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Economics of Permissioned Blockchain Adoption

Author

Listed:
  • Garud Iyengar

    (IEOR Department, Columbia University, New York, New York 10027)

  • Fahad Saleh

    (School of Business, Wake Forest University, Winston-Salem, North Carolina 27109)

  • Jay Sethuraman

    (IEOR Department, Columbia University, New York, New York 10027)

  • Wenjun Wang

    (IEOR Department, Columbia University, New York, New York 10027)

Abstract

We construct an economic framework for understanding the incentives of the participants of a permissioned blockchain for supply chains and other related industries. Our study aims to determine whether adoption of blockchain is socially beneficial and whether such adoption arises in equilibrium. We find that blockchain reduces information asymmetry for consumers, thereby enhancing consumer welfare. Consumer welfare gains can be sufficiently large that blockchain adoption is socially beneficial; nonetheless, we find that blockchain adoption does not arise in equilibrium. This situation arises because blockchain adoption costs are borne by manufacturers, and manufacturers cannot extract consumer gains through prices due to the competitive nature of the manufacturing sector. We offer a system of transfers to generate blockchain adoption in equilibrium when it is socially beneficial.

Suggested Citation

  • Garud Iyengar & Fahad Saleh & Jay Sethuraman & Wenjun Wang, 2023. "Economics of Permissioned Blockchain Adoption," Management Science, INFORMS, vol. 69(6), pages 3415-3436, June.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:6:p:3415-3436
    DOI: 10.1287/mnsc.2022.4532
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    References listed on IDEAS

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    Cited by:

    1. Davies, Jennifer & Sharifi, Hossein & Lyons, Andrew & Forster, Rick & Elsayed, Omar Khaled Shokry Mohamed, 2024. "Non-fungible tokens: The missing ingredient for sustainable supply chains in the metaverse age?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 182(C).
    2. Deqing Ma & Pengcheng Ma & Jinsong Hu, 2024. "The Impact of Blockchain Technology Adoption on an E-Commerce Closed-Loop Supply Chain Considering Consumer Trust," Sustainability, MDPI, vol. 16(4), pages 1-41, February.
    3. Wang, Minxue & Li, Bo & Song, Dongping, 2024. "The impact of blockchain on restricting the misuse of green loans in a capital-constrained supply chain," European Journal of Operational Research, Elsevier, vol. 314(3), pages 980-996.
    4. Sun, Xuting & Kuo, Yong-Hong & Xue, Weili & Li, Yanzhi, 2024. "Technology-driven logistics and supply chain management for societal impacts," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 185(C).
    5. Jens Gudmundsson & Jens Leth Hougaard & Jay Sethuraman, 2024. "Managing cascading disruptions through optimal liability assignment," Papers 2408.07361, arXiv.org.

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