Supply chain operations with online platforms under the cap-and-trade regulation: Impacts of using blockchain technology

Abstract

This paper analytically studies a supply chain in which the manufacturer sells its products through an offline channel and an online platform under cap-and-trade regulation. The online platform can operate under either the agency mode or reselling mode. A cross-channel effect is present between the online and offline channels, and the online platform has its power. The market includes information-sensitive and information-insensitive consumers, and the use of blockchain technology is examined. We analytically find that an increase of the cross-channel effect and platform power can benefit the manufacturer and online platform. The optimal production quantities with the agency mode are increasing in the commission rate when the cross-channel effect is high. Choosing the agency mode (reselling mode) can benefit the manufacturer when the commission rate is low (high). Whether blockchain technology can enhance profitability of the manufacturer’s offline channel depends on the cross-channel effect. Blockchain can generate more (less) consumer surplus when the cross-channel effect is low (high). With the agency mode, blockchain technology can always increase the online platform’s profit, while it may reduce its profit with reselling mode. We further discuss the coordination issues.