Using blockchain to combat multiple types of counterfeits: Adoption strategy and value analysis

Abstract

This study examines manufacturers’ (i.e., brand-name firms’) incentives to adopt blockchain technology-supported (BTS) platforms in markets where deceptive and non-deceptive counterfeits coexist. It is among the first to analyze the adoption of BTS platforms in the context of a complex counterfeit market. First, the study integrates consumers’ perceived risk concerning product authenticity (CPRPA) into a signaling game model to examine the impacts of quality information asymmetry on market dynamics. The findings reveal that even though heightened CPRPA incentivizes deceptive counterfeiters to engage in non-deceptive sales (disclosing the true quality of their products), quality information asymmetry still exerts adverse impacts on both manufacturers and consumers, while simultaneously benefiting all counterfeiters. Second, the study evaluates manufacturers’ optimal strategies for adopting BTS platforms and the value derived from such adoption. The results suggest that CPRPA exerts a non-monotonic impact on manufacturers’ optimal decisions to adopt BTS platforms, and manufacturers may never benefit from such adoption in the presence of deceptive sales. Although higher adoption costs diminish the effectiveness of BTS platforms, such adoption can reduce illegal profits and improve consumer surplus. However, the adoption of BTS platforms may inadvertently increase demand for deceptive counterfeits. Consequently, BTS platforms are found to exert a more marked effect in combating non-deceptive counterfeits than deceptive ones. Additionally, BTS platform adoption contributes more to improving consumer surplus than to combating counterfeits.