- Influencer Marketing
- Empirical Industrial Organization
Job Market Paper
Financial transactions are frequently involved in placing products in front of consumers. The party receiving such payments is often legally required to disclose them to consumers, but disclosure can be diminished. In some of these settings, theory predicts that disclosure can be costly and disruptive, yet voluntarily disclosure is chosen on occasion. I study why inﬂuencers disclose sponsorships and the impacts of disclosure regulation on Twitch.tv, the largest online video game livestreaming platform. Here, inﬂuencers can vary the degree (or prominence) of disclosure while still satisfying requirements. Revealed preferences for disclosure let me identify disclosure effects and mechanisms. Using a stylized model motivated by Spence (1978), I demonstrate that disclosure is a tool that inﬂuencers use to toggle mechanisms of advertising such as signaling. When nondisclosure happens, inﬂuencers forgo advertising mechanisms because beneﬁts from these mechanisms do not outweigh the incurred reputation costs. My descriptive evidence supports predictions generated from a separating equilibrium where inﬂuencers disclose “high” type sponsors to signal their reputation or quality and pool “low” type sponsors with organic content to mitigate “sellout” effects. I address shortcomings of the stylized model by building on its ﬁndings with a dynamic model of inﬂuencer sponsored content and disclosure choice. Enforcing strict disclosure would lead to a 16.5% decrease in sponsored content streams and a 0.67% increase in platform viewership even though the incidence of the “no stream” outside option increases. Inﬂuencers are unwilling to disclose low-type sponsorships and substitute away from these opportunities to organic content. If consumers prefer organic content over sponsored content, then a prominent disclosure policy improves consumers’ platform experience.