An Empirical Study of Blockchain-Driven Transparency in a Consumer Marketplace

61 Pages Posted: 25 Sep 2023 Last revised: 28 Sep 2023

See all articles by Jane Yi Jiang

Jane Yi Jiang

University of Maryland - Robert H. Smith School of Business

Wedad J. Elmaghraby

University of Maryland - Robert H. Smith School of Business

Ken Moon

University of Pennsylvania - The Wharton School

Date Written: September 3, 2023

Abstract

Marketplaces have been reshaped continually by technological advancements ranging from railroads to the mobile Internet and search. Now, marketplace transparency is set to be transformed by blockchain technology, which offers a uniquely credible platform for tracing the flow of products through firms' supply chains. The popular belief is that blockchain will imminently enable consumers to comprehensively trace food products from farm to table, reveal counterfeits and contamination, and more accurately identify socially responsible products and firms. However, no previous empirical research has examined blockchain technology's impact on consumer marketplaces, and implementing a blockchain-based solution for supply chain transparency can be costly and complex. In collaboration with a leading Chinese technology company that operates the top online consumer grocery marketplace in China, we analyze its recent efforts to introduce blockchain tracing among its sellers. Our findings indicate that credible supply chain transparency encourages consumers to more readily buy traced products, especially those that are handling-sensitive or offered in less-trusted markets. Consequently, adopting third-party sellers experienced an average monthly revenue increase of up to 23.4%. By utilizing structural estimation to understand how consumers assess product attributes and quality, we highlight that consumer responses (and welfare effects) vary in sophistication and size based on their prior experience with the product category. Additionally, we establish that consumers deem blockchain-based information to be more reliable than sellers' claims.

Keywords: blockchain, consumer learning, consumer trust, consumer welfare, empirical operations management, food safety, information asymmetry, online marketplace, social good, structural estimation, supply chain transparency

Suggested Citation

Jiang, Jane and Elmaghraby, Wedad J. and Moon, Ken, An Empirical Study of Blockchain-Driven Transparency in a Consumer Marketplace (September 3, 2023). Available at SSRN: https://ssrn.com/abstract=4560414 or http://dx.doi.org/10.2139/ssrn.4560414

Jane Jiang (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

Wedad J. Elmaghraby

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Ken Moon

University of Pennsylvania - The Wharton School ( email )

Jon M. Huntsman Hall
3730 Walnut St.
Philadelphia, PA 19104-6365
United States

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