Managing the Product-Counterfeiting Problem with a Blockchain-Supported E-Commerce Platform

Abstract

As a disruptive tool, blockchain technology can eradicate the product-counterfeiting problem in supply chains. However, a blockchain-supported platform charges an operating fee to legitimate manufacturers and retailers for product traceability and authentication. In this study, we employ enterprise profit-driven analytical models using Stackelberg equilibrium theory and highlight the values of blockchain-supported e-commerce platforms in addressing the product-counterfeiting problem. To measure the actual benefits of blockchain technology, we compare the profits of all agents in two different supply chains, traditional and blockchain-supported. Results show that the application of blockchain technology is not always beneficial to manufacturers, retailers, and customers. However, when the manufacturing cost of a legitimate manufacturer is sufficiently high, the manufacturer generates more profits using blockchain technology. Further, for a price-sensitive market, a retailer tends to trade in a blockchain-supported e-commerce platform if the retailer’s qualification in the platform is lower than that in a traditional supply chain, and the manufacturing cost of the counterfeit manufacturer in the platform is higher than that in a traditional supply chain.