Impacts of Consumer Skepticism and Blockchain-Enabled Sustainability Disclosure in A Supply Chain

Firms are increasingly adopting blockchain-enabled traceability system that can ensure data non-tampering to credibly disclose product information because consumers are usually skeptical, especially about sustainability information of product. In this paper, we develop a game-theoretical model with consumer skepticism to examine the investment strategy of blockchain-enabled disclosure in a supply chain from different stakeholders’ perspectives. Two asymmetric manufacturers that differ in the sustainability of their products sell through one common retailer. Common consumers who trust the sustainability information of the product are willing to pay a premium for the sustainable product, but skeptical consumers are not. Blockchain-enabled disclosure makes more consumers to trust sustainability information of product. Interestingly, the analytical results reveal the latent pitfall of blockchain-enabled disclosure even without considering implementation costs. The market competition between the asymmetric manufacturers can be intensified by the disclosure. As a result, the profits of the two manufacturers might be reduced. In contrast, the retailer’s profit always increases due to blockchain-enabled disclosure. Moreover, we find that the size of skeptical consumers may have non-monotone impacts on the profits of the retailer and the manufacturers. Thus, as consumer skepticism increases, the retailer and the sustainable manufacturer are indeed less likely to invest in blockchain-enabled disclosure under certain conditions. Finally, we examine the impacts of a mandatory disclosure policy, for example, information disclosure mandated by the government, and find that it may create a win-win outcome for the society and the environment by improving both social welfare and environmental performance.