Price and Product Quality Decisions for a Two-Echelon Supply Chain in the Blockchain Era

Abstract

Frequent problems of counterfeiting have spawned consumer demands to monitor the entire supply chain. The application of blockchain technology with anti-counterfeiting and traceability can improve the reliability and authenticity of product information and eliminate consumer doubts about product quality. Furthermore, based on the transparency of blockchain technology, brand suppliers can independently obtain the market demand information through information sharing. This paper introduces a consumer suspicion coefficient to illustrate the application of blockchain technology in the supply chain. Considering product authenticity verification and information sharing, we study the optimal pricing and product quality decisions in a two-level supply chain under the following three scenarios: (1) no blockchain technology, a traditional supply chain, and no information sharing (case TN); (2) no blockchain technology but a traditional supply chain with information sharing (case TS); and (3) a supply chain based on blockchain technology (case BT). We find that when the consumer suspicion coefficient increases, consumers will have limited faith in the authenticity of the product, which will affect the retailer’s optimal decision and profit. By comparing the equilibrium results of several cases, we also find that demand information sharing by the retailer may not achieve a win-win outcome in a decentralized channel in the absence of blockchain technology. Under demand information sharing based on blockchain technology, however, if the consumer suspicion coefficient exceeds a certain threshold, the brand supplier and retailer can achieve a win–win outcome. In addition, the extended models reveal that in a centralized supply chain, regardless of the state of market demand, blockchain technology can always improve product quality and retail price and optimize supply chain profit.