Turn a blind eye? E-tailer's blockchain participation considering upstream competition between copycats and brands

Abstract

E-tailers such as Amazon and JD.com have long been criticized for the co-existence of copycat and genuine products sold on their platforms. Although many brands have developed blockchain-based digital manufacturing systems which can enable the traceability of genuine products, consumers could not identify the genuine products without the e-tailers’ participation in the blockchain: A well-behaved blockchain requires the digital connection of the upstream (i.e., the brand) and the downstream (i.e., the e-tailer). We hence build a game-theoretical model to analyze the e-tailers’ incentives to participate in the upstream brand's blockchain, which guarantees the consumers' trust but the e-tailer's revenue shared from the copycat sales might be reduced. The e-tailers operate under a hybrid mode where the copycat products are sold in agency stores and the genuine products are sold in the e-tailers’ reselling stores. We find that the brand's efficient image investment helps incentivize the e-tailer to connect to the upstream brand's blockchain-based manufacturing system. And the e-tailer's blockchain participation induces the genuine product's larger market share by enhancing its diversified competition with the copycat. Otherwise, the e-tailer still tends to participate in the brand's blockchain if its commission rate from the copycat store is low and the e-tailer's reselling channel advantage is limited.