Information disclosure and blockchain technology adoption strategy for competing platforms

Abstract

A key strategic decision for platforms such as Amazon, JD.com, and eBay is the extent to which they provide information to consumers because product information plays an important role in consumers’ purchasing decisions. Considering that consumers may doubt the disclosed information, these platforms may have the incentive to implement blockchain technology to authenticate their disclosed information and, therefore, eliminate consumer distrust. In this paper, we develop an analytical model to investigate the optimal information disclosure and equilibrium blockchain adoption strategy for competing platforms and analyse how the consumers’ beliefs and blockchain cost will affect the equilibrium results. Our results show that the equilibrium blockchain adoption strategy is a threshold-structured policy. To be specific, there are two critical values of blockchain cost. If the blockchain cost is larger than the upper threshold, then neither of the platforms has the incentive to apply blockchain technology, and the market is full of unverified information; however, if the blockchain cost is less than the lower threshold, both platforms prefer to apply blockchain technology, and the amount of authenticated information is larger than that of unverified information in the nonblockchain case. Finally, if the blockchain cost is between the two bounds, then a mixed strategy becomes the equilibrium; that is, one platform adopts the blockchain technology, while the other does not. In this case, the amount of authenticated information may be larger than that of unverified information, but the platform that ignores using blockchains is also better off with this new technology. We make several extensions, and the results show that our main conclusions remain unchanged, which indicates that the conclusions can be generalized.