Truth, trust, and trade-offs: When blockchain in supply chains backfires

Tal Avinadav and Noam Shamir

European Journal of Operational Research, 2025, vol. 326, issue 3, 467-480

Abstract: We study the role of blockchain in achieving information transparency and generating trust in a dyadic supply chain with one retailer sourcing from a single supplier. The retailer has superior information regarding the demand distribution, whereas the supplier sets the capacity in preparation for the selling season. Two sources of risk are identified: information risk, which captures the incentives of the retailer to portray a favorable market condition to the supplier to encourage the supplier to secure an ample capacity, and demand risk, which captures the potential for lost sales or excess capacity investment, even when knowing the correct demand distribution. We demonstrate how blockchain eliminates information risk for the supplier. As an alternative to blockchain, we analyze a commitment contract where the retailer can order in advance a certain number of units; this commitment can serve as a signaling tool to convey market information to the supplier. We argue that the commitment contract can eliminate the information risk for the supplier (as can blockchain), but it can also reduce the supplier’s demand risk. We conclude that in many instances, the supplier and the supply chain can become worse off when blockchain is used, while the retailer favors this technology.

Keywords: Blockchain; Capacity planning; Information asymmetry; Risk (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221725003650
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:326:y:2025:i:3:p:467-480

DOI: 10.1016/j.ejor.2025.05.011

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().