Platform information sharing and selling contract strategies with blockchain adoption

Abstract

The recent rapid development of blockchain technology has drawn considerable attention. To examine the impact of blockchain on platform supply chains, we construct a supply chain consisting of two suppliers and an e-commerce platform. Each supplier may use either a reselling or an agency selling contract; therefore, three scenarios are possible: pure agency selling, pure reselling, or hybrid contracts. Considering blockchain’s role in eliminating transaction costs and achieving demand information transparency, we apply a game theory model to study each player’s pricing strategy and profits when blockchain and selling contract strategies vary. We find that the platform’s optimal selling contract and blockchain strategies strongly depend on commission rates, competition intensity, and transaction costs. Suppliers are willing to join the blockchain to gain demand information and reduce transaction costs. With low transaction costs and high competition intensity, the platform may ally itself with the agency supplier and authorize him to join the blockchain to maximize profits, which may ruin social welfare. From a social welfare perspective, we find that a pure agency contract is optimal, whereas the optimal blockchain strategy varies. Specifically, blockchain adoption may not benefit social welfare even when its operations costs are negligible. We further explore a scenario in which two suppliers can choose their selling contracts to derive insights into suppliers’ contract choices and government subsidy policies. Moreover, we explore the impact of marginal production costs on the optimal strategy for platforms.