Competition between green and non-green products in the blockchain era

Abstract

Blockchain technology has been used to certify the green level of green products, which changes the competition landscape between green and non-green products. We explore the important issue concerning how blockchain adoption affects the duopoly game between green and non-green products. We first examine a benchmark case where blockchain is not used. Then we develop two pricing models to analyze the value of blockchain adoption and the competition landscape between green and non-green products, where one concerns a green product manufacturer that applies blockchain to certify the green level of its product, and the other concerns a non-green product manufacturer. To assess the robustness of the results, we extend the models to consider two important cases, namely (i) substitutability between green and non-green products, and (ii) mixed competition including the simultaneous presence of conventional, blockchain-enabled, and non-green products in the marketplace. We show that the green product manufacturer does not necessarily increase its price when adopting blockchain, whereas the non-green product manufacturer does. Specifically, when the green level is high, the GPM's blockchain adoption decreases price competition between green and non-green products, causing both the green and non-green product manufacturers to raise prices. In addition, it is intriguing to find that the presence of more sustainable consumers in the market does not cause the green product manufacturer to charge a higher price than the non-green product manufacturer. Under the mixed competition scenario, as a result of blockchain adoption, the blockchain-enabled green product manufacturer charges a higher price than the green and non-green product manufacturer. However, this does not inherently result in a higher profit margin for the blockchain-enabled green product manufacturer.