The Interplay of Manufacturer Encroachment and Blockchain Adoption to Combat Counterfeits in a Platform Supply Chain

Generally, a critical issue regarding the online platform is that customers can’t fully perceive the product quality at purchase. Especially when the brand manufacturer only authorizes a third-party reseller to sell through the platform, which may provide an opportunity for counterfeiters. To address this issue, we establish a theoretical model that one brand manufacturer wholesales its products to a third-party reseller who then sells through one online platform. The platform acts as a marketplace and multiple counterfeiters are also existing on the platform, which may deceive customers. In particular, we consider the manufacturer can encroach with a direct channel and the platform can adopt blockchain technology to help customers identify product authenticity. The results show that the platform could induce the brand manufacturer to encroach by deploying blockchain technology. Furthermore, an interesting result indicates that though either manufacturer encroachment or blockchain technology used solely, can effectively boycott counterfeits, the coexistence of these two strategies can raise the demand of counterfeit products. Finally, we find that when the brand manufacturer encroaches the platform and the platform adopts blockchain technology, brand manufacturer, online platform, third-party reseller, and social welfare can achieve Pareto improvement, while the consumer surplus may be worse off