Blockchain Adoption for Combating Deceptive Counterfeits

16 Pages Posted: 15 Aug 2018

See all articles by Hubert Pun

Hubert Pun

Ivey Business School

Jayashankar M. Swaminathan

University of North Carolina (UNC) at Chapel Hill - Operations Area

Pengwen Hou

affiliation not provided to SSRN

Date Written: July 27, 2018

Abstract

We examine how blockchain technology can be used to combat counterfeiting. Specifically, we consider a market that consists of a manufacturer and a counterfeiter. The manufacturer can either use blockchain or signal through pricing to validate product authenticity. Customers have privacy concerns around blockchain usage. We find that blockchain should be used only when customers have intermediate distrust about products in the market. In markets with relaxed intellectual property regulations against counterfeiting where customers have serious distrust about products, pricing strategy is more effective than blockchain. Further, when the counterfeiter can produce a comparable quality product, the manufacturer could benefit using a pooling strategy. This benefit can be sufficiently large such that the manufacturer may not use blockchain even when the government offers subsidy or even when implementation is free. However, we show that blockchain can be more effective than pricing strategy in eliminating the post-purchase regret and improving social welfare.

Keywords: blockchain, customer privacy, deceptive counterfeit, government subsidy

Suggested Citation

Pun, Hubert and Swaminathan, Jayashankar M. and Hou, Pengwen, Blockchain Adoption for Combating Deceptive Counterfeits (July 27, 2018). Kenan Institute of Private Enterprise Research Paper No. 18-18, Available at SSRN: https://ssrn.com/abstract=3223656 or http://dx.doi.org/10.2139/ssrn.3223656

Hubert Pun (Contact Author)

Ivey Business School ( email )

1151 Richmond Street North
London, Ontario N6A 3K7
Canada

Jayashankar M. Swaminathan

University of North Carolina (UNC) at Chapel Hill - Operations Area ( email )

300 Kenan Center Drive
Chapel Hill, NC 27599
United States

Pengwen Hou

affiliation not provided to SSRN

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