Blockchain-Empowered Market Entry Strategy for a Green Product

Abstract

It is often difficult for consumers to predict the greenness of a new green product, reducing their willingness to purchase the product. Numerous companies have recently started adopting blockchain to demonstrate their products' quality. In this study, a market is considered where consumers decide what to buy when they know the greenness of existing products but are unsure about the greenness of new green products. This research presents a game theory model to examine the incumbent's entry-deterrence strategy and the entrant's blockchain adoption strategy. We examine the conditions under which blockchain can help an entrant's market entry, and the impact of blockchain adoption on firms' pricing strategies and profits, consumer surplus, and social welfare. The findings denote that blockchain adoption makes the incumbent more inclined to tolerate the entrant when the blockchain adoption cost is negligible. In addition, blockchain adoption can result in a “win-win” outcome for the two firms when the cost of the green products is low and the proportion of high-type consumers is high. However, blockchain adoption may not always benefit the entrant even if the blockchain adoption cost is negligible, particularly when consumers' perceived greenness of green products is significant enough. Furthermore, blockchain adoption may not be beneficial for consumer surplus and social welfare when green products' cost is moderate. Finally, blockchain adoption may drive the entrant to improve or reduce product greenness, depending on the proportion of high-type consumers and their uncertainty about the greenness.