Combating counterfeits with the Blockchain-technology-supported platform under government enforcement

Abstract

The intrinsic value of brand names has led to the widespread presence of counterfeits in multi-industries. Although government enforcement plays a role in combating counterfeits, it is difficult to fundamentally curb counterfeiting. This paper examines how the brand-name firm adopts the blockchain-technology-supported (BTS) platform in dealing with counterfeits under government enforcement. We consider a market with a manufacturer (i.e., a brand-name firm) and a counterfeiter. First, we develop a signaling game model to analyze the negative impact of deceptive sales. The results show that, under weak government enforcement and a high rampancy level of counterfeits, deceptive sales will decrease the expected demand for authentic products, the manufacturer’s expected profit, the expected consumer surplus, and the expected social welfare. Although government enforcement forces the counterfeiter to implement non-deceptive sales, it will decrease the expected consumer surplus under symmetric quality information. Then, we develop a Stackelberg game model to analyze the manufacturer’s adoption strategy for the BTS platform. We find that weaker government enforcement will incentivize the manufacturer to adopt the BTS platform. However, the manufacturer does not always adopt the BTS platform even if the counterfeiter implements deceptive sales. Finally, we analyze the effect of adopting the BTS platform under government enforcement. We reveal that the role of the BTS platform in improving consumer rights is stronger than that in combating counterfeits, and the effect of adopting the BTS platform will strengthen as government enforcement weakens.