for public nuisance’, BBC News, [online] 15 Apr, Available at: https://www.bbc.co.uk/news/articles/cj400lje9vxo (Accessed: 23 Apr 2026).

 

Kim, C. (2023). ‘Kai Cenat: Twitch streamer says he's "beyond disappointed" after New York riot’, BBC News, [online] 4 August, Available at: https://www.bbc.co.uk/news/world-us-canada-66466699 (Accessed: 3 April 2026).

 

Goolsbee, A., Levitt, S. and Syverson, C. (2024). Microeconomics. 4th edn. New York: Macmillan Learning. Kortext. Available at: https://read.kortext.com/reader/pdf/948705/ (Accessed: 25 Feb 2026).

 

McLymore, A. (2024). ‘Focus: ‘Livestream’ shopping thwarts some high-tech tools to stop fake merch’, Reuters, [online] 8 May, Available at: https://www.reuters.com/technology/livestream-shopping-thwarts-some-high-tech-tools-stop-fake-merch-2024-05-07/ (Accessed: 24 April 2026).