Economics of Permissioned Blockchain Adoption

Garud Iyengar (), Fahad Saleh (), Jay Sethuraman () and Wenjun Wang ()
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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

Management Science, 2023, vol. 69, issue 6, 3415-3436

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.

Keywords: permissioned blockchain; blockchain adoption; technology adoption; FinTech (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:6:p:3415-3436

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