Combating Deceptive Counterfeits With Blockchain Technology Under Asymmetric Information

Abstract

Blockchain technology has recently been regarded as a promising anti-counterfeiting strategy. This article explores whether the retailer concerned with goodwill should adopt blockchain to combat counterfeits and disclose demand on the blockchain when both demand information and the supplier's product quality information are asymmetric. We also extend the model by considering the supplier's willingness to join the blockchain, endogenous authenticity proportion, and multiple suppliers. The main results show that when goodwill loss is high, the retailer always prefers blockchain; when this loss is medium, the retailer prefers blockchain only if both the unit production cost and proportion of authentic products are low. In some cases, the retailer has an incentive to disclose demand on the blockchain to motivate the supplier to join the blockchain, thereby achieving a win–win situation. The optimal government subsidy that both incentivizes the retailer to adopt blockchain and improves the supplier's preference for blockchain is also explored.