Blockchain adoption in a supply chain system to combat counterfeiting

Abstract

The ongoing boom in platform retailing has been accompanied by widespread counterfeiting. Blockchain technology has attracted much attention as a way to combat this practice. We consider a supply chain system consisting of one brand seller, one counterfeiter and one platform retailer and examine how blockchain adoption affects the decisions of firms in this system and the performance of the whole system. We show that the platform’s use of blockchain reduces both products’ selling price and increases the brand seller’s demand while also increasing the counterfeiter’s demand under certain conditions when a wholesale contract is adopted. Moreover, we find that blockchain technology could be an effective anticounterfeit tool but that the platform does not always use it, even if its implementation is costless. The platform is more willing to use blockchain when imitation good’s quality is relatively low, and an agency contract can better incentivize the platform to deploy blockchain than a wholesale contract if the commission fee is large. Finally, consumer surplus and social welfare may decrease after the platform adopts blockchain, but the whole supply chain system can perform better through the platform’s blockchain implementation if the imitation good’s quality and consumers’ trust in the platform are low.