Enabling Emergency Production Shifting The Value of Blockchain

DOI: 10.1111/risa.
14199
ORIGINAL ARTICLE
Enabling emergency production shifting: The value of blockchain

in supply chain resilience confronting COVID-19
Baozhuang Niu Lingfeng Wang Jian Dong
School of Business Administration, South China Abstract

University of Technology, Guangzhou, PR China
Nowadays, factories located in COVID-19 infected countries/regions are facing ran-
Correspondence
dom outbreaks. If blockchain is adopted, then the outbreaks can be known immediately
Jian Dong, School of Business Administration, and emergency production shifting can be enabled, although high crash cost will be
South China University of Technology, incurred. Otherwise, production delay will become inevitable. We therefore formulate
Guangzhou 510640, PR China.
Email: dongjian677@yeah.net
the tradeoffs among the high crash cost, the benefit from quick production, and the
efficiency loss because of supply chain decentralization in a global brand’s blockchain
Funding information adoption decisions. We show that, in the presence of supply chain competition, the
National Natural Science Foundation of China, global brand will be benefited from blockchain adoption when the competition inten-
Grant/Award Numbers: 72293564, 72125006, sity degree is high, the crash cost is low, and the probability of COVID-19 outbreak is
72293560
high. We then verify the robustness of the main findings by studying the impact of the
global brand’s risk attitude, its overestimation of production delay, and the unexpected
production delay in the low-risk areas. In addition, we examine the social welfare and
find it can also benefit from the global brand’s blockchain adoption but the consumer
surplus cannot.
KEYWORDS
Blockchain adoption, Supply chain competition, Production delay, Global supply chain
1 INTRODUCTION factories in the infected area will not be shut down forever,
but if the brand does not decide production shifting, produc-
Before the COVID-19 pandemic, many global brands such tion delay will become inevitable. In this sense, production
as Nike, Adidas, Puma, Samsung, and Apple had gradually delay can be taken as the fourth modeling approaches of sup-
relied on factories located in the low-cost countries/regions ply risk in complement with Gupta, Ivanov, and Choi (2021),
(e.g., India, Vietnam and Thailand) for product manufactur- because “late delivery is obviously bad to most people (and
ing (Sourci, 2018). However, in 2021, the supply resilience hence constitutes risk)”, as pointed by Choi, Guo, Liu, and
in these areas has confronted big challenges because of the Shi (2020).
random outbreaks of COVID-19 (Accenture, 2022). In the How to solve this production stability problem? The global
summer of 2021, under the pressure of COVID-19 pandemic, brands mainly have two options: (1) Waiting for days or
Vietnam government imposed new restrictions including the even months until the government lifts restrictions and the
mandatory shutdown of factories for several months. This factories reopen, which makes them become the second-
immediately resulted in production delay of the aforemen- mover in the supply chain competition (CNBC, 2021b); (2)
tioned global brands because they had to wait for the end of Emergently shifting production if COVID-19 outbreaks are
outbreaks (Supply Chain Dive, 2021, CNBC, 2021a). Nike timely known. For example, brands such as Wolverine, Rorze,
suffered from this production delay more because Nike made Hooker, LoveSac and Lakeland have placed many emergency
over half of its shoes in Vietnam, which could not be pro- production orders to Chinese contract manufacturers (CMs)
duced and delivered on schedule (CNN, 2021, Footwear in 2021 because China can guarantee supply chain resilience
News, 2021). Adidas also lost around $600 million in sales at that time, at a high crash cost (CNBC, 2021c, QuartZ,
due to the random shutdown of Vietnam factories (Sourcing 2021).
Journal, 2021). In this paper, we refer to the production delay In practice, production shifting can be time-consuming
caused by COVID-19 outbreak as “risk”, which is similar to because the brands have to find qualified manufacturers,
supply disruption risk but has truly new features. That is, the sign production contracts, and prepare resources including
Risk Analysis. 2023;1–31. wileyonlinelibrary.com/journal/risa © 2023 Society for Risk Analysis. 1

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2 NIU ET AL.
FIGURE 1 Application of blockchain in confronting COVID-19.
materials/components and the pool of workers. Accord- management. Those brands who have adopted blockchain
ing to Charles Roberson, the CEO of Lakeland Industries, are allowed to access the real-time information offered by
the company even hired new executives for production the government and anticipate the production delay.
shifting project from Vietnam to China. Being aware of Undoubtedly, it is costly for global brands to establish
these, the global brands create the new demand of know- blockchain systems and analyze real-time data (Azati, 2023).
ing the COVID-19 outbreaks in advance, based on which So we discuss the main trade-offs for the brands’ blockchain
they can shift production before government restrictions. adoption as follows. First, if the global brand does not adopt
Blockchain-based system arises as an efficient tool that helps blockchain, it cannot know the random outbreaks of COVID-
the global brands monitor COVID-19 outbreaks and enable 19 immediately. Once the CMs cannot produce, the brand
emergency production shifting in a short time (Kalla et al., has to become a second-mover in production competition.
2020). Specifically, blockchain system can be consisted of On the contrary, blockchain provides real-time information
three modules: (1) multi-source information module; (2) of the COVID-19 outbreaks, enables quick contract signing,
emergency decision-making module; and (3) smart contract and effective production shifting to the safe areas. Although
module (see Figure 1 for a visual explanation). First, multidi- it is at a high crash cost, this saves time so simultaneous pro-
mensional instant information such as the detailed data about duction becomes guaranteed for the global brand. Second, if
COVID-19 spread, the hospitals’ diagnosis capability, supply the global brand adopts blockchain, it needs to undertake the
chain members’ coping methods, the government depart- establishment cost no matter there exists production delay or
ments’ prevention instructions (e.g., pandemic control center, not. If the production is abroad, then the tariff cost will further
water supply department and power supply departments) can make the brand’s decisions intricate.
be gathered (Marbouh, Abbasi, Maasmi, Omar, Debe, Salah, Based on the foregoing discussions, we aim to answer
& Ellahham 2020, Stimson, 2021). Second, combing the use the following research questions: (1) Under what conditions
of big data and AI, a blockchain-based complex multidimen- would the global brand adopt blockchain to ensure supply
sional decision-making mechanism helps process these data, chain resilience? (2) What is the impact of production delay
based on which the production delay decision will be made on the global brand’s profit and equilibrium decisions (e.g.,
(Ting, Carin, Dzau, & Wong, 2020; Torky & Hassanien, price and quantity)? (3) How the downstream market com-
2020; Alsaed et al., 2021). Third, smart contracts enable petition influences the global brand’s blockchain adoption
quick CM search and contracting in production shifting, in decision?
hours or even minutes, because the search of CMs and the We develop a game-theoretic model to investigate the
contract term negotiation can be finished immediately (Choi global brand’s blockchain adoption decisions. Consider a
& Lambert, 2017, Chattu, Nanda, Chattu, Kadri, & Knight, supply chain consisted of a global brand who sources from a
2019, IBM, 2020, Nateghi & Aven, 2021). For instance, low-cost CM but with production delay risk, and a local cen-
the government facing serious COVID-19 pandemic has tralized competitor in a safe area. Based on the global brand’s
given global brands the priority to pandemic prevention and blockchain adoption decision and the production delay risk,
ENABLING EMERGENCY PRODUCTION SHIFTING 3
there are four scenarios: (1) the global brand does not adopt the global brand’s risk aversion induces it more likely to adopt
blockchain and production delay does not happen (Scenario blockchain because the loss of production delay uncertainty
NN), in which the global brand keeps sourcing from the low- is magnified. In the presence of overestimation of produc-
cost CM and engaging in a simultaneous production game tion delay, the global brand’s incentive to adopt blockchain
with its competitor; (2) the global brand does not adopt will be reduced because of the meaningless production shift-
blockchain and production delay happens (Scenario ND), ing. If the safe area is also exposed to the production delay
in which the global brand could only wait until the gov- risk, the global brand’s incentive to adopt blockchain will be
ernment lifts restrictions and play as a second-mover in the restrained. Finally, we investigate the impact of blockchain
production game; (3) the global brand adopts blockchain but adoption on social welfare and customer surplus. The result
production delay does not occur (Scenario BN), in which worth noting is that blockchain adoption is beneficial for
the global brand keeps sourcing from the low-cost CM and social welfare but harmful for customer surplus.
incurs blockchain adoption cost; (4) the global brand adopts This paper investigates the risk handling from the supply
blockchain and production delay happens (Scenario BD), in chain perspective, which contributes to the literature on risk
which the global brand makes emergency production shifting science. Indeed, it is impossible to predict the risk for indi-
at a high crash cost. viduals accurately, but for factories and supply chains, risks
In addition to the difference of production cost, we iden- like factory shutdown and production delay can be known
tify two interactive effects that act as the driving forces of exactly and handled with the use of blockchain technology
the global brand’s blockchain adoption decisions. (1) Dou- (Aven & Zio, 2021). Here, we investigate how blockchain
ble marginalization effect that comes from the global brand’s adoption helps handle COVID-19-related production delay
decentralized supply chain structure; (2) Second-mover dis- risk by informing outbreaks and enabling emergency produc-
advantage that stems from the sequential production game in tion shifting to enhance supply chain resilience. This greatly
Scenario ND. enriches the application of foundational risk science in supply
We find production delay caused by random outbreaks chain management confronting COVID-19.
of COVID-19 reduces the global brand’s profit, which is The remainder of this paper is organized as follows. In
consistent with intuition but the driving forces are intricate. Section 2, we review the relevant literature and highlight our
When the global brand adopts blockchain, the presence of contributions. Section 3 describes the model setting. In Sec-
production delay induces production shifting at a high crash tion 4, we conduct sensitivity analysis on the equilibrium
cost. This drives up the manufacturing wholesale price and outcomes with respect to parameters such as competition
enhances the double marginalization effect. When the global intensity degree, based on which we investigate the global
brand does not adopt blockchain, the presence of production brand’s blockchain adoption decisions. We provide two
delay puts the global brand at the second-mover position, extensions in Section 5 by considering risk-aversion global
making it lose market share. As a response, the low-cost CM brand, inaccurate forecast, less-infected rather than safe area,
becomes not so cost-effective: It will increase the wholesale social welfare and the yield uncertainty of the low-cost CM.
price to compensate for the loss of order quantity. This also Section 6 concludes this paper and discusses several future
aggravates the double marginalization effect and reduces the research directions. All proofs are relegated to the A1.
global brand’s profit.
We find that adopting blockchain helps the global brand
obtain a higher profit when the competition intensity degree 2 LITERATURE REVIEW
is high, the crash cost is low, and the possibility of produc-
tion delay is high. We highlight the impact of the competition This work is closely related to the literature on blockchain
intensity degree on the global brand’s blockchain adoption adoption in supply chain management. Babich and Hilary
decisions. The main explanations are as follows: (1) Intensi- (2020) discuss the strengths and weaknesses of blockchain
fied downstream competition reduces the global brand’s retail technology and point out its potential to reshape supply
price so the CM is incentivized to lower the manufacturing chains. Hastig and Sodhi (2020) think blockchain technology
price for the global brand’s larger order quantity, especially in is the focal technology for supply chain traceability system
Scenario BD. This weakens the double marginalization effect and propose the business requirements and critical success
and enhances the global brand’s preference for blockchain factors for blockchain adoption. Shi, Yao, and Luo (2021)
adoption; (2) The global brand’s second-mover disadvantage develop a comprehensive review on innovative platform
in Scenario ND increases in competition intensity degree, operations with blockchain adoption. Hu, Huang, Huang, and
which drives the global brand to adopt blockchain and avoid Su (2021) point out that blockchain can be used to solve the
being the second-mover in production competition. trust crisis of the organic agricultural supply chain because
To ensure supply resilience, factors such as the global of the characteristic of transparency and immutability. Dong,
brand’s risk attitude, its overestimation of production delay, Chen, Shi, and Ng (2021) study how blockchain technology
and the unexpected low-probability-production-delay-risk in influences a retailer’s supply chain finance strategy to build
safe areas should not be ignored. We therefore provide several its originated channel. Liu, Barenji, Li, Montreuil, and Huang
important extensions to verify the robustness of the main find- (2021) propose a Blockchain and Internet of Things-based
ings and meanwhile derive new results. For example, we find platform to improve the transparency and traceability in
4 NIU ET AL.
the drug supply chain. Shen, Liu, Quan, and Wen (2021) based on multicompartment SIS stochastic model and zonal
study the use of blockchain technology to identify product ventilation model. Choi (2020) build an analytical model to
authenticity and combat copycats. They find that the brand explore how to transform “static service operations” to “bring
name companies may reduce product quality when using service near your home” mobile service operations under the
blockchain since customers could distinguish genuine prod- corona virus outbreak. Aven and Bouder (2020) explain the
ucts from copycats. Niu, Dong, and Liu (2021) focus on the concepts and principles of risk science which help assess the
incentive alignment for blockchain adoption in a medicine vulnerabilities and risks related to the COVID-19 pandemic.
supply chain, in which blockchain contributes to information Gupta, Starr, and Zanjirani Farahani (2021) provide a com-
transparency. Choi and Shi (2022a) point out that blockchain prehensive literature review of the epidemic/pandemic related
can be used by on-demand ride-hailing platforms to create operations management. Kumar, Choi, Wamba, and Gupta
traceable service history of each car and driver, which helps (2021) propose an extended Susceptible-Exposed-Infectious-
eliminate the customers’ worries of infection in the shared Removed (SEIR) model to analyze infection vulnerability
vehicles. Different from the above literature, we consider stratification risk in COVID-19. Salter (2021) suggest gov-
the application of blockchain technology in the COVID-19 ernments to implement Effective Fiber Mask Programs
pandemic context where blockchain is used to monitor (EFMPs) and limit new infections during the pandemic. Aven
production delay and enable emergency production shifting and Zio (2021) point out that there are three categories of
to the safe areas. Otherwise, the global brand could only wait strategies in risk governance and systemic frameworks for
for deregulation and play as a second-mover in production risk handling: risk-informed, resilience, and discursive strate-
competition. gies. Niu, Dai, and Li (2021) further study the incumbent
This work is also closely related to the literature on global ventilator manufacturers’ incentives of knowledge sharing
supply chain management. There are two sub-streams of when many automakers turn to manufacture ventilators to
related literature. The first sub-stream is on tax-effective combat COVID-19. Shen, Dong, and Minner (2022) inves-
supply chain. Hsu and Zhu (2011) study the optimal supply tigate the impact of production and sale of masks on safety
chain structure with China’s export-oriented tax and tariff index, welfare and supply chain profits. They identify how
rules. Huh and Park (2013) propose two transfer pricing the customer’s choice between N95 and surgical mask varies
methods for tax-planning and investigate the impact on with infection probability without protection (IPWP). Choi
supply chain performance under demand uncertainty. and Shi (2022b) study the “supply guarantee deposit pay-
Shunko, Debo, and Gavirneni (2014) identify when to ment (SGDP)” in the fashion supply chain with supply
use single and dual transfer-pricing systems to maximize the risk caused by COVID-19, where they find SGDP helps
MNF’s after-tax profit. Shunko, Do, and Tsay (2017) further achieve a win-win situation in the presence of production
investigate the optimal profit and risk allocation between the disruption. We note that the foregoing works are multi-
MNF’s subsidiaries in different tax jurisdictions. Xu, Hsu, folded, covering topics such as healthcare resource allocation,
and Niu (2018) study how market sizes and China’s VAT production disruption, emergency knowledge sharing, and
refund policy influence an MNF’s procurement outsourcing infection forecasting. We follow the steps of Choi and Shi
strategy. Shi, Tang, and Dong (2022) investigate whether a (2022b) by studying production issues but we focus on pro-
global brand should stick to the domestic market or enter duction delay rather than production disruption. Without
the overseas market by highlighting the value of purchasing blockchain, the global brand has to become a second-mover,
agent. The other sub-stream of literature concerns about while blockchain adoption can inform risk in advance and
production location issues. Wu and Zhang (2014) investigate enhance supply chain resilience by enabling emergency pro-
a firm’s sourcing strategy where sourcing from the home duction shifting, covering two of the three categories of risk
country helps obtain accurate demand information while handling strategies in Aven and Zio (2021). Our findings can
sourcing from overseas provides a cost advantage. Chen be insightful in production delay risk handling practice and
and Hu (2017) study a manufacturer’s offshoring-reshoring appear novel in this stream of literature.
decisions by considering the impact of tariff and offshore The literature on risk management and supply chain
supply dependence. Niu, Li, and Liu (2020) analyze a MNF’s resilience is also closely related to our paper. The first sub-
production shifting decisions with the consideration of partial stream of literature is on risk management, many of which
tax refund policy, cross-market competition, and production formulate risk using mean-variance (MV) analysis, VaR and
pooling effect. Different from the foregoing works, we study CVaR models. The VaR and CVaR models as risk mea-
the impact of tariff cost when the global brand’s production sures can be found in Luciano, Peccati, and Cifarelli (2003),
is outsourced to a low-cost CM located in countries/regions Chen, Xu, and Zhang (2009) and Wu, Wang, Chao, Ng,
such as Vietnam. We formulated the value of production and Cheng (2010), to name a few. Chiu and Choi (2016)
timing because blockchain can enable emergency production provide a comprehensive literature review on mean-variance
shifting which helps avoid the loss of production delay (MV) analysis in risk management, in which they classify
caused by the outbreak of COVID-19. the literature into three areas, namely single-echelon sup-
Another related stream of literature is on COVID-19- ply chain problems (Atkinson, 1979, Eeckhoudt, Gollier, &
driven operations management. López-García, King, and Schlesinger, 1995, Chen, Sim, Simchi-Levi, & Sun, 2007,
Noakes (2019) study the spread of nosocomial infections Wang & Webster, 2009), multi-echelon problems (Lau &
FIGURE 2 Supply chain structures.
Lau, 1999, Tsay, 2002, Gan, Sethi, & Yan, 2004, 2005, Wei TA B L E 1 Scenario matrix.
& Choi, 2010) and supply chains with information updat- No production delay Production delay
ing (Choi, Li, & Yan, 2003, Choi & Chow, 2008, Buzacott,
Not adopt blockchain NN ND
Yan, & Zhang, 2011, Niu & Zou, 2017). Regarding the
literature on supply chain resilience, we find it is mainly Adopt blockchain BN BD
related to sourcing strategies. See Song and Zipkin (1996),
Moinzadeh and Aggarwal (1997), Gürler and Parlar (1997),
and Tomlin (2006) for early examples. Some recent litera- the low-cost CM suffers from production delay risk with a
ture focuses on supply chain resilience based on co-opetition possibility 𝜙. This motivates the global brand to consider
models. For example, Bakshi and Kleindorfer (2009) use blockchain adoption, although the adoption cost is inevitable.
the Harsanyi–Selten–Nash bargaining framework to investi- We consider the following two cases:
gate supply chain members’ investment decisions for supply Not adopt blockchain: The global brand could not know
chain resilience in a co-opetition context. Tang and Kou- production delay immediately because the government will
velis (2011) study the impact of supplier correlation in a not share sufficient real-time data. Even the global brand can
co-opetitive structure by consisting suppliers’ yield uncer- know production delay, time-consuming contract works still
tainty risk. If the common supplier has yield uncertainty risk, make it become a second-mover in production competition.
Chen and Guo (2014) study a buyer’s strategic dual-sourcing Consequently, if production delay occurs, the global brand
decision under the uniform supply capacity allocation rule. has to wait for the recovery of factories and play as a second-
Niu, Xie, Mu, and Ji (2020) examine an MNF’s local sourcing mover in production competition.
strategy by considering the impact of unreliable supply risk Adopt blockchain: The global brand is enabled to shift
and indirect supplier competition. Different from the afore- production to the safe areas, with the blockchain adoption
mentioned literature, our paper focus on production delay cost, the crash cost, and the benefit of timely production. If
risk in global operations, which appears novel in this stream the global brand knows there will no outbreaks of COVID-19
of literature, especially under the COVID-19 pandemic. We pandemic using blockchain, it will not shift production but
investigate the global brands’ blockchain adoption decisions the blockchain adoption cost has been sunk.
to solve the production delay problem, and the main findings Combining the global brand’s blockchain adoption deci-
can deliver valuable insights to both the managers and the sions and production delay risk, there are four situations
governments. (please see the Table 1).
Following Lus and Muriel (2009), Feng and Lu (2013) and
Hsu, Lai, Niu, and Xiao (2017), the reverse demand functions
3 MODEL SETTING of the global brand (denoted by the subscript GB) and the
competitor (denoted by the subscript C) are
We consider a supply chain consisting of a risk-neutral global
brand1 who sources from a low-cost CM but with production pGB = a − qGB − bqC ;
delay risk, and a local centralized competitor in the safe area2 .
The global brand and the competitor sell partial substitutable
products to customers in a safe way, so market disruption pC = a − qC − bqGB ;
is not considered (see Figure 2 for a visual explanation).
Subject to random outbreaks of the COVID-19 pandemic, where a is market potential and b ∈ (0, 1) represents product
substitutability between the global brand’s product and the
1
competitor’s product. The parameter b can also be explained
This assumption is relaxed in Section 5.1 where we study a risk-averse global brand.
2
This assumption is relaxed in Section 5.3 where we consider that local production as the competition intensity degree where b → 1 indicates
delay is also possible so it becomes a low-risk area rather than the safe area. the products become more homogeneous so the market
6 NIU ET AL.
TA B L E 2 Notations.
Notations Definitions
wl The manufacturing price in Scenario l, l ∈ {NN, ND, BN, BD}

qli Production/order quantity of the global brand (i = GB) or the competitor (i = C) in Scenario l, l ∈ {NN, ND, BN, BD}
pi The market price of the global brand’s product (i = GB) or the competitor’s product (i = C)
a The size of market potential
b Product substitutability (market competition intensity degree)
f The import tariff rate
ck The production cost of the local stable CM (k = 1) or the local centralized competitor (k = 2), where c1 > c2 to
formulate the high crash cost.
F The sunk cost of blockchain adoption
𝜋jl Firmj’s profit in Scenario l, j ∈ {GB, C, LCM, SCM}, l ∈ {NN, ND, BN, BD}
𝜋GB
X
The global brand’s expected profit with and without blockchain, where X ∈ {B, N}
competition is intensified (McGuire and Staelin, 1983). To ensure positive outcomes, a >
7c2 1
, c1 < (a + c2 ) and
Notations are summarized in Table 2. 5 2
4a2 −4a2 b+a2 b2 −8ac1 +4abc1 +4c21 +4abc2 −2ab2 c2 −4bc1 c2 +b2 c22
The global brand, local competitor, low-cost CM and local F< are
64−32b2 +4b4
stable CM are denoted by the subscript GB, C, LCM and required. All outcomes are presented in A2.
SCM, respectively. We present the objective functions of the The sequence of events is summarized as follows (see
supply chain members as follows. Figure 3 for a visual explanation). In the first stage, the global
Under Scenario NN and ND: brand decides whether to adopt blockchain. If the answer
is yes, then the global brand will monitor the real-time sit-
( ) ( )
𝜋GB = pGB − w qGB − fwqGB ; 𝜋C = pC − c2 qC ; 𝜋LCM uations of the COVID-19 outbreak and production delay
risk. Once production delay occurs (Scenario BD), the global
= wqGB brand will make emergency production shifting to a stable
CM, at a crash cost included in the manufacturing price.
Under Scenario BN: Finally, the two competitors determine their production/sales
quantities, respectively.
( ) If the global brand knows production delay would not
𝜋GB = pGB − w qGB − fwqGB − F; 𝜋C
appear by blockchain (Scenario BN), then the global brand
( )
= pC − c2 qC ; 𝜋LCM = wqGB keeps sourcing from the low-cost CM without production
shifting. This saves the crash cost but the blockchain adoption
Under Scenario BD: cost is sunk. Then, the low-cost CM decides the manu-
facturing price, based on which the global brand and the
( ) ( ) local competitor determine their production/sales quantities
𝜋GB = pGB − w qGB − F; 𝜋C = pC − c2 qC ; 𝜋SCM simultaneously.
= (w − c1 ) qGB If the global brand does not adopt blockchain and pro-
duction delay does not occur (Scenario NN), then the global
f is the tariff rate levied on the imported product. Without brand and the local competitor play a simultaneous produc-
tion competition game. That is, the low-cost CM decides the
loss of generality, we assume the production cost of low-cost manufacturing price, based on which the global brand and
CM is zero and use a positive production cost c2 to highlight the competitor determine their production/sales quantities
the production cost of the local competitor. When the global simultaneously.
brand makes emergency production shifting, it occurs a crash If production delay occurs, then scenario ND appears.
cost c1 . We assume c1 > c2 to highlight the significant cost Because it takes a relatively long time to recover from the
of emergency production. F is the sunk cost of blockchain COVID-19 pandemic, the global brand and low-cost CM
adoption. make decisions after the recovery of production delay. On the
The global brand’s expected profits with and without contrary, the global brand’s competitor decides the produc-
blockchain are tion/sales quantity early because it is in the safe area. After
production delay, the low-cost CM determines the manufac-
( ) BN N ( ) NN turing price, based on which the global brand decides the
𝜋GB
B
= 𝜙𝜋GB
BD
+ 1 − 𝜙 𝜋GB ; 𝜋GB = 𝜙𝜋GB
ND
+ 1 − 𝜙 𝜋GB ;
production/sales quantity.
FIGURE 3 The sequence of events.
4 ANALYSIS AND RESULTS 𝜕wNN 𝜕wND

4. < 0, < 0.
𝜕f 𝜕f
4.1 Analysis of scenario N where
blockchain is not adopted Because the global brand acts as a second-mover in Sce-
nario ND, conventional wisdom holds that the upstream CM
Without blockchain, the global brand could not know the would decide a lower wholesale price to stimulate the global
outbreaks of the COVID-19 pandemic timely and even it brand to place a larger order (Wang et al., 2013). However,
knows, time-consuming contract negotiation makes it has to Lemma 1(1) shows the low-cost CM even determines a higher
be a second-mover in production competition. In practice, wholesale price than in Scenario NN. We provide the follow-
the brand without blockchain mainly sticks to sourcing from ing explanations. Clearly, the low-cost CM need balance the
the low-cost CM no matter there exists production delay or profit margin and the order quantity to maximize its profit
not. If production delay does not occur (Scenario NN), the function by the manufacturing price decision. As will be
global brand and its competitor play a simultaneous produc- shown later, the global brand’s second-mover position in Sce-
tion game. If production delay happens (Scenario ND), the nario ND limits its market share significantly. Participating
global brand and its competitor play a sequential production this, the low-cost CM is aware that a lower manufacturing
game where the global brand acts as a second-mover. We first price could not stimulate the global brand’s order quantity
obtain the equilibrium outcomes by backward induction and efficiently. Therefore, it has no other way but to charge a
the analysis of the low-cost CM’s manufacturing price is as higher price that contributes to a higher profit margin.
follows. Lemma 1(2) and (3) present that, with the increase of
competition intensity degree, there exhibit different manu-
Lemma 1. facturing price changes in Scenario NN and Scenario ND.
In Scenario NN, the global brand and its competitor engage
1. wND > wNN ; in a head-to-head competition and the low-cost CM mainly
𝜕wNN collects profit from a larger order quantity rather than a high
2. < 0; profit margin. This motivates the low-cost CM to lower the
𝜕b √
𝜕wND 5c2 a 8ac2 −4c22 −3a2 manufacturing price, especially when the overall market
3. > 0 if a < and − < b < 1;
𝜕b 3 a−c2 (a−c2 )2 potential is shrunk because of high product homogene-
𝜕wND ity (Lus & Muriel, 2009). However, in Scenario ND, the
otherwise, ≤ 0;
𝜕b manufacturing price has the opportunity to increase in b
8 NIU ET AL.
when the market potential is small and b is large. This also the global brand’s incentive to place a large order quan-
stems from the low-cost CM’s incentives to collect profit tity (Cachon, 2003). These two driving forces help explain
from a high profit margin when it is aware that the global Lemma 2(2) ∼ (5).
5c
brand’s market potential is so small (i.e., a < 2 ) and the We focus on Scenario NN first, where the global brand
3
market potential is further shrunk by a large b (Lus & Muriel, does not adopt blockchain and production delay is absent. It
𝜕qNN 𝜕qNN
2009). This indicates that even a very low manufacturing is intuitive to find C < 0 and GB < 0, because the over-
𝜕b 𝜕b
price cannot induce a large order quantity. all market potential is shrinking given a large b. Customers
Lemma 1(4) shows that the manufacturing prices in Sce- experience more and more homogeneous products available
nario NN and ND are decreasing in tariff rate. In such a in the market so their purchase intentions are weakened (Lus
cross-border supply chain, the tariff behaves as the global & Muriel, 2009). However, recalling Lemma 1(2), where
brand’s procurement cost and a higher tariff rate reduces the 𝜕wNN 𝜕qNN
global brand’s order quantity. In this sense, given a higher tar- we have < 0, we can understand GB > 0 is possible
𝜕b 𝜕b
iff rate, the low-cost CM has to lower its manufacturing price, because the global brand has the manufacturing cost advan-
leading to a substitutable relationship between w and f (Niu, tage and the negative impact of double marginalization effect
Zeng, & Liu, 2021). is mitigated when b is large. This helps explain the first part
of Lemma 2(2).
Lemma 2. Compare with Scenario NN, the global brand becomes
the second-mover which hurts its market share and produc-
1. qND ⟨qNN , qND ⟩qNN ; tion/sales quantity. As a result, it becomes more difficult for
GB GB C C √ 𝜕qND
𝜕qNN 2a 2ac2 −c22 the global brand to have GB
> 0. We indeed find the fea-
2. GB
> 0 if a < 5c2 and −2 0 in Lemma 2(4) is smaller than that
GB
𝜕b
otherwise, GB
≤ 0; in Lemma 2(2). As the global brand’ competitor, we find it
𝜕b
𝜕qNN is benefited by having a large sales quantity and it becomes
3. C
< 0;
𝜕b √ 𝜕qND
𝜕qND 8ac2 −4c22 −3a2
possible to have C > 0, especially when the market poten-
5c2 a 𝜕b
4. GB
> 0 if a < and − < b < 1; tial a is sufficiently large. That is, the first-mover advantage
𝜕b 3 a−c2 (a−c2 )2
𝜕qND helps the competitor overcomes the production cost disad-
otherwise, GB
≤ 0; vantage in a safe area, and intensified market competition
𝜕b √
𝜕qND 8c2 4(a−c2 ) 3a2 −8ac2 +4c22 further enhances the competitor’s first-mover advantage. This
5. C
> 0 if a > and −2 <b< explains Lemma 2(5).
𝜕b 3 a a2
𝜕qND
1; otherwise, C
≤ 0. Proposition 1.
𝜕b
Lemma 2(1) presents that, without blockchain adoption, 1. 𝜋GB

NN
> 𝜋GB
ND
, 𝜋CNN < 𝜋CND ;
production delay reduces the global brand’s production/sales √
𝜕𝜋GB
NN
2a 2ac2 −c22
quantity but is beneficial for the competitor. This result is 2. > 0 if a < 5c2 and −2 < b < 1;
𝜕b a−c2 (a−c2 )2
consistent with the conventional wisdom that, in quantity 𝜕𝜋GB
NN
competition, the first-mover could sell more products (Singh otherwise, ≤ 0;
𝜕b √
and Vives, 1984). We denote the difference of the global 𝜕𝜋GB
ND
5c2 a 8ac2 −4c22 −3a2
brand’s quantities in Scenario ND and Scenario NN (i.e., 3. > 0 if a < , − 0 and 𝜕b
𝜕b 𝜕𝜋C
ND 𝜕𝜋C
NN
𝜕[qNN −qND ] 4. < 0, < 0.
GB GB
> 0), indicating that a more intensified competi- 𝜕b 𝜕b
𝜕a
tion or a large market potential will widen the quantity gap Proposition 1(1) reveals that without the adoption of
and strengthen the global brand’s second-mover disadvan- blockchain, the presence of production delay hurts the global
tage. Correspondingly, the global brand’s competitor holds brand’s profit but benefits its competitor, which is intuitive
𝜕[qND −qNN ]
a quantity advantage as the first-mover (i.e., C C
>0 because the global brand has to be the second-mover by los-
𝜕b
𝜕[qND −qNN ] ing the sales and bearing a high manufacturing cost (we have
and C C
> 0). wND > wNN in Lemma 1).
𝜕a
We note that, on the one hand, compared with the local Then we analyze how the profits change with b. We find the
competitor, the low-cost CM produces at a lower cost (i.e., global brand may be benefited from intensified market com-
c2 > 0). Undoubtedly, the low production cost is beneficial petition (see Proposition 1(2) and (3)) no matter production
for the global brand. On the other hand, the double marginal- delay occurs or not. This is mainly because the channel power
ization effect in the decentralized supply chain decreases facing the low-cost CM is enhanced as the global brand’s
order is the important profit of the low-cost CM. Intensified result, we have analyzed the CMs’ pricing strategies. Note
market competition results in pressure for the global brand that, the global brand and the competitor engage in a simul-
which induces the low-cost CM to determine a lower manu- taneous production game in both scenarios where the CMs
facturing price. Taking a close look at the conditions, we find tend to obtain profit from large sales quantities. Thus, as the
𝜕qND downstream competition becomes tenser, both the stable CM
the conditions are the same as those to satisfy GB
> 0 and
𝜕b in Scenario BD and the low-cost CM in Scenario BN pre-
𝜕qNN
GB
> 0. This is mathematically because of 𝜋GB =
NN
(qNN
GB
)2 fer to decrease the manufacturing price for further enlarged
𝜕b
order quantities. Considering wBD > wBN , we note that, on
and 𝜋GB
ND
= (qND
GB
)2 .
the one hand, the stable CM has more space to cut price. On
Differently, the competitor is always hurt by intensified
the other hand, due to the fixed tariff cost, the low-cost CM
competition, even though it has the opportunity to sell more
is aware that lowering the manufacturing price is not very
products as b increases in Scenario ND (see Lemma 2). Note
elastic, which contributes to a slower decrease of wBN with
that 𝜋CND = (pND
C
− c2 )qND
C
. This indicates that the impact
respect to b.
of the reduced profit margin (pND C
− c2 ) is more significant
when b is large. Although the first-mover advantage brings Lemma 4.
the competitor more sales, a large b indicates a shrunk mar-
ket potential, which restricts the benefit from the first-mover 1. qBD ⟨qBN , qBD ⟩qBN ;
advantage. So pNDC
cannot be very high, and we indeed have GB GB
𝜕qBD
C C
pND − c < qND

, resulting in 𝜋CND < (qND )2 . Therefore, the 2. GB
< 0;
C 2 C C 𝜕b
benefit from possible large sales quantity as Lemma 2(5) 𝜕qBD 1 2(a−c2 )
3. C
> 0 if (a + 4c2 ) < c1 and −
shows is dominated by a relatively lower profit margin. This √ 𝜕b 5 a−c1
explains Proposition 1(4). 2ac1 −c21 −2ac2 +c22 𝜕qBD
2 2 < b < 1; otherwise, C
≤ 0.
(a−c1 ) 𝜕b
4.2 Analysis of scenario B where We find that, when the global brand adopts blockchain,
blockchain is adopted the presence of production delay reduces the global
brand’s sales quantity but increases the competitor’s (i.e.,
In this section, we analyze Scenario BN and BD where the qBD ⟨qBN , qBD
GB GB C
⟩qBN
C
). This result is similar to Lemma 2(1) but
global brand uses blockchain and knows production delay the driving forces are totally different. With blockchain, the
immediately. In Scenario BN where production delay does global brand sources from the stable CM by emergency pro-
not occur, the global brand still outsources production to duction shifting. However, the high crash cost drives up the
the low-cost CM. While in Scenario BD, the global brand stable CM’s manufacturing price, which reduces the global
knows production delay in advance and makes emergency brand’s sales quantity.
production shifting to a stable CM. Compared with the case without blockchain, the global
Since the outcomes in Scenario BN are the same as those brand need not suffer from second-mover disadvantage. Now
in Scenario NN, we omit the redundant results. We analyze it engages in head-to-head production competition with its
the equilibrium manufacturing price first. competitor in a simultaneous game. In this sense, the increas-
ing product homogeneity b → 1 further intensifies the market
Lemma 3. 𝜕qBD
competition, so we find GB < 0, which differs from Lemma
𝜕b
2(4). On the contrary, we find the competitor may increase its
1. wBD > wBN ;
𝜕wBD 𝜕wBN sales quantity, especially when the global brand’s crash cost
2. < < 0. is sufficiently high.
𝜕b 𝜕b
Then, we compare the profits of the global brand in
The global brand bears a high crash cost in Scenario BD Scenario BD and Scenario BN, and obtain the following
compared with the competitor (i.e., c1 > c2 ). So Lemma 3(1) proposition.
indicates the local stable CM in Scenario BD always charges
a higher manufacturing price than the low-cost CM in Sce- Proposition 2.
nario BN. Though this result is similar to that in Lemma 1(1),
the reasons behind are different. The higher manufacturing 1. 𝜋GB
BN
> 𝜋GB
BD
, 𝜋CBN < 𝜋CBD ;
price in Scenario BD comes from the high crash cost. Appar- 𝜕𝜋GB
BD
ently, the low-cost CM in Scenario BN takes advantage of the 2. < 0;

𝜕b
low production cost and charges a low manufacturing price to 𝜕𝜋C
BD
1 2(a−c2 )
3. > 0 if (a + 4c2 ) < c1 and −
stimulate the global brand to place a large quantity. 𝜕b
√ 5 a−c1
Then, we find that, as the competition becomes intensified, 2ac1 −c21 −2ac2 +c22 𝜕𝜋C
BD
2 2 < b < 1; otherwise, ≤ 0.
the stable CM in Scenario BD lowers its manufacturing price (a−c1 ) 𝜕b
faster than the low-cost CM in Scenario BN. To explain the
10 NIU ET AL.
Proposition 2 immediately follows Lemma 4, as we math- c1 , the blockchain adoption cost F and the probability of pro-
ematically have 𝜋GB BN
= (qBN
GB
)2 , 𝜋GB
BD
= (qBD
GB
)2 , and 𝜋CBD = duction delay are intuitive. So we here focus on the market
(qBD
C
)2 . The difference from Proposition 1 is that the com- competition intensity degree b, which significantly influ-
petitor has the opportunity to obtain a high profit when b ences the global brand’s second-mover disadvantage without
increases. This highlights the dark side of the global brand’s blockchain adoption, and the enhanced double marginaliza-
blockchain adoption: Although its second-mover disadvan- tion loss because of the crash cost, the stable CM’s high
tage disappears, the intensified head-to-head simultaneous manufacturing price, and the competitor’s cannibalisation.
competition strengthens the global brand’s cost disadvantage We find that, the market intensity degree b plays three roles
because of the stable CM’s crash cost and the enhanced dou- in the optimal decisions of the global brand and its com-
ble marginalization effect. As a useful managerial insight, petitor. First, b → 1 indicates product homogeneity becomes
the global brand is reminded to keep excellent relation- more and more significant, resulting in tenser competition
ship with a stable CM, even if there is no production delay in their production decisions. Conventional wisdom is that
risk and the low-cost CM is chosen. In practice, we indeed their production quantities will become smaller. This high-
observe that some global brands place a very small propor- lights the negative impact of the global brand’s second-mover
tion of its manufacturing orders (ignorable in our context) disadvantage when production delay occurs and emergency
to the stable CM while the large proportion to the low-cost production shifting is impossible without blockchain adop-
CM when the latter’s region does not experience COVID-19 tion. Second, b → 1 indicates consumers’ overall purchase
outbreaks (Chen & Guo, 2014). Once blockchain provides intentions are weakened because they find the product of the
the outbreak information, the global brand will immediately global brand and the competitor could not provide them the
shift all the manufacturing orders to the stable CM, without fun with differentiation (Lus & Muriel, 2009). This strength-
the significant increased crash cost. Undoubtedly, the value ens the negative impact of the global brand’s second-mover
of blockchain in supply chain resilience is increased, lead- disadvantage (see our explanations following Proposition 1)
ing to the global brand’s high competitiveness confronting if the global brand sticks to using the low-cost CM and
COVID-19. waiting for the recovery of the shutdown factories. Even
Synthesizing the findings from Proposition 1 and 2, we the global brand has adopted blockchain, a shrunk market
find that production delay risk always hurts global brand’s potential because of a large b will drive the stable CM to
profitability, no matter blockchain is adopted or not. This increase the manufacturing price (see Lemma 3) because the
illustrates the inevitable loss in a cross-border supply chain CM expects the global brand’s smaller order quantity. This
caused by the COVID-19 pandemic. Although blockchain further induces the cannibalisation of the global brand’s com-
adoption can be seen as a prevention/mitigation measure in petitor. Having said that, finally, we note that the global brand
Aven and Zio (2021), it also incurs sunk cost and higher will experience the low-cost CM’s price markup when they
production cost, making blockchain adoption not always ben- face production delay (Lemma 1), even the global brand does
eficial. Therefore, it is necessary to compare the supply not adoption blockchain and hence, emergency production
chain members’ profits and clarify their true incentives of shifting becomes impossible. We have shown that an increas-
blockchain adoption. ing b helps lower the manufacturing prices because the CMs
worry about order loss. The manufacturing price in Scenario
BD is decreasing faster than the other scenarios (Lemma 3).
4.3 The incentive for blockchain adoption This weakens the negative impact of the double marginaliza-
tion effect and induces the global brand to favor blockchain
It is the global brand who decides blockchain adoption, so we adoption.
compare its profits with and without blockchain. The main Clearly, the first and the third roles of b act as the driving
findings are summarized in Proposition 3. forces for the global brand to adopt blockchain while the sec-
ond acts as a barrier to blockchain adoption. We show that,
√
a 2c1 when the crash cost c1 is low, and the probability of produc-
Proposition 3. 𝜋GB
B
> 𝜋GB
N
if c1 < , 2 <
8 a tion delay 𝜙 is high, the impact of b’s second role will be
{a[b(8+b)−16]+8c1 −8bc2 }(8c1 −ab2 )
b < 1, 0 < F < and lessened. As a result, we have 𝜋GB B
> 𝜋GB
N
if b is large, c1 is
1024−512b2 +64b4
512b2 F−64b4 F−1024F small, and 𝜙 is large.
< 𝜙 < 1; otherwise, we have Proposition 3 can be insightful. For the global brands that
{a[b(8+b)−16]+8c1 −8bc2 }(ab2 −8c1 )
𝜋GB
B
≤ 𝜋GB
N
. meet the requirements, blockchain can be used to assess,
communicate and handle production delay risk, by enabling
In practice, blockchain adoption is usually an ex-ante deci- emergency production shifting and mitigating the profit loss.
sion before the outbreak of COVID-19 pandemic. Therefore, According to Aven and Zio (2021), the findings in this paper
we take the global brand’s expected profits participating in the can be regarded as the first two strategies in the systemic
probability of future production delay. Proposition 3 provides risk frameworks, i.e., risk-informed and robustness/resilience
the conditions under which the global brand is benefited from strategies, which enriches the application of foundational risk
blockchain adoption. The conditions regarding the crash cost science in supply chain management confronting COVID-19.
4.4 Numerical studies Consistent with the analytical results, Table 4 illustrates
how firms’ and the entire supply chain’s performances change
In this section, we focus on worldwide well-known protec- with a, b and 𝜙, and highlights the impact of blockchain adop-
tive clothing brand, Lakeland, which has been mentioned in tion on the entire supply chain and the local competitor. As
Introduction as an example of emergency production shifting. Table 4 shows, in such a market, global brand benefits from
According to the Annual report 2021, Lakeland has “opened Scenario B where emergency production shifting is enabled
manufacturing facilities in Vietnam in an effort to hedge if 𝜙 is not sufficiently low. This observation is in line with
against ever increasing manufacturing cost in China” and Lakeland’s emergency production shifting when facing Viet-
China is its most important market in Asia (US Securities and namese factories’ production delay with a high probability.
Exchange Commission, 2022). We also note that Lakeland This also reflects that our theoretical findings are capable
has highlighted the impact of the COVID-19 pandemic in of providing useful insights for the managers. Furthermore,
2021. These aspects support that Lakeland is a typical exam- we show that the global brand’s incentives of blockchain
ple that fits this paper. Winner Medical, a billion-dollar listed adoption will be increased and the possibility of emergency
medical product company located in Shenzhen, is Lakeland’s production shifting will be higher when the market potential
most important competitor in China. is more substantial or/and the competition is more inten-
The real data are collected and compiled from several sified because the second-mover disadvantage in Scenario
sources including N is strengthened. In contrast, if the market competition is
relatively mild (e.g., b = 0.35), the negative impact of pro-
∙ US Securities and Exchange Commission: Annual report duction delay will be restrained while the high production
of Lakeland from 2018 to 2021. cost will become a heavy burden, so there is no need to shift
∙ Hibor, a Chinese investment research platform: Annual production. This sheds light on why giant companies such as
report of Winner Medical Nike and Samsung have not opted for emergency production
∙ Statista: Manufacturing labor costs per hour for China, shifting.
Vietnam, Mexico from 2016 to 2020. Regarding the entire supply chain and the competitor’s
∙ Safety and Health Protective Good Committee of China performance, Table 4 delivers two important insights. First,
Textile Commerce Association and e-commerce platforms the entire supply chain is more likely to be benefited from
such as JD and Taobao: Market information such as sales blockchain adoption than the global brand itself (e.g., a =
price and market demand. 17 000, b = 0.35, 𝜙 ≤ 0.25). Only when the market poten-
∙ China Customs: Tariff rate. tial is notable and the production delay risk is significant,
∙ The literature and reports: Emergency production cost and the global brand is incentivized to adopt blockchain to ben-
the sunk cost of blockchain platform. efit the entire supply chain. This suggests that the potential
∙ The literature and reports: Emergency production cost and CM can subsidize the global brand’s blockchain adoption,
the sunk cost of blockchain platform. which actually increases the likelihood of emergency produc-
tion shifting. Second, blockchain adoption cannot result in a
From Statista, we estimate that the unit production cost of “win-win” situation but may induce a “lose-lose” situation for
local competitor is c2 = $2.5 (Statista, 2021). According to the global brand and the local competitor, depending on mar-
Rosenshine and Obee (1976), Chiang and Gutierrez (1998), ket potential (i.e., a) and production delay risk (i.e., 𝜙). There
Axsäter (2007), Zheng, Shu, and Wu (2015), and Barron are two cases: (1) when 𝜙 is low, both the global brand and
(2022), the unit production cost of emergency order ranges the local competitor have profit loss with blockchain adop-
from 100% to 250% of normal production costs. To conform tion; (2) when 𝜙 is relatively high and a is large, blockchain
to reality, we estimate c1 = $3. The tariff rate of protective adoption is beneficial for the global brand but harmful for the
clothing (HS code 6210.10.3010) imported from Vietnam is local competitor. We also note that, a mild competition (i.e., a
8% (China Customs, 2022). From Azati, we estimate the sunk smaller b) reduces the global brands’ gains but mitigates the
cost of blockchain adoption is $200, 000 (Azati, 2023). We loss of local competitor because of global brand’s blockchain
obtain sales information from two firms’ 2021 annual reports adoption. This complements our theoretical results that the
(Hibor, 2022), based on which we estimate the parameter mild competition hinders the incentive of blockchain adop-
value of market potential a = 17, 000 and market com- tion. and global brands are suggested to monitor the market
petition b = 0.52. Since the material prices and market conditions and competition intensity carefully when they
conditions can be volatile in four scenarios, we accord- make the blockchain adoption decision.
ingly adjust the value of a ∈ {12 000, 24 000} and b ∈
{0.35, 0.65} to see their impact on our results. In a similar 5 EXTENSIONS
vein, the possibility of pandemic outbreak 𝜙 is not straight-
forward, we follow Kumar, Basu, and Avittathur (2018) by 5.1 Risk-averse global brand
letting 𝜙 = 0.25. We also consider 𝜙 ∈ {0.1, 0.5, 0.75} to
see the impact on the results. See Table 3 for all estimated In this subsection, we assume the global brand is risk-
parameters. averse and the other supply chain members are risk-neutral.
12 NIU ET AL.
TA B L E 3 Estimated parameters in numerical studies.
Parameters Values
Local stable CM’s unit cost of emergency order c1 $3

Local competitor’s unit cost of normal order c2 $2.5
Tariff rate f 8%
Sunk cost of blockchain platform F $0.2M
Market potential a {12 000, 17 000, 24 000}
Competition intensity b {0.35, 0.52, 0.65}
Possibility of production delay 𝜙 {0.1, 0.25, 0.5, 0.75}
Following Choi et al. (2020) and Zhang, Sethi, Choi, Proposition 4(2) is the same as the basic model, and the global
and Cheng (2022), global
√ brand’s objectives are given by brand is still incentivized to adopt blockchain when b is suf-
B
U(𝜋GB ) = E[𝜋GB B
] − 𝜆 Var[𝜋GB B N
] and U(𝜋GB ) = E[𝜋GB
N
]− ficiently high. The new results are that the risk averse global
√ brand would adopt blockchain even if the probability of pro-
𝜆 Var[𝜋GB N
] where 𝜆 is the risk aversion degree. The duction delay is low, or, the sunk cost is high (Proposition
expected profit functions of the global brand with and without 4(1) and (3)). The reason is that the risk-averse global brand’s
blockchain adoption are, respectively: production quantity is reduced by 𝜆 (driving qGB to derive
from the profit-maximization one) and F (driving up the prod-
[ B ] ( ) BN uct price pGB ), which shows similar effect of an increasing
E 𝜋GB = 𝜙𝜋GB
BD
+ 1 − 𝜙 𝜋GB ;
b that shrinks the total demand. In this sense, a risk-averse
global brand becomes more likely to adopt blockchain to
[ N ] ( ) NN ensure emergency production shifting.
E 𝜋GB = 𝜙𝜋GB
ND
+ 1 − 𝜙 𝜋GB .
And the variance of the profit functions with and without 5.2 Overestimation of production delay
blockchain adoption are:
[ B ] [ B2 ] [ B ]2 In practice, even the forecast accurately says that things,

Var 𝜋GB = E 𝜋GB − E 𝜋GB = 𝜙𝜋GB
BD2 e.g., raining, storm, and production delay, will not occur,
a decision-maker may still believe some risk will appear
( ) BN2 [ B ]2
+ 1 − 𝜙 𝜋GB − E 𝜋GB ; because of his/her risk aversion (Laster, Bennett, & Geoum,
1999, Kermer, Driver-Linn, Wilson, & Gilbert, 2006, Niu,
Chen, Chen, Ding, & Yue, 2021). Specifically, let d ∈ {0, 1}
[ N ] [ 2
] [ N ]2 denote the actual production delay, with d = 0 (resp. d =
Var 𝜋GB = E 𝜋N
GB
− E 𝜋GB = 𝜙𝜋GB
ND2
1) representing no production delay (resp. production delay)
( ) ND2 [ N ]2 in fact. Let s ∈ {0, 1} denote the global brand’s belief of pro-
+ 1 − 𝜙 𝜋GB − E 𝜋GB . duction delay, with s = 0 (resp. s = 1) representing the
global brand’s belief of no production delay (resp. produc-
We omit the straightforward derivations here and highlight tion delay). Similar to Niu, Chen et al. (2021), we assume
the impact of risk aversion on the global brand’s blockchain the belief is in line with forecast when there is indeed pro-
adoption strategy. See Proposition 4 for the main results. duction delay (i.e., Scenario BD), i.e., Pr(s = 0|d = 1) =
0, Pr(s = 1|d = 1) = 1. However, when there is no pro-
Proposition 4. U(𝜋GB B
) > U(𝜋GB
N
) if one of the following duction delay (i.e., Scenario BN), the global brand may
conditions is satisfied: wrongly believe there will be delay, because of its risk aver-
sion. The correct belief is with probability 𝛿 ∈ (0, 1), i.e.,
√
a 2c1 Pr(s = 0|d = 0) = 𝛿, Pr(s = 1|d = 0) = 1 − 𝛿. When 𝛿 =
1. c2 < c1 < , 2 𝜆1 ; √ bility theorem and Bayes law, the probabilities of signals and
a 2c
2. c2 < c1 < , 2 1
 𝜙2 ; posteriors can be derived as follows:
8 √ a
a
3. c2 < c1 < , 2
2c1
 𝜆1 . ( ) ( )
8 a Pr (s = 1) = (1 − 𝛿) 1 − 𝜙 + 𝜙, Pr (s = 0) = 𝛿 1 − 𝜙 ;
Otherwise, we have U(𝜋GB B

) ≤ U(𝜋GBN
).
Proposition 4 reveals that our main results and explanations Pr (d = 0|s = 0) = 1, Pr(d = 1|s = 0) = 0;
are robust even when the global brand is risk averse, because
TA B L E 4 Comparison of the performances of the firms and the supply chain.
a = 12 000 a = 17 000 a = 24 000

𝝓 0.1 0.25 0.5 0.75 0.1 0.25 0.5 0.75 0.1 0.25 0.5 0.75
b = 0.35
N
𝜋GB ($M) 6.49 6.46 6.40 6.34 13.04 12.96 12.84 12.72 25.98 25.84 25.60 25.36
B
𝜋GB ($M) 6.31 6.32 6.32 6.32 12.88 12.88 12.88 12.88 25.88 28.87 25.87 25.87
B N
𝜋GB − 𝜋GB ($M) −0.18 −0.14 −0.08 −0.02 −0.15 −0.08 0.04 0.16 −0.10 0.04 0.28 0.51
N
𝜋SC ($M) 18.20 18.14 18.07 17.99 36.51 36.41 36.26 36.10 72.76 72.57 72.26 71.94
B
𝜋SC ($M) 18.10 18.25 18.49 18.72 36.56 36.84 37.30 37.78 73.06 73.62 74.55 75.48
B N
𝜋SC − 𝜋SC ($M) −0.10 0.11 0.42 0.73 0.05 0.42 1.05 1.67 0.30 1.05 2.29 3.54
ENABLING EMERGENCY PRODUCTION SHIFTING
N
𝜋C ($M) 30.83 30.84 30.87 30.89 61.89 61.91 61.96 62.00 123.4 123.4 123.5 123.6
𝜋CB ($M) 30.82 30.82 30.82 30.82 61.87 61.87 61.87 61.87 123.3 123.3 123.3 123.3
𝜋CB − 𝜋CN ($M) −0.01 −0.02 −0.04 −0.06 −0.02 −0.04 −0.09 −0.12 −0.03 −0.09 −0.17 −0.25
b = 0.52
N
𝜋GB ($M) 5.62 5.54 5.41 5.29 11.28 11.12 10.87 10.62 22.48 22.17 21.67 21.16
B
𝜋GB ($M) 5.47 5.47 5.47 5.47 11.18 11.18 11.18 11.17 22.48 22.48 22.47 22.47
B N
𝜋GB − 𝜋GB ($M) −0.15 −0.07 0.05 0.18 −0.10 0.05 0.31 0.56 0.002 0.30 0.81 1.31
N
𝜋SC ($M) 15.39 15.28 15.09 14.91 30.88 30.66 30.29 29.92 61.54 61.10 60.37 59.63
B
𝜋SC ($M) 15.34 15.45 15.65 15.84 30.98 31.21 31.60 31.99 61.94 62.41 63.19 63.97
B N
𝜋SC − 𝜋SC ($M) −0.05 0.18 0.55 0.93 0.10 0.56 1.31 2.07 0.40 1.31 2.82 4.33
N
𝜋C ($M) 28.97 29.01 29.08 29.14 58.14 58.22 58.36 58.50 115.9 116.1 116.3 116.6
𝜋CB ($M) 28.94 28.94 28.94 28.94 58.09 58.10 58.09 58.09 115.8 115.8 115.8 115.8
𝜋CB − 𝜋CN ($M) −0.03 −0.07 −0.13 −0.20 −0.05 −0.14 −0.27 −0.41 −0.11 −0.27 −0.54 −0.81
b = 0.65
N
𝜋GB ($M) 5.05 4.93 4.74 4.55 10.14 9.90 9.52 9.13 20.20 19.74 18.97 18.20
B
𝜋GB ($M) 4.93 4.92 4.93 4..93 10.09 10.09 10.09 10.09 20.30 20.31 20.30 20.30
B N
𝜋GB − 𝜋GB ($M) −0.12 −0.01 0.18 0.38 −0.05 0.19 0.57 0.96 0.1 0.57 1.33 2.11
N
𝜋SC ($M) 13.50 13.32 13.02 12.72 27.09 26.73 26.13 25.53 54.00 53.28 52.28 50.89
B
𝜋SC ($M) 13.49 13.59 13.75 13.92 27.27 27.47 27.80 28.14 54.54 54.95 55.62 56.30
B N
𝜋SC − 𝜋SC ($M) −0.01 0.27 0.73 1.20 0.17 0.74 1.67 2.61 0.55 1.67 3.54 5.41
N
𝜋C ($M) 27.75 27.83 27.96 28.09 55.70 55.86 56.12 56.38 111.0 111.3 111.9 112.4
𝜋CB ($M) 27.70 27.70 27.70 27.70 55.60 55.60 55.60 55.60 110.8 110.8 110.8 110.8
𝜋CB − 𝜋CN ($M) −0.05 −0.13 −0.26 −0.39 −0.10 −0.26 −0.52 −0.78 −0.21 −0.52 −1.04 −1.56
13
14 NIU ET AL.
and Depending on the outbreak of pandemic in both areas and

( ) blockchain adoption, there are eight cases (see Table 5). We
(1 − 𝛿) 1 − 𝜙 use a new format XYZ to denote scenarios here, where X ∈
Pr (d = 0|s = 1) = ( ) , Pr(d = 1|s = 1) {N, B} represents blockchain adoption or not, Y ∈ {N, D}
1−𝛿 1−𝜙
represents whether the infected area faces production delay
𝜙 because of COVID-19 outbreak, and Z ∈ {N, D} represents
= ( ).
1−𝛿 1−𝜙 whether the less infected area faces production delay. The
global brand with blockchain knows production delay in
Based on posterior probabilities, we rewrite the global both the infected area and the safe area. Otherwise, emer-
brand’s profit functions when the global brand adopts gency production shifting becomes impossible which alters
blockchain. If s = 0, the global brand would not choose its competition with the local competitor. The inverse demand
emergency production shifting and 𝜋GB|s = 0 = 𝜋GB
BN
. If s = functions and objective functions are the same as the basic
1, the global brand would choose emergency production shift- model so we omit them here. Note that, in each scenario, we
ing with 𝜋GB|s = 1 = 𝜋GBBD
, but production delay may not have the corresponding event sequence, which influences the
(1−𝛿)(1−𝜙) solving sequence. We obtain the expected profits of the global
occur with probability . Hence, we have 𝜋GB
B
= brand as following:
1−𝛿(1−𝜙)
Pr(s = 1)𝜋GB|s=1 + Pr(s = 0)𝜋GB|s=0 .
( ) BDN ( ) BND
𝜋GB
B
= 𝜉𝜙𝜋GB
BDD
+ 1 − 𝜉 𝜙𝜋GB + 𝜉 1 − 𝜙 𝜋GB
Proposition 5. 𝜋GB
B
> 𝜋GB
N
if one of the following conditions ( )( ) BNN
is satisfied + 1 − 𝜉 1 − 𝜙 𝜋GB ;
√ √c
1. a > 8c1 , 2 2 1
 8c1 , 2 2 and
Otherwise, we have 𝜋GBB
≤ 𝜋GBB
. 3
1
Proposition 5 keeps in line with our main findings in c1 < (a + c2 ) are required. Comparing the global brand’s
2
the basic model, especially the intriguing effect on b. How- profits with and without blockchain, we obtain the following
ever, in the presence of overestimation of production delay, proposition.
we find the global brand would adopt blockchain when the
probability of production delay is moderate only when the Proposition 6. 𝜋GB
B
> 𝜋GB
N
if one of the following conditions
belief accuracy is sufficiently high (see Proposition 5(1)). is satisfied:
This actually reduces the global brand’s incentives to adopt √
blockchain, compared with the basic model. The reason is 1. a > 8c1 , 2
2c1
< b < 1, 0 < F < F4 , 𝜙5 < 𝜙 < 𝜙6
that, overestimation of production delay causes meaningless a
production shifting, which increases global brand’s cost and and 0 < 𝜉 √ < 𝜉1 ;
2c1
reduces its incentives to adopt blockchain, especially when 2. a > 8c1 , 2 8c1 , 2 8c1 , 2 1
< b < 1, F4 < F < F5 , 𝜙5 < 𝜙 < 1
a
and 0 < 𝜉 < 𝜉1 .
5.3 Low-probability-production-delay-risk Otherwise, we have 𝜋GB
B
≤ 𝜋GB
N
.
in Safe Area Our main findings are robust. The new result is that,
mathematically,
√ the four conditions can be unified as a >
In practice, no production market can be totally free from 2c
COVID-19. Inspired by this thought, we extend the basic 8c1 , 2 1
< b < 1, 0 < F < F5 , 𝜙5 < 𝜙 < 1 and 0 < 𝜉 <
a
model by considering the safe area as less infected area that Min{𝜉1 , 𝜙}.So blockchain can be adopted only when 𝜉 is
is of low-probability-production-delay-risk. We assume the small. A direct understanding is that when 𝜉 is sufficiently
pandemic outbreak in both areas are independent and simul- high, the less-infected area also faces production delay with
taneous, and the probability of production delay in safety area a high probability, making emergency production shifting
is 𝜉 (0 < 𝜉 < 𝜙). Note that, if very few people are infected meaningless. Compared with the basic model, the introduc-
but quickly controlled, then the pandemic outbreak will not tion of 𝜉 mainly affects Scenario NND, NDD, BND and
occur, not to mention production delay.
TA B L E 5 Eight scenarios of production delay.
Scenario Description Probability
NNN Simultaneous game (1 − 𝜉)(1 − 𝜙)

NND The local competitor becomes second-mover 𝜉(1 − 𝜙)
NDN The global brand becomes second-mover (1 − 𝜉)𝜙
NDD Both sellers are forced to be second-mover, which is actually a simultaneous game 𝜉𝜙
BNN Simultaneous game (1 − 𝜉)(1 − 𝜙)
BND The local competitor becomes second-mover 𝜉(1 − 𝜙)
BDN Emergency production shifting is implemented, and they engage in simultaneous game (1 − 𝜉)𝜙
BDD Both sellers are forced to be second-mover, which is actually a simultaneous game 𝜉𝜙
BDD. If blockchain is absent, the global brand can possi- The expected social welfare and customer surplus with and
bly avoid the second-mover disadvantage (Scenario NDD) without blockchain are
or even get the first-mover advantage (Scenario NND). On ( ) ( )
the other hand, if blockchain is adopted, the global brand can SWN = 𝜙SWND + 1 − 𝜙 SWNN ; SWB = 𝜙SWBD + 1 − 𝜙 SWBN ;
( ) ( )
be the first-mover (Scenario BND) or do not have to pay for CSN = 𝜙CSND + 1 − 𝜙 CSNN ; CSB = 𝜙CSBD + 1 − 𝜙 CSBN ;
emergency production to pursue a simultaneous game (Sce-
nario BDD). Since the global brand’s profits in both scenarios The results are complicated so we relegate them to A3.
are increased, the key is the comparison of the profit incre-
mental between two scenarios. Proposition 6 indicates the Proposition 7. The customer surplus when blockchain is
expected profit incremental in Scenario N is larger than that adopted is lower than that without blockchain. (i.e., CSN >
in Scenario D, which restrains the global brand’s incentive to CSB ).
adopt blockchain. Therefore, only when 𝜉 is small, the profit
incremental in Scenario N becomes limited and blockchain The reason for Proposition 7 is that, in Scenario BD, the
adoption is preferred. global brand has to bear a much higher cost because of the
stable CM’s high crash cost, the significant double marginal-
ization effect and the blockchain adoption cost, which drives
5.4 Social welfare and customer surplus up the product price and reduces the sales quantity. As the
response, the global brand’s competitor also increases the
Note that, in such a cross-border supply chain, the local social product price because of the reference price effect, leading
welfare is consisted of customer surplus, local firms’ profits to a reduced customer surplus (Singh & Vives, 1984). In
(including the global brand, the global brand’s competitor, contrast, when the global brand does not adopt blockchain,
and the stable CM) and the government’s tariff income. We though the global brand suffers from the second-mover dis-
use SW and CS to denote social welfare and customer surplus, advantage in Scenario ND, the production cost is low, and the
respectively. Following Singh and Vives (1984), the functions supply chain system is coordinated in a sequential competi-
of customer surplus and social welfare in the four scenarios tion game. As a result, the total sales quantity (global brand’s
are as follows: + its competitor’s) is increased, and the average product price
In Scenario NN, ND and BN: is lowered, which benefits the customer surplus.
Then we study the impact of competition intensity degree
( )
CS = a (qGB + qC ) − q2GB + q2C + 2bqGB qC ∕2 and the probability of production delay (see Figure 4). We
find that intensified market competition generally benefits the
− (pGB qGB + pC qC ) ; customers because the global brand and its competitor have
to produce more but sell the products at a lower price. One
observation worth noting is that CSB can be decreasing in b
SW = CS + 𝜋C + fwqGB ; when b is sufficiently large. The reason is that the total sales
𝜕[𝜙(qBD +qBD )+(1−𝜙)(qBN +qBN )]
quantity decreases in b (i.e., GB C GB C
< 0)
In Scenario BD: 𝜕b
and the decreasing rate is large. This reduces the overall
( ) product supply in the market.
CS = a (qGB + qC ) − qGB 2 + qC 2 + 2bqGB qC ∕2 Regarding the impact of the probability of production
− (pGB qGB + pC qC ) ; delay, we find that when 𝜙 increases, the expected customer
surplus with blockchain is decreasing while that without
blockchain is increasing. This observation stems from the
impact of the CM’s pricing power and the supply chain coor-
SW = CS + 𝜋SCM + 𝜋C ;
16 NIU ET AL.
FIGURE 4 The comparison of customer surplus with and without blockchain adoption.
FIGURE 5 The comparison of social welfare with and without blockchain adoption.
dination when production delay occurs and the global brand (0, 1) with mean 𝜇 and variance 𝜎2 . The superscript YNN,
becomes the second-mover. Clearly, if 𝜙 increases, the sta- YND, YBN, YBD denote the four scenarios where the low-
ble CM’s pricing power because of the high crash cost is cost CM has yield uncertainty. The reverse demand functions
enhanced, so the global brand has to determine a high product in Scenario YNN, YND and YBN where the global brand
price, which hurts customer surplus. If there is no blockchain, sources from the low-cost CM are:
as a second-mover, the global brand together with its com-
petitor actually produce more products for the customers, pGB = a − eqGB − bqC ;
which increases customer surplus.
We could not obtain analytical comparison results of social
welfare so we conduct extensive numerical studies. Figure 5 pC = a − qC − beqGB .
reveals that social welfare is generally higher when the global
brand adopts blockchain, which is in contrast to the com-
And the profit functions of the supply chain members in
parison results of customer surplus. The main reason is
Scenario YNN and YND become
that the stable CM’s profit is included and the tariff loss
can be ignored with the global brand’s blockchain adoption, ( )
𝜋GB = pGB − w eqGB − fweqGB ; 𝜋C
especially when the probability of production delay is high.
( )
= pC − c2 qC ; 𝜋LCM = weqGB .
5.5 Low-cost CM’s production yield The profit functions of the supply chain members in
uncertainty Scenario YBN are
In practice, production yield problem can be important for the ( )
𝜋GB = pGB − w eqGB − fweqGB − F; 𝜋C
low-cost CM, so we follow Yano and Lee (1995) by using a
random variable e to denote its yield uncertainty. We have e ∈ ( )
= pC − c2 qC ; 𝜋LCM = weqGB .
when it faces production delay but could not make emergency

production shifting. We develop a chain-to-chain competition
model comprised of a global brand who sells products to a
safe market but is optional to rely on a low-cost CM with
random production delay, a competitor who produces and
sells products in the safe market, and a stable CM who can
produce for the global brand if emergency production shift-
ing is enabled by blockchain. Depending on the blockchain
adoption decision and the production delay occurrence, we
investigate four typical scenarios to study the global brand’s
blockchain adoption decisions, the customer surplus and the
social welfare.
We find the main results are driven by the double marginal-
ization effect, the global brand’s second-mover disadvantage,
and more importantly, the market competition intensity
degree labeled by a parameter b. We find production delay
FIGURE 6 The comparison of global brand’s profit with and without caused by random outbreaks of COVID-19 reduces the global
blockchain. brand’s profit, regardless of blockchain adoption. When the
global brand adopts blockchain, the presence of produc-
tion delay induces emergency production shifting at a high
Because the global brand sources from the stable CM
crash cost. This drives up the manufacturing price, enhances
rather than the low-cost CM, the reverse demand functions
the double marginalization effect, and hence reduces the
and profit functions in Scenario YBD are the same as those in
7𝜇2 c2 +8𝜎2 c2 global brand’s profit. When the global brand does not adopt
scenario BD. Here a ≥ is required to ensure posi- blockchain, the presence of production delay puts the global
5𝜇2 +8𝜎2
tive outcomes. We analyze the impact of yield uncertainty on brand at the second-mover position, making it lose sales to
the low-cost CM’s decision first. the competitor, and even the low-cost CM will become not
cost-effective: It will increase the manufacturing price to
Lemma 5. The wholesale price in Scenario YND is lower compensate for the loss of order quantity. This also aggra-
than that in Scenario ND (i.e., wYND < wND ). vates the double marginalization effect and reduces the global
brand’s profit.
Compared with the main model, Lemma 5 reflects that the Of two evils, the lesser should be chosen. We there-
low-cost CM with yield uncertainty would lower its whole- fore compare the global brand’s profits with and without
sale price significantly to keep the global brand’s order. This blockchain adoption. We obtain some expected results, e.g.,
effect can be very effective even production delay occurs the global brand can be better off with blockchain when the
(Niu, Li, Zhang, Cheng, & Tan, 2019). Then we investi- stable CM’s crash cost is low, the blockchain adoption cost is
gate the global brand’s blockchain adoption decisions. Again, limited, and the probability of production delay is high. We
the analytical comparison result is too complicated and we also obtain one interesting result that intensified market com-
conduct numerical studies to show the main observations. petition serves as an important driving force for the global
We highlight the typical curves by Figure 6, which indi- brand to adopt blockchain. We show that: (1) A large b helps
cates that our main results are robust that the global brand reduce the double marginalization effect in Scenario BD; (2)
is more likely to adopt blockchain when b is large and 𝜙 is The global brand’s second-mover disadvantage in Scenario
large. ND is enhanced by a large b, so the global brand tries to avoid
playing as a second-mover in production competition; (3) The
overall market will be shrunk given a large b, so the stable
6 CONCLUSIONS CM lowers the manufacturing price to stimulate the global
brand’s order quantity. We identify how these three forces
Nowadays, production delay because of the outbreaks of impact the global brand’s blockchain adoption decisions. We
COVID-19 pandemic is not uncommon. We observe that also study the impact of other important factors such as the
many well-known global brands have made emergency pro- global brand’s risk attitude, his overestimation of production
duction shifting from the infected countries/regions to a delay, and the unexpected low-probability-production-delay-
less-infected area even if they have to bear a high crash cost. risk in safe areas, where the robustness of the main findings
Since blockchain is widely believed to enable quick search of is verified. We further find that the global brand’s risk aver-
new stable CMs and smart contracting of production shifting, sion makes blockchain adoption more attractive, but the
we study the global brand’s optimal decisions in blockchain overestimation of production delay and the low-probability-
adoption. We mainly consider the global brand’s crash cost, production-delay-risk in the safe area reduces his incentive to
blockchain adoption cost, tariff cost if it sticks to using an adopt blockchain. We finally investigate the impact on social
overseas low-cost CM, and the second-mover disadvantage welfare and customer surplus. We find that blockchain adop-
18 NIU ET AL.
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𝜕qGB
TA B L E A 1 Equilibrium outcomes in main model.
Notation Outcomes
a[8−b(4+b)]+4bc2 2a−ab+bc2
w wND = wNN =
4(4−b2 )(1+f ) 4+4f
[a(2−b)+bc2 +2c1 ] 2a−ab+bc2
wBD = wBN =
4 4+4f
a[8−b(4+b)]+4bc2 2a−ab+bc2
qGB qND
GB
= qNN
GB
=
8(4−b2 ) 8−2b2
2a−ab+bc2 −2c1 2a−ab+bc2
qBD
GB
= qBN
GB
=
8−2b2 8−2b2
a(4−b)−4c2 a(2−b)(4+b)−(8−b2 )c2
qC qND
C
= qNN
C
=
2(4−b2 ) 4(4−b2 )
a(2−b)(4+b)−(8−b2 )c2 +2bc1 a(2−b)(4+b)−(8−b2 )c2
qBD
C
= qBN
C
=
4(4−b2 ) 4(4−b2 )
{a[b(4+b)−8]−4bc2 }2 [a(2−b)+bc2 ]2
𝜋GB 𝜋GB
ND
= 2 𝜋GB
NN
= 2
64(4−b2 ) 4(4−b2 )
[a(2−b)+bc2 −2c1 ]2 [a(2−b)+bc2 ]2
𝜋GB
BD
= 2 −F 𝜋GB
BN
= 2 −F
4(4−b2 ) 4(4−b2 )
2
[a(4−b)−4c2 ]2 [a(2−b)(4+b)−(8−b2 )c2 ]
𝜋C 𝜋CND = 𝜋CNN = 2
16(4−b2 ) 16(4−b2 )
2 2
[a(2−b)(4+b)−(8−b2 )c2 +2bc1 ] [a(2−b)(4+b)−(8−b2 )c2 ]
𝜋CBD = 2 𝜋CBN = 2
16(4−b2 ) 16(4−b2 )
It is easy to show the profit function is concave in qGB . First, the production quantities of the global brand and its
𝜕𝜋
Thus, solving GB = 0, we derive the global brand’s best competitor are
𝜕qGB
1
response function as qGB = (a − w − fw − bqC ). 2a − ab − 2w − 2fw + bc2
2 qGB = ,
Then the CM’s profit function is 𝜋LCM = 4 − b2
1
w[ (a − w − fw − bqC )]. 2a − ab + bw + bfw − 2c2
2
We take the first-order condition of 𝜋LCM with respect qC = .
4 − b2
to w, and derive the CM’s best wholesale price as w =
a−bqC
, based on which the local competitor’s profit function Second, substituting qGB and qC into the CM’s profit
2(1+f )
becomes function, we have the CM’s profit function 𝜋LCM =
2a−ab−2w−2fw+bc2
w[ ].
1 [ ( ) ]
2
4−b
2a−ab+bc2
𝜋C = q a (4 − b) − 4c2 + b2 − 4 qC . Taking the first-order condition we have w = ,
4 C 4+4f
2a−ab+bc2 a(2−b)(4+b)−(8−b2 )c2
qGB = , and qC = .
Again, we take the first-order condition of 𝜋C with respect 8−2b2 4(4−b2 )
to qc , and obtain Finally, we derive the supply chain members’ equilibrium
profits as follows:
⎧ a[8−b(4+b)]+4bc2
⎪ w = 4(4−b2 )(1+f ) ⎧ 2
a[8−b(4+b)]+4bc2 .
⎨ ⎪ [a(2−b)+bc2 ]
𝜋GB =
⎪ qGB =
2
8(4−b2 ) ⎪ 4(4−b2 )
⎩ ⎪ [ (
a(2−b)(4+b)− 8−b2 c2
) ]2
⎨ 𝜋C = 2
.
The supply chain members’ equilibrium profit functions ⎪ 16(4−b2 )
⎪
2
[a(2−b)+bc2 ]
are obtained as follows: ⎪ 𝜋LCM =
8(4−b2 )(1+f )
⎩
⎧ 2
⎪ 𝜋GB = {a[b(4+b)]−8−4bc 2}
With blockchain
⎪ 64(4−b2 )
2
In the second scenario, the global brand with blockchain will
⎪ [4c2 −a(4−b)]
2
⎨ 𝜋C = . source from the low-cost CM if there is no production delay
16(4−b2 )
⎪ 2 and a stable CM if there is production delay. The outcomes
⎪ 𝜋LCM = {a[b(4+b)−8]−4bc 2}
without production delay remain the same as the results in
⎪ 2
32(4−b ) (1+f )
2
⎩ A.1.2, so we only show results with production delay here.
The profit functions of the three supply chain members
The simultaneous production game in Scenario NN (global brand, local stable CM, local competitor) are:
First, the CM decides the manufacturing price w. Then, the
( ) ( )
global brand and its competitor decide their production quan- 𝜋GB = pGB − w qGB − F; 𝜋C = pC − c2 qC ;
tities simultaneously. We also solve this game by backward
induction. 𝜋SCM = (w − c1 ) qGB .
22
TA B L E A 2 Equilibrium outcomes.
a2 (2−b)2 [20+b(24+5b)]−2a{64+b{8−b[44−b(2+5b)]}}c2 +(64−44b2 +5b4 )c22
CSNN 2
32(4−b2 )
a2 (2−b)[26+34f +b(7+3f )]−c2 {96a(1+f )−2ab[6+14f +b(7+3f )]+[b2 (7+3f )−48(1+f )]c2 }
SWNN
32(4−b2 )(1+f )
a2 {320+b[64−(4−b)b(44+9b)]}−8a{64+b[8−(28−b)b]}c2 +16(16−7b2 )c22

CSND
2 2 128(4−b )
1
2 {a2 {320 + b[64 − (4 − b)b(44 + 9b)]} − 8a{64 − b[(28 − b)b − 8]}c2
128(b2 −4)
SWND
2 4f {a[8−b(4+b)]+4bc2 }2
+16(16 − 7b2 )c22 + 8(4 − b2 )[4c2 − a(4 − b)] − }
1+f
a2 (2−b)2 [20+b(24+5b)]−2a{64+b{8−b[44−b(2+5b)]}}c2 +(64−44b2 +5b4 )c22

CSBN 2
32(4−b2 )
a2 (2−b)[26+34f +b(7+3f )]−c2 {96a(1+f )−2ab[6+14f +b(7+3f )]+[b2 (7+3f )−48(1+f )]c2 }
SWBN
32(4−b2 )(1+f )
1 2
CSBD 2 {a2 (2 − b) [20 + b(24 + 5b)] + 4(4 − 3b2 )c21 − 2a{64 + b{8 + b[b(2 + 5b) − 44]}}c2 + (64 − 44b2 + 5b4 )c22 + 4c1 {b(4 + b2 )c2 − a{8 + b[4 − (6 − b)b]}}}
32(4−b2 )
a2 (2−b)(34+3b)+20c21 −4c1 [a(10−7b)+7bc2 ]−c2 [96a−2ab(14+3b)−3(16−b2 )c2 ]

SWBD
32(4−b2 )
1
SWB {−a2 (2 − b)[26 + 34f + b(7 + 3f − 4𝜙) + 8𝜙] + 4(1 + f )𝜙c1 [a(−10 + 7b) + 5c1 ] − 2{48a(1 + f ) − ab[6 + 14f + b(7 + 3f − 4𝜙) + 8𝜙] + 14b(1 + f )𝜙c1 }c2 +
32(4−b2 )(1+f )
[48(1 + f ) − b2 (7 + 3f − 4𝜙)]c22 }
1 2
CSB 2 {a2 (2 − b) [20 + b(24 + 5b)] + 4(4 − 3b2 )𝜙c21 − 2a{64 + b{8 − b[44 − b(2 + 5b)]}}c2 + (64 − 44b2 + 5b4 )c22 + 4𝜙c1 {b(4 + b2 )c2 − a{8 + b[4 − (6 − b)b]}}}
32(4−b2 )
1 2
2 {a2 {4(2 − b) (2 + b)[26 + 34f + b(7 + 3f )]
128(4−b2 ) (1+f )
2
+b {48(1 + f ) − b[8(−3 + f ) + b(27 + 7f )]}𝜙}
SWN
+8a{(4 − b2 ){−48(1 + f ) + b[6 + 14f + b(7 + 3f )]} + b2 {−16(1 + f ) + b[−3 + f + b(7 + 3f )]}𝜙}c2
−4{−192(1 + f ) + b4 (7 + 3f )(−1 + 𝜙) + 4b2 [19 + 15f − 4(1 + f )𝜙]}c22 }
1 2
2 {a2 {4(2 − b) [20 + b(24 + 5b)] + b2 [48 − b(8 + 11b)]𝜙}
CSN 128(4−b2 )
−8a{64 + b{8 − b{44 − 16𝜙 − b[2 − 5b(1 − 𝜙) − 𝜙]}}}c2 + 4[64 + 5b4 (1 − 𝜙) − 4b2 (11 − 4𝜙)]c22 }
NIU ET AL.
TA B L E A 3 Equilibrium outcomes.
a b[a(4−b)𝜇2 +4a𝜎2 −4(𝜇2 +𝜎2 )c2 ] 2a−ab+bc2
wYND = − wYNN =
2+2f [2(4−b2 )𝜇2 +8𝜎2 ](2+2f ) 4+4f
[bc2 +2c1 +a(2−b)] 2a−ab+bc2
wYBD = wYBN =
4 4+4f
𝜇{a[8−b(4+b)]𝜇2 +4a(2−b)𝜎2 +4b(𝜇2 +𝜎2 )c2 } 𝜇[a(2−b)+bc2 ]
qYND
GB
= qYNN
GB
=
8[(4−b2 )𝜇2 +4𝜎2 ](𝜇2 +𝜎2 ) 2(4−b2 )𝜇2 +8𝜎2
2a−ab+bc2 −2c1 𝜇[a(2−b)+bc2 ]
qYBD
GB
= qYBN
GB
=
8−2b2 2(4−b2 )𝜇2 +8𝜎2
a(4−b)𝜇2 +4a𝜎2 −4(𝜇2 +𝜎2 )c2 a(2−b)(4+b)𝜇2 +8a𝜎2 −[(8−b2 )𝜇2 +8𝜎2 ]c2
qYND
C
= qYNN
C
=
2(4−b2 )𝜇2 +8𝜎2 4(4−b2 )𝜇2 +16𝜎2
a(2−b)(4+b)−(8−b2 )c2 +2bc1 a(2−b)(4+b)𝜇2 +8a𝜎2 −[(8−b2 )𝜇2 +8𝜎2 ]c2
qYBD
C
= qYBN
C
=
4(4−b2 ) 4(4−b2 )𝜇2 +16𝜎2
2
{a[8−b(4+b)]𝜇3 +4a(2−b)𝜇𝜎2 +4b𝜇(𝜇2 +𝜎2 )c2 } 𝜇2 (𝜇2 +𝜎2 )[a(2−b)+bc2 ]2
𝜋GB
YND
= 2 𝜋GB
YNN
= 2
64[(4−b2 )𝜇2 +4𝜎2 ] (𝜇2 +𝜎2 ) 4[(4−b2 )𝜇2 +4𝜎2 ]
[a(2−b)+bc2 −2c1 ]2 𝜇2 (𝜇2 +𝜎2 )[a(2−b)+bc2 ]2
𝜋GB
YBD
= 2 −F 𝜋GB
YBN
= 2 −F
4(4−b2 ) 4[(4−b2 )𝜇2 +4𝜎2 ]
2
[a(4−b)𝜇2 +4a𝜎2 −4(𝜇2 +𝜎2 )c2 ]
𝜋CYND = 𝜋CYNN =
16[(4−b2 )𝜇2 +4𝜎2 ](𝜇2 +𝜎2 ) 2
{a(2−b)(4+b)𝜇2 +8a𝜎2 −[(8−b2 )𝜇2 +8𝜎2 ]c2 }
2
16[(4−b2 )𝜇2 +4𝜎2 ]
2 2
[a(2−b)(4+b)−(8−b2 )c2 +2bc1 ] {a(2−b)(4+b)𝜇2 +8a𝜎2 −[(8−b2 )𝜇2 +8𝜎2 ]c2 }
𝜋CYBD = 2 𝜋CYBN = 2
16(4−b2 ) 16[(4−b2 )𝜇2 +4𝜎2 ]
The simultaneous production game in Scenario BN ing the first-order condition of qNN
GB
− qND
GB
with respect to a,
See details in A.1.2. b2 𝜕[qNN −qND ]
we get > 0. So GB GB > 0 is proven.
8(4−b2 ) 𝜕a
The simultaneous production game in Scenario BD Correspondingly, we take the first-order condition of
2b(a+2c2 )
The game sequence is as follows. First, the stable CM decides qNN
C
− qND
C
with respect to b, and obtain 2 > 0, thus
the manufacturing price w. Then, the global brand and its (4−b2 )
𝜕[qNN −qND ]
competitor decide their sales quantities simultaneously. We C C
> 0 is proven. Then we take the first-order condi-
𝜕b
solve this problem backward. b2
First, the quantities of the global brand and its competitor tion of qNN
C
− qND
C
with respect to a, and obtain > 0.
16−4b2
are 𝜕[qNN −qND ]
Therefore, C C
> 0 is proven.
𝜕a
2a − ab − 2w + bc2 2a − ab + bw − 2c2
qGB = , qC = ;
4 − b2 4 − b2
Proof of Lemma 1. The difference of the low-cost CM’s man-
Then, substituting qGB and qC into the stable CM’s profit ufacturing prices in Scenario ND and NN is wND − wNN =
2a−ab−2w+bc2 b2 [a(1−b)+bc2 ]
function we have 𝜋SCM = (w − c1 )( ). Setting > 0. Taking the first-order condition of wND
4−b2 4(4−b2 )(1+f )
the first-order condition with respect to w generates the solu- 𝜕wND a[(2−b)b−4]+(4+b2 )c2
1 with respect to b, we have = . Since
tion w = [a(2 − b) + bc2 + 2c1 ], based on which the equi- 𝜕b 2
(4−b2 ) (1+f )
4
2a−ab+bc2 −2c1 𝜕wND
librium production quantities are qGB = , qC = (4 − b2 )2 (1 + f ) > 0, we know the signs of depend on
8−2b2 𝜕b
a(2−b)(4+b)−(8−b2 )c 2 +2bc1 a[(2 − b)b − 4] + (4 + b2 )c2 .
.
4(4−b2 )
Finally, we derive the supply chain members’ equilibrium
profits as follows: Let B (b) = a[(2 − b)b − 4] + (4 + b2 )c2 , which is a con-
cave function with respect to b. Taking the first-order
𝜕B(b)
⎧ 2 condition of B(b) with respect to b, we have =
𝜕b
⎪ 𝜋GB = [a(2−b)+bc2 −2c 2
1]
−F a(2 − 2b) + 2bc2 > 0. So B(b) increases in b.
⎪ 4(4−b2 )
⎪ [ ( 2 ) ]2 Since B (b = 0) = 4(c2 − a) < 0 and B (b = 1) =
a(2−b)(4+b)+ b −8 c2 +2bc1
𝜋
⎨ C = 2
. 5c2 − 3a, we discuss the signs of B(b = 1). Let
⎪ 16(4−b2 )
5c2 − 3a = 0 and we obtain a = 2 . So when
5c
⎪
2
[a(2−b)+bc2 −2c1 ] 3
⎪ 𝜋SCM = 5c2 5c2
⎩
8(4−b )2
a> , B(b) < 0 always holds. If a < , solving
3 √ 3
a −3a2 +8ac2 −4c22
Proofs of Lemmas and Propositions B (b) = 0, we obtain b′ = −
a−c2 (a−c2 )2
Proof of second-mover disadvantage √
a −3a2 +8ac2 −4c22
Taking the first-order condition of qNN − qND with respect to and b′′ = + . So B(b) > 0 when
GB GB a−c2 (a−c2 )2
𝜕[qNN −qND
b, we obtain
ab
2 > 0. Thus GB GB
]
> 0 is proven. Tak- b′ <b< b′′ . Since b′′ > 1 > b′, combining with 0 0 when 𝜕qND
√ 𝜕b
quantity in Scenario ND with respect to b and have C
=
7c2 5c2 a −3a2 +8ac 2 −4c2
2
𝜕b
<a< , − 2 < b < 1. a[−4+(8−b)b]−8bc2 𝜕qND
5 3 a−c2 (a−c2 )
2 . The signs of C
depend on C (b) =
2(4−b2 ) 𝜕b
Then taking the first-order condition of wNN with respect
𝜕wNN c2 −a a[4 − (8 − b)b] + 8bc2 , which is a concave function of b.
to b, we have = < 0. Taking the first-order condition of C(b) with respect to b we
𝜕b 4+4f
𝜕C(b)
get = −2a(4 − b) + 8c2 , which increases in b. Then
𝜕b
𝜕C(b) 4(a−c2 )
Proof of Lemma 2. We compare the global brand and the letting = 0 we obtain b = .
𝜕b a
7c2 4(a−c2 )
competitor’s sales quantities in Scenario ND and NN as Due to a > , we know the critical value b = >
5 a
𝜕C(b)
1 always holds. So we have < 0 and C(b) decreases in
ab2 b2 (a − c2 ) 𝜕b
qND
GB
− qNN
GB
= − ( ) ; qND
C
− qNN
C
= ( ). b. When b = 0, we have C (b = 0) = 4a > 0. When b =
8 4 − b2 4 4 − b2 1, we have C (b = 1) = 8c2 − 3a. Only when 8c2 − 3a <
𝜕qND
0, we show C
> 0 holds.
ab2 b2 (a−c2 ) 𝜕b
It’s straightforward that − < 0 and > 0, so Then under the condition a >
8c2
, we solve C (b) = 0 and
8(4−b2 ) 4(4−b2 )
we have Lemma 2(1). √ 3
4(a−c2 ) 3a2 −8ac2 +4c22 4(a−c2 )
Then we take the first-order condition of the global brand’s obtain bIII = −2 , bIV = +
a2
sales quantity in Scenario ND with respect to b and have √ a a
𝜕qND a[(2−b)b−4]+(4+b2 )c2 3a2 −8ac2 +4c22 𝜕qND

GB
= . Considering Lemma 1(2), the 2 . So C
> 0 when bIII < b < bIV . Combin-
𝜕b 2(4−b2 )
2 a2 𝜕b
𝜕qND ing with the range of b, we know only bIII is effective and
GB
signs of also depend on B(b). It is easy to show that bIV is out of the feasible region. As a result, we derive
𝜕b √
𝜕qND 7c2 5c2 a −3a2 +8ac2 −4c22 bIII 0 if <a< , and − <
𝜕b 5 3 a−c2 (a−c2 )2
b < 1. Thus, we have Lemma 2(2). Proof of Proposition 1. We compare the global brand’s profits
Continuing to take the first-order condition of the global in Scenario NN and ND:
brand’s quantity in Scenario NN with respect to b we have [ ]
𝜕qNN (4+b2 )c2 −a(2−b)2 ab2 16a − ab (8 + b) + 8bc2
GB
= 2 . 𝜋GB − 𝜋GB =
NN ND
( )2 ;
𝜕b 2(4−b2 )
𝜕qNN 64 4 − b2
The signs of GB
depend on K (b) = (4 + b2 ) c2 −
𝜕b
a(2 − b)2 ,
which is a concave function of b. Taking the first- Because 16a − ab(8 + b) + 8bc2 > 16a − ab(8 + b) >
order condition of K(b) with respect to b we get
𝜕K(b)
= 7a > 0, we have 𝜋GB
NN
> 𝜋GB
ND
.
𝜕b Then we compare the competitor’s profits in Scenario NN
𝜕K(b) 𝜕K(b)
2a(2 − b) + 2bc2 . Since decreases in b and = and ND
𝜕b 𝜕b
4a 2 𝜕K(b)
0 occurs when b = = c > 2. is always [ ]
2(a−c2 ) 1− 2
a
𝜕b b3 2a (2 − b) c2 − 2a2 (2 − b) + bc22
positive and K(b) increases in b. 𝜋C − 𝜋 C =
NN ND
( )2 ;
𝜕qNN 16 4 − b2
When b = 0,we have GB
|b = 0 = 4(c2 − a) < 0.
𝜕b
𝜕qNN
When b = 1, we have GB
|b = 1 = 5c2 − a. To ensure Taking the first-order condition of 𝜋CNN − 𝜋CND with
𝜕b
𝜕qNN 𝜕(𝜋C
NN −𝜋 ND )
GB
> 0, we let 5c2 − a > 0 and obtain a < 5c2 . respect to a, we obtain C
= − 2(2 − b)(2a − c2 ).
𝜕b 𝜕b
7c2 𝜕(𝜋C
NN −𝜋 ND )
Under the condition < a < 5c2 , we solve (4 + b2 )c2 − It’s straightforward that C
< 0 so that 𝜋CNN −
5 √ 𝜕b
7c2
2a 2ac2 −c22 𝜋CND decreases in a. Letting a = , we derive 𝜋CNN −
a (2 − b)2 = 0 and obtain bI = −2 2 , bII = 5
√
a−c2 (a−c2 ) b3 c22 (56−53b)
𝜋CND |a = 7c2 = − < 0. Proposition 1(1)
2a 2ac2 −c22 𝜕qND 16(4−b2 )
2
25
+2 2 . So C
> 0 when bI < b < bII . Clearly, is proven.
5
a−c2 (a−c2 ) 𝜕b
bII exceeds the feasible scope and bI is the only effective root. Taking the first-order condition of the global brand’s
Therefore, we have Lemma 2(3). profit in Scenario NN with respect to b, we derive
Then we take the first-order condition of the competitor’s 𝜕𝜋GB
NN
[a(2−b)+bc2 ][a(2−b)2 −(4+b2 )c2 ] a(2−b)−bc2
𝜕qNN
= − 3 . Since − 3 <
𝜕b 2(4−b2 ) 2(4−b2 )
quantity in Scenario NN with respect to b and have C
= 𝜕𝜋GB
NN
𝜕b
a(2−b)2 +4bc2 0, we know the signs of depend on Z (b) = a(2 − b)2 −
− < 0. 𝜕b
2
2(4−b2 ) (4 + b2 )c2 , which is convex in b. Taking the first-order
𝜕Z(b) 7c
condition of Z(b) with respect to b, we get = 4c2 − 3a. Considering a > 2 , we show 4c2 − a(4 − b) < 0
𝜕b 5
−2a(2 − b) − 2bc2 < 0. So Z(b) monotonically decreases holds. Proposition 1(4a) is proven.
𝜕𝜋NN a(a−c ) 𝜕𝜋C
NN 𝜕𝜋C
ND
in b. When b = 0, we have GB
|b = 0 = 2
> 0. We have − =
𝜕b 16 𝜕b 𝜕b
And when b = 1, we have Z (b = 1) = a − 5c2 . When b2 {a2 (6−b)(2−b)−c2 [a(6−b)(2−b)+4bc2 ]}
. Due to 4(b − 4) <
2 3 0,
a < 5c2 , we have a − 5c2 < 0. Then under the condition 4(b2 −4)
3
7c2 𝜕𝜋C NN 𝜕𝜋C

ND
< a < 5c2 , we solve a(2 − b)2 − (4 + b2 ) c2 = 0 and the signs of − depend on the numerator. Let
5 √ √ 𝜕b 𝜕b
2a 2ac2 −c22 2a 2ac2 −c22 X (b) = (6 − b)(2 − b) − c2 [a(6 − b)(2 − b) + 4bc2 ].
a2
derive bI = −2 , bII = +2 .
a−c2 (a−c2 )2 a−c2 (a−c2 )2 Taking the first-order condition of X(b) with respect to
𝜕𝜋NN 𝜕X(b)
So GB > 0 when bI < b < bII . Combining with the range b, we derive = − 2a2 (4 − b) − 2c2 [2c2 − a(4 − b)].
𝜕b 𝜕b
of b, we derive bI < b < 1. Then we have Proposition 1(2) Taking second-order condition of X(b), we obtain its
𝜕X(b)
Taking first-order condition of the global brand’s second-order condition is always positive and is
𝜕b
profit with respect to b in Scenario ND, we derive monotonically increasing in b. When b = 0, we have
𝜕𝜋GB
ND
{−a[8−b(4+b)]−4bc2 }{a[4−(2−b)b]−(4+b2 )c2 } 𝜕X(b)
= . It’s obvious = − 8a2 + 2c2 (4a − 2c2 ) < 0. And when b = 1, we
𝜕b 8(4−b2 )
3 𝜕b
𝜕X(b)
{−a[8−b(4+b)]−4bc2 } 𝜕𝜋GB
ND
have = − 6a2 + 2c2 (3a − 2c2 ) < 0.
that 3 < 0. So the signs of depend 𝜕b
8(4−b2 ) 𝜕b So X(b) is monotonically decreasing with b. When b = 0,
on a[4 − (2 − b)b] − (4 + b2 )c2 . It is easy to see the first- we have X (b) = 12a2 − 12ac2 > 0. When b = 1, we have
order condition of a[4 − (2 − b)b] − (4 + b2 )c2 with respect X (b) = 5a2 − 5ac2 − 4c2 2 , which is convex in a.√Solving
√
to b is always negative and a[4 − (2 − b)b] − (4 + b2 )c2 c 1 21
5a2 − 5ac2 − 4 c2 2 = 0, we obtain a1 = 2 − c22
monotonically decreases in b. √ √ 2 2 5
𝜕𝜋GB
ND c 1 21
When b = 0, we have |b = 0 =
a(a−c2 )
> 0. When and a2 = 2 + c22 , where X(b = 1) < 0 if a ∈
𝜕b 16 2 2 5 √ √
b = 1, we have a[4 − (2 − b)b] − (4 + b2 ) c2 = 3a − 5c2 . 7c
(a1 , a2 ). Because 2 > 2 −
c 1 21
c22 , we divide it into
5c 5 2 2 5
We have 3a − 5c2 < 0 only when a < 2 . The result two cases to analyze.
3
𝜕𝜋GB
ND 𝜕qND
GB
of is similar with , which signs depend on
𝜕b 𝜕b 7c2
1. < a ≤ a2
the similar function a[4 + (−2 + b)b] − (4 + b2 )c2 . It is 5
𝜕𝜋GB
ND
7c2 5c2 a
easy to show that > 0 if <a< , and −
√ 𝜕b 5 3 a−c2 In this case we have 5a2 − 5ac2 − 4c2 2 ≤ 0. Then,
−3a2 +8ac 2 −4c2
2 2(2a2 −2ac2 +c22 )
2 < b < 1. Thus, we have proposition 1(3). solving X (b) = 0 we have bV = −
(a−c2 ) √ a(a−c2 )
Then we take the first-order condition of the competitor’s a4 −2a3 c2 +5a2 c22 −4ac32 +c42 2(2a2 −2ac2 +c22 )
𝜕𝜋C
NN 2 2 and bVI = +
profit with respect to b in Scenario NN and have = √ a2 (a−c2 ) a(a−c2 )
𝜕b
[a(2−b)2 +4bc2 ][(8−b2 )c2 −a(2−b)(4+b)] a4 −2a3 c2 +5a2 c22 −4ac32 +c42 𝜕𝜋C
NN 𝜕𝜋C
ND
; 2 2 where − > 0 when

3 a2 (a−c 2) 𝜕b 𝜕b
4(4−b2 )
[a(2−b)2 +4bc2 ] bV a2
𝜕P(b)
Let P (b) = (8 − b2 ) c2 − a(2 − b)(4 + b). We have =
𝜕b
2(a + ab − bc2 ) > 0. So P(b) increases in b. In this case, 5a2 − 5ac2 − 4c2 2 > 0. It is obvious that
When b = 0,we have (8 − b2 )c2 − a(2 − b) (4 + b) = 𝜕𝜋C
NN 𝜕𝜋C
ND
X(b) > 0 and − < 0.
8(c2 − a) < 0. And when b = 1, we have (8 − b2 )c2 − 𝜕b 𝜕b
𝜕𝜋C
NN 𝜕𝜋NN 𝜕𝜋ND
a(2 − b) (4 + b) = 7c2 − 5a < 0. Thus, < 0 is proven. In short, we get the result of C
> C only
𝜕b √ √ 𝜕b 𝜕b
2 −2ac +c2 )
Then we take the first-order condition of local competitor’s 7c2 c 1 21 2(2a
<a< 2 + −
2
𝜕𝜋C
ND if c22 and 2
profit with respect to b in Scenario ND and derive = √ 5 2 2 5 a(a−c2 )

𝜕b a4 −2a3 c2 +5a2 c22 −4ac32 +c42
−
[a(4−b)−4c2 ][a(1−b)+bc2 ]
. It is obvious that
[a(1−b)+bc2 ]
>0 2 < b < 1.
2 2 a2 (a−c2 )2
2(4−b2 ) 2(4−b2 )
𝜕𝜋ND
Hereby, Proposition 1 is proven.
when 0 < b < 1 and the signs of C depend on 4c2 −
𝜕b
a(4 − b). Proof of Lemma 3. We compare the CM’s wholesale
It is easy to show 4c2 − a(4 − b) is monotonically price in Scenario BD and BN. We have wBD − wBN =
a(2−b)f +bf c2 +2(1+f )c1
increasing in b. When b = 0, we have 4c2 − a(4 − b) = > 0, Lemma 3(1) is proven.
4(1+f )
4(c2 − a) < 0. And when b = 1, we have 4c2 − a(4 − b) =
26 NIU ET AL.
Then we compare the first-order conditions of whole- In this case, 5c1 − a − 4c2 > 0. Considering the numer-
𝜕wBD 𝜕wBN 1 c2 −a 𝜕qBD
sale prices. We have − = (c2 − a) − = ator is monotonically increasing in b, C
is neg-
𝜕b 𝜕b 4 4+4f 𝜕b
f (c2 −a) ative first and then positive when b exceeds thresh-
< 0. Till now, Lemma 3 is proven.
4(1+f ) olds. Solving (4 + b2 )c1 − a(2 − b)2 √
− 4b c2 = 0, we get
2(a−c2 )−2 2ac1 −c21 −2ac2 +c22
Proof of Lemma 4. We compare the global brand’s quanti- two thresholds where bk1 = and
√ a−c1
ties in Scenario BD and BN. And we obtain qBD
GB
− qBN
GB
= 2(a−c2 )+2 2ac1 −c21 −2ac2 +c22
c1 bk2 = . bk2 is beyond the fea-
− 2 < 0. a−c1
4−b
𝜕qBD
sible region and only bk1 is effective. Thus c
>
𝜕b
It is easy to show that < qBD qBN .
And then we com-
GB GB 0 only when
1 1
(a + 4c2 ) < c1 < (a + c2 ) and
2(a−c2 )
−
pare local competitor’s quantities and obtain qBD − qBN = √ 5 2 a−c1
C C 2ac1 −c21 −2ac2 +c22
bc1
> 0. Hereby, we have Lemma 4(1). 2 < b < 1. Therefore, Lemma 4 is proven.
8−2b2 (a−c1 )2
Taking the first-order condition of the global brand’s quan-
𝜕qBD Proof of Proposition 2. We compare the global brand’s profit
tity in Scenario BD with respect to b, we obtain GB
=
𝜕b in Scenario BN and BD.
(4+b2 )c2 −a(2−b)2 −4bc1 𝜕qBD
[ ]
GB
2 . The signs of depend on the numer-
2(4−b2 ) 𝜕b c1 c1 − a (2 − b) − bc2
ator. Let H (b) = (4 + b2 )c2 − a(2 − b)2 − 4bc1 , which is 𝜋GB − 𝜋GB = −
BN BD
( )2 ;
concave in b. Taking the first-order condition of H(b), 4 − b2
𝜕H(b)
we have = 2a(2 − b) − 4c1 + 2bc2 . It is easy to find
𝜕b
𝜕H(b) Considering 0 0.
𝜕b
is monotonically decreasing in b. When b = 0, we have Comparing the competitor’s profits, we have 𝜋CBD − 𝜋CBN =
𝜕H(b) 𝜕H(b)
= 4a − 4c1 > 0. And when b = 1,we have = {b(b + 2b2 − 8)c21 − (2 − b)(2 + b)c2 [−a(2 − b)(4 + b) +
𝜕b 𝜕b
1 𝜕H(b)
2(a + c2 ) − 4c1 > 0 due to c1 ≤ (a + c2 ). That is, >0 (8 − b2 )c2 ] + c1 {−a(2 − b)(4 + b)(4 − b − b2 ) + [32 − (4 −
2 𝜕b
holds in the feasible region and H(b) increases in b. b)b2 (3 + b)]c2 }}∕4(4 − b2 )2 . Clearly, the signs of
Because H (b = 0) = − 4(a − c2 ) − 4bc1 < 0 and 𝜋CBD − 𝜋CBN depend on its numerator, which is a con-
𝜕qBD cave function of c1 . Let S(c1 ) = b(b + 2b2 − 8)c21 +
H (b = 1) = − a + 5c2 − 4c1 < 0, we have GB < 0 and
𝜕b (2 − b)(2 + b)c2 [a(2 − b)(4 + b) − (8 − b2 )c2 ] + c1 {a(2 −
Lemma 4(2) is proven.
b)(4 + b)(b + b2 − 4) + [32 − (4 − b)b2 (3 + b)]c2 }.
We take the first-order conditions of the local competitor’s
𝜕qBD
Solving S (c1 ) = 0, we get two roots that c′1 =
quantities in Scenario BD with respect to b and obtain C
= 1
𝜕b {a(2 − b)(4 + b)(4 − b − b2 ) − [32 − (4 − b)b2
(4+b2 )c1 −a(2−b) −4bc2 2 2b(b+2b2 −8) √
2 . Due to 2(4 − b2 )2 > 0, the signs of (3 + b)]c2 − A} and c′′ =
1
{a(2 − b)(4 + b)(4 −
2(4−b2 ) 1 2b(b+2b2 −8)√
𝜕qBD
C
depend on the numerator, which is concave in b. b − b2 ) − [32 − (4 − b)b2 (3 + b)]c2 + A} where A =
𝜕b
Taking the first-order and second-order condition of the 4b(4 − b2 )(8 − b − 2b2 )c2 [a(2 − b)(4 + b) + (8 − b2 )c2 ] +
numerator, we find the first-order condition of the numera- {a(2 − b)(4 + b)(4 − b − b2 ) + [32 − (4 − b)b2 (3 + b)]c2 }2 .
tor is positive and monotonically decreasing with b. So the It is easy to obtain c′′1
< 0 and only c′1 is effective. As
numerator is monotonically increasing with b. When b = a result, we have 𝜋CBD − 𝜋CBN > 0 if c1 < c′1 , Otherwise,
0, we have(4 + b2 )c1 − a(2 − b)2 − 4b c2 = −4(a − c1 ) − 𝜋CBD − 𝜋CBN ≤ 0.
4bc2 < 0. When b = 1, we have (4 + b2 )c1 − a(2 − b)2 − Taking the first-order condition of the global brand’s
4b c2 = 5c1 − 4c2 − a. We then discuss the signs of 5c1 − 𝜕𝜋GB
BD
profit in Scenario BD with respect to b, we have =
4c2 − a. 𝜕b
2
[2c1 −a(2−b)−bc2 ][4bc1 −a(2−b) −(4+b2 )c 2]
3 . According to the proof
1 2(4−b2 )
1. c2 < c1 < (a + 4c2 ) of Lemma 4(2), we have 4bc1 − a(2 − b)2 − (4 + b2 )c2 <
5
𝜕𝜋BD
0. So the signs of GB depend on 2c1 − a(2 − b) − bc2 .
𝜕b
𝜕qBD
In this case, 5c1 − a − 4c2 < 0 and the sign of C
is It is easy to show that 2c1 − a(2 − b) − bc2 monotonically
𝜕b 𝜕𝜋BD
always negative. increases in b and is negative for all b ∈ (0, 1). Thus, GB <
𝜕b
0 is proven.
1 1 Taking the first-order condition of the global brand’s
1. (a + 4c2 ) < c1 < (a + c2 )
5 2 profit in Scenario BN with respect to b, we obtain
𝜕𝜋GB
BN
[a(2−b)+bc2 ][a(2−b)2 −(4+b2 )c2 ] 𝜕W(b)
=− . It is obvious that Then we discuss the signs of . When b = 0,
𝜕b 3 𝜕b
2(4−b2 ) 𝜕W(b) 𝜕W(b)
[a(2−b)+bc2 ] 𝜕𝜋GB
BN = 64c1 (a − c2 ) > 0. When b = 1, =
− < 0, so the signs of depend on a(2 − b)2 − 𝜕b 𝜕b
2(4−b2 )
3
𝜕b 64c1 (a − c2 ) + 4a(a + 6bc2 )
> 0. Thus, we can get a
(4 + b2 )c2 ,
which is convex in b. Then taking the first-order conclusion that W(b) is always increasing in b. Specif-
condition of a(2 − b)2 − (4 + b2 )c2 with respect to b, we find ically, we have W (b = 0) = −8c1 (16a − 8c1 ) < 0
the function always decreases in b. When b = 0, we have and W (b = 1) = (8c1 − a)(8c1 − 7a − 8c2 ). Due to
a(2 − b)2 − (4 + b2 ) c2 = 4a − 4c2 > 0. When b = 1, we 1
c1 ≤ (a + c2 ), we have 8c1 − 7a − 8c2 ≤ −3a − 4c2 < 0.
have a(2 − b)2 − (4 + b2 ) c2 = a − 5c2 . Let a − 5 c2 = 0. 2
Next, we have two cases to discuss.
We get a = 5c2 , thus we have two cases to discuss.
𝜕𝜋GB
BN 1. a ≤ 8c1
1. a ≥ 5c2 : < 0 always holds.
𝜕b
7c2
2. < a < 5c2 W (b = 1) = (8c1 − a) (8c1 − 7a − 8c2 ) ≤ 0. So it is
5
easy to show 𝜋GB
B
− 𝜋GB
N
≤ 0.
In this case, a − 5c2 < 0. Considering a(2 − b)2 −
(4 + b2 )c2 is monotonically decreasing with b, we 1. a > 8c1
√ − b) − (4 + b ) c2 = 0 √and b3 =
solve a(2 2 2 get
2ac2 −c22 2ac2 −c22
2a
−2 2 , b4 =
2a
+2 . Though In this case we have W (b = 1) =
a−c2 (a−c2 ) a−c2 (a−c2 )2 (8c1 − a) (8c1 − 7a − 8c2 ) > 0, which indicates
a(2 − b)2 − (4 + b2 )c2 is positive when b3 0
b4 exceeds the feasible region and only b3 is effec- once b is larger than a certain threshold. Solv-
𝜕𝜋GB
BN
7c2 √ √
tive. Thus, we have > 0 if < a < 5c2 and ing W(b) = 0, we obtain b5 = −
2 2 c1
√ , b6 =
√ 𝜕b 5
a
2a 2ac2 −c22 √ √ √ √
−2 < b < 1. Therefore, Proposition 2 is 2 2 c1 2(−2a+2c2 − 2 4a2 −ac1 −4ac2 +2c22 )
a−c2 (a−c2 )2 √ , b7 = and
proven. a
√ √
a
2(−2a+2c2 + 2 4a2 −ac1 −4ac2 +2c2 )
b8 = 2
. Obviously, b5 and
Proof of Proposition 3. We compare the global a
brand’s profits with and without blockchain. Here b7 are negative and we only need consider b6 and b8 . It is
we consider using 𝜙 to denote the probability of easy to prove 0 < b6 < 1 when a > 8c1 , and b8 is mono-
pandemic outbreak and production delay. We have increasing with c1 and c2 . When c1 = c2 = 0,
tonically √
[2c1 −a(2−b)−bc2 ]2 [a(2−b)+bc2 ]2 b8 ∗ = 4( 2 − 1) > 1 so that b8 is not in the feasi-
𝜋GB
B
− 𝜋GB
N
={ 𝜙 + (1 − 𝜙) }−
2 2 ble range of b. In sum, we have W(b) > 0 if a > 8c2 ,
4(4−b2 )
2
4(4−b2 )
√ √c
{a[8−b(4+b)]+4bc2 } [a(2−b)+bc2 ]2 a
c2 < c1 < and 2 2 1
< b < 1. In this case, 𝜋GB
B
− 𝜋GB
N
F−{ 𝜙 + (1 − 𝜙) }=
2 2
64(4−b ) 4(4−b2 )
2 8 a
𝜙(8c1 −ab2 ){8c is monotonically increasing with 𝜙. When 𝜙 = 0,
1 −a[16−b(8+b)]−8bc2 }
2 − F. 𝜋GB
B
− 𝜋GBN
= −F < 0. When 𝜙 = 1, 𝜋GB B
− 𝜋GB
N
=
64(4−b2 )
(8c1 −ab2 ){8c1 −a[16−b(8+b)]−8bc2 }
2 − F. Solve 𝜋GB
B
− 𝜋GB
N
= 0
𝜙(8c1 −ab2 ){8c 1 −a[16−b(8+b)]−8bc2 } 64(4−b2 )
The signs of 512b2 F−64b4 F−1024F
and we obtain 𝜙′ =
2
64(4−b2 ) > 0.
{a[b(8+b)−16]+8c1 −8bc2 }(ab2 −8c1 )
depend on the numerator. Let W (b) = (8c1 − ab2 )
512b2 F−64b4 F−1024F
{8c1 − a[16 − b(8 + b)] − 8bc2 }. Taking the first- Solve = 1 and we obtain
{a[b(8+b)−16]+8c1 −8bc2 }(ab2 −8c1 )
order condition of W(b) with respect to b we obtain {a[b(8+b)−16]+8c1 −8bc2 }(8c1 −ab2 )
𝜕W(b) F′ = .
= 64c1 (a − c2 ) + 4ab{8 − a[b(6 + b)] + 6bc2 }. 1024−512b2 +64b4
𝜕b
a
√ √c
𝜕 2 W(b)
Then we have = 4a{a[8 − 3b(4 + b)] + 12bc2 } and Therefore, when a > 8c2 , c2 < c1 < , 2 2 1
 𝜙′ , 0 < F < F ′ and 0 < 𝜙 < 𝜙′ , we can prove 𝜋GB
B
−
𝜕b3 𝜕b3 𝜋GB > 0.
N
𝜕 2 W(b)
so is monotonically decreasing in b. When b = 0,
𝜕b2
𝜕 2 W(b)
we have = 32a2 > 0. And when b = 1, we have Proofs of Extensions
𝜕b2
𝜕 2 W(b) 𝜕 2 W(b) 12 Proof of Proposition 4. According to the objective
= 4a(7a − 12c2 ), where < 0 if a > c2 and 1
𝜕b2 𝜕b2 7 N
function mentioned before, we obtain U (𝜋GB )=−
𝜕 2 W(b) 𝜕W(b) √ 64
> 0 otherwise. In this situation, would first
𝜕b2 𝜕b a2 b4 (1−𝜙)𝜙{a[16−b(8+b)]+8bc2 }2 𝜙{a[8−b(4+b)]−4bc2 }2 +16(1−𝜙)(a(2−b)+bc2 )2
increase and then decrease or always increase on the domain 𝜆 4 + 2
(4−b2 ) 64(4−b2 )
of definition, depending on the relative market size.
28 NIU ET AL.
√ √
and B
U (𝜋GB )=
1
{ (1−𝜙)[a(2−b)+bc 2]
2
−4𝜆
(1−𝜙)𝜙c2 [a(2−b)−c1 +bc2 ]2
1 +
𝜙 in [0, 1]. When 𝜙 = 0, we have 𝜙 + (1 − 𝜙)𝜙 = 0.
4 2
(4−b2 ) (4−b2 )
4
When 𝜙 = 1, we have L (𝜆 = 1) = 𝜏 − F. So L(𝜆 = 1) is
𝜙[a(2−b)−2c1 +bc2 ]2 monotonically increasing in 𝜏. Solving L (𝜆 = 1) = 0, we
2 }−F .
(4−b2 )
obtain F2 = 𝜏.
Thus when F ≥ F2 , the sign of L(𝜆 = 0) is minus. To
Then we compare the global brand’s utilities in these
guarantee L(𝜆) > 0, 𝜆 > 𝜆1 is needed.
two above situations and obtain U(𝜋GBB
) − U (𝜋GB
N
)=
√ When 0 < F < F2 , solving L (𝜆 = 0) = 0, we obtain
(𝜙+𝜆 (1−𝜙)𝜙)(ab2 −8c1 ){a[16−b(8+b)]−8c1 +8bc2 }
2 − F. F
𝜙2 = . So when 0 < F < F2 and 𝜙 > 𝜙2 , L(𝜆) > 0 holds.
64(−4+b2 ) 𝜏
Let O (b) = (ab2 − 8c1 )
{a[16 − b(8 + b)] − 8c1 + 8bc2 }. When 0 < F < F2 and 0 < 𝜙 < 𝜙2 , we obtain L(𝜆 = 0) <
Taking the first order condition of O(b) with 0. To guarantee L(𝜆) > 0, 𝜆 > 𝜆1 is needed. Till now,
𝜕O(b) Proposition 4 is proven.
respect to b, we obtain = 64c1 (a − c2 ) +
𝜕b
4ab{a[8 − b(6 + b)] + 6bc2 } > 0 for any feasible b. So,
Proof of Proposition 5. Through expec-
O(b) monotonically increases in b. When b = 0, we have
tation calculation, we obtain 𝜋GB
B
=
O(b) |b = 0 = − 8c1 (16a − 8c1 ) < 0. And when b = 1,
4[1−𝛿(1−𝜙)]c21 +4[1−𝛿(1−𝜙)]c1 [a(b−2)−bc2 ]+[a(2−b)+bc2 ]2
we have O(b) |b = 1 = (a − 8c1 ) {7a − 8c1 + 8c2 }. We let 2 −F
(a − 8c1 )(7a − 8c1 + 8c2 ) = 0 and derive a3 = 8c1 or 4(4−b2 )
𝜙{a[8−b(4+b)]+4bc2 }2 +16(1−𝜙)(a(2−b)+bc2 )2
8
a4 = (c1 + c2 ). Due to a > 2(c1 − c2 ), there exist two and 𝜋GB
N
= 2 . Then
7 64(4−b2 )
cases to discuss. we compare the global brand’s profit in these two situa-
𝛿(1−𝜙)c1 [a(2−b)−c1 +bc2 ]
1 tions and obtain 𝜋GB
B
− 𝜋GB
N
= 2 +
1. c1 ≥ a (4−b2 )
8 16a2 b2 𝜙−8a2 b3 𝜙−a2 b4 𝜙+64c21 +8ab3 𝜙c2 −64c1 [a(2−b)+bc2 ]
2 −
64(4−b2 )
We have O(b) ≤ 0 in this case, thus U(𝜋GB
B
) − U(𝜋GB
N
)≤0 (1−𝜙)c1 [a(2−b)−c1 +bc2 ]
always holds. F. It’s obvious that 2 > 0, so
(4−b2 )
𝜋GB
B
− 𝜋GB
N
is a linearly increasing function of
1
1. c1 < a 𝛿. Solving 𝜋GB
B
− 𝜋GB
N
= 0, we obtain 𝛿1 =
8
2
64(4−b2 ) F−a2 b2 [16−b(8+b)]𝜙+64c1 [a(2−b)−c1 ]−8b(ab2 𝜙−8c1 )c2
In this case, O(b) |b = 1 = (a − 8c1 ) {7a − 8c1 + 8c2 } > 0. .
64(1−𝜙)c1 [a(2−b)−c1 +bc2 ]
Considering O(b) is monotonically increasing with b√ when
2c1 It’s easy to show that 64(1 − 𝜙)c1 [a(2 − b) − c1 + bc2 ] >
b ∈ [0, 1], we solve O (b) = 0 and obtain bo1 = − 2 ,
√ √ a 0. We let T (𝜙) = 1024F − 512b2 F +
2c1 2(2c2 −2a− 2(4a2 −ac1 −4ac2 +2c22 )) 64b F − 64c1 + 64c1 [a(2 − b) + bc2 ] −
4 2
bo2 = 2 , b = and
a √ o3 a 𝜙(16a2 b2 − 8a2 b3 − a2 b4 − 8ab3 c2 ). It is convenient to
2(2c2 −2a+ 2(4a2 −ac1 −4ac2 +2c22 ))
bo4 = . Obviously, bo1 prove −16a2 b2 + 8a2 b3 + a2 b4 − 8ab3 c2 < 0, so T(𝜙)
a monotonically decreases in 𝜙. Solving T (𝜙) = 0, we obtain
and bo3 are negative, and bo4 > 1 because − 8(4a2 2
64{(4−b2 ) F+c1 [a(2−b)−c1 +bc2 ]}
ac1 − 4ac2 + 2c22 ) − (5a − 4c2 )2 = a(7a − 8c1 + 8c2 ) > 0. 𝜙4 = .
ab2 {a[16−b(8+b)]+8bc2 }
That is, only bo2 is feasible and O(b) > 0 when bo2 0, and
ab2 {a[16−b(8+b)]+8bc2 }
(ab2 −8c1 ){a[16−b(8+b)]−8c1 +8bc2 }
Let 𝜏 = 2 > 0 and we have 2
64{(4−b2 ) F+c 1 [a(2−b)−c1 +bc2 ]}
√ 64(−4+b2 ) is monotonically increas-
ab2 {a[16−b(8+b)]+8bc2 }
L (𝜆) = 𝜏[𝜙 + 𝜆 (1 − 𝜙)𝜙] − F. It’s obvious that L(𝜆) 2
64{(4−b2 ) F+c 1 [a(2−b)−c1 +bc2 ]}
is increasing in 𝜆. Solving L (𝜆) = 0, we obtain 𝜆1 = ing in F. Solving = 0, we
F−𝜏𝜙 ab2 {a[16−b(8+b)]+8bc2 }
√ . Letting 𝜆 = 0, we obtain L (0) = 𝜏𝜙 − F. So c1 (2a−ab−c1 +bc2 )
𝜏 (1−𝜙)𝜙 obtain F4 = − 2 < 0. Hence, we have
L(0) is monotonically increasing in 𝜙. When 𝜙 = 0, we get (4−b2 )
2
64{(4−b2 ) F+c1 [a(2−b)−c1 +bc2 ]}
L (0) = −F < 0. When 𝜙 = 1, L (0) = 𝜏 − F. 𝜙4 > 0. Solving = 1, we
ab2 {a[16−b(8+b)]+8bc2 }
When F > 𝜏, it’s easy to√show L(𝜆 = 0) < 0. Next we
(ab2 −8c1 ){a[16−b(8+b)]−8c1 +8bc2 }
derive L (𝜆 = 1) = 𝜏[𝜙 + (1 − 𝜙)𝜙] − F. Taking the first obtain F3 = . To guarantee
√ 64(4−b2 )
2
order condition of 𝜙 + (1 − 𝜙)𝜙 with respect to 𝜙, we 𝜙4 < 1, 0 < F < F3 is needed.

obtain 1 + √
1−2𝜙
. Then, taking the second order condi- Now, we can discuss the sign of 𝛿1 .
2 (1−𝜙)𝜙
1
First, we discuss the case of 𝛿1 < 0 to ensure 𝜋GB
B
− 𝜋GB
N
>
tion, we obtain − < 0. When 𝜙 → 0, we have a[16−b(8+b)]−8c1 +8bc2
4((1−𝜙)𝜙)
3∕2 0. For F3 , it’s obvious that 2 > 0, and
1−2𝜙 1−2𝜙 64(4−b2 )
1+ √ > 0. When 𝜙 → 1, we have 1 + < 0. √ obviously the first order condition of (ab2 − 8c1 ) with respect
2 (1−𝜙)𝜙 2 (1−𝜙)𝜙
√ to b is positive. So (ab2 − 8c1 ) is monotonically increasing
So 𝜙 + (1 − 𝜙)𝜙 is first increase and then decrease in
√
2c1 Taking the fourth derivative of T(b) with respect to
in b. Solving ab2 − 8 c1 = 0, we obtain b = 2 . To
√ a b we get T ′′′′ (b) = 24a2 > 0. So the third deriva-
2c1 tive of T(b) is monotonically increasing in b. Due to
ensure F3 > 0, we need a > 8c1 and 2 0, the sec-
√ ond derivative of T(b) is monotonically increasing in
2c
𝜋GB
B
− 𝜋GB
N
> 0 holds for any feasible 𝛿 if a > 8c1 , 2 1
< b. We easily obtain T ′′ (b) = 2a2 b2 + 4a2 b(8 + 2b) +
a
b < 1, 0 < F < F3 and 𝜙4 < 𝜙 < 1. 2a2 [−16 + b(8 + b)] − 48abc2 . When b = 0, we
Second, we discuss the case of 𝜋GB B
− 𝜋GB
N
> 0 when have T ′′ (0) = −32a2 < 0. When b = 1, we obtain
0 < 𝛿1 < 1. We have proved that 𝛿1 > 0 when 0 < 𝜙 < 𝜙4 . T ′′ (1) = 𝜙(28a2 − 48ac2 ). So T ′ (b) is first decreasing
Now we need to prove 𝛿1 < 1. Let the numerator of 𝛿1 then increasing in b. Then we take the first order condition
minus denominator, we have R (𝜙) = 64(4 − b2 )2 F − of T(b) with respect to b and get T ′ (b) = a2 b2 (8 + 2b) −
a2 b2 [16 − b(8 + b)]𝜙 + 64c1 [a(2 − b) − c1 ] − 8b(ab2 𝜙 − 2a2 b[16 − b(8 + b)]+8[−8ac1 − 2ab2 c2 + (−ab2 + 8c1 )c2 ].
8c1 )c2 − 64(1 − 𝜙)c1 [a(2 − b) − c1 + bc2 ]. Taking the When b = 0, we have T ′ (0) = 8(−8ac1 + 8c1 c2 ) <
first order condition of R(𝜙) with respect to 𝜙, we obtain 0. When b = 1, we obtain T ′ (1) = −4a2 −
R′ (𝜙) = −(ab2 − 8c1 ){a[16 − b(8 + b)] − 8c1 + 8bc2 } < 8[8ac1 + 2ac2 − (a − 8c1 )c2 ] < 0. Considering the mono-
0. And
√ √c
according to above proof, when a > 8c1 and tonicity of the T ′ (b), it is easy to conclude T ′ (b) < 0 and
2 2 1
 0 exists. T(b) is monotonically decreasing in b.
a
When b = 0, we have T (0) = 64c1 (2a − c1 ) > 0. When
We R (𝜙√= 0) = 64(4 − b2 )2 F > 0. When
have
√ c1
b = 1, we have T (1) = −(a − 8c1 )(7a − 8c1 + 8c2 ). Due
a > 8c1 and 2 2 0, there exist two cases to discuss.
a
cally decreasing with 𝜙. Let R (𝜙) = 0 and we derive
2 1
64(4−b2 ) F 1. c1 ≥ a:
𝜙3 = . So when 𝜙 > 𝜙3 , there 8
(ab2 −8c1 ){a[16−b(8+b)]−8c1 +8bc2 }
exists R(𝜙) < 0 so that 𝛿1 < 1. We obtain T(1) > 0. Thus we have T(b) > 0 in the feasible
Then comparing 𝜙3 and 𝜙4 we obtain 𝜙4 − region and J(𝜙) is monotonically increasing in 𝜙.
2
64c1 [a(2−b)−c1 +bc2 ] (4−b2 ) When 𝜙 = 0, we get J (0) = 0. When 𝜙 = 1, we have
𝜙3 = + 64F{ +
ab2 {a[16−b(8+b)]+8bc2 } ab2 {a[16−b(8+b)]+8bc 2} J (1) = T(b) > 0. Thus we have J(𝜙) > 0 in the feasible
2 2
(4−b )
}. Solving 𝜙4 − 𝜙3 = 0, we region and S(𝜉) is monotonically increasing in 𝜉.
(ab2 −8c1 ){a[−16+b(8+b)]+8c1 −8bc2 }
When 𝜉 = 0, we have S (0) = a2 b2 [16 − b(8 + b)]𝜙 −
have F = F3 . And ab2 {a[−16 + b(8 + b)] − 8bc2 } − 8𝜙{8c1 [a(2 − b) − c1 ] + b(8c1 − ab2 )c2 } − 64(4 − b2 )2 F.
(ab2 − 8c1 ) {a[−16 + b(8 + b)] + 8c1 − 8bc2 } = − It’s easy to find that S(0) is a linear func-
64c1 [a(2 − b) − c1 + bc2 ] < 0, so 𝜙4 − 𝜙3 is monotonically tion of 𝜙. Let D (b) = a2 b2 [16 − b(8 + b)] −
decreasing in F. When 0 < F < F√ , we have 𝜙4 > 𝜙3 . 8{8c1 [a(2 − b) − c1 ] + b(8c1 − ab2 )c2 }.
√ 3 c Taking the
Therefore, when a > 8c1 , 2 2 1
 𝜋GB
N
. obtain D′ (b) = − a2 b2 (8 + 2b) − 2a2 [−16 + b(8 + b)] +
8[8ac1 2ab2 c2 + (ab2 − 8c1 )c2 ]. We can find that D′ (b) =
Proof of Proposition 6. By calculating the expected profits of − T ′ (b) > 0, thus D(b) is monotonically increasing in b.
the global brand with and without blockchain, we obtain When b = 0, we have D (0) = 64c1 (−2a + c1 ) < 0. When
(16−8b2 +b4 𝜉(1−𝜙))[a(2−b)+bc2 ]2 b = 1, we have D (1) = (a − 8c1 ) (7a − 8c1 + 8c2 ) < 0.
32(1−𝜉)𝜙c2 +32(1−𝜉)𝜙c1 [a(2−b)+bc2 ]+
𝜋GB
B = 1
2
2−b2 Thus, we have D(b) < 0 in the feasible region and S(0)
32(4−b2 )
(1−𝜉)𝜙{a[8−b(4+b)]+4bc2 }2 16(1−𝜉)(1−𝜙)[a(2−b)+bc2 ]2
is monotonically decreasing in 𝜙. When 𝜙 = 0, we get
−F and 𝜋 N
GB
= 1
64
{ 2 + 2 + S(0)|𝜙 = 0 = − 64(4 − b2 )2 F < 0. When 𝜙 = 1, we have
(4−b2 ) (4−b2 )
2𝜉(1−𝜙)[a(2−b)+bc2 ]2
+
16𝜉𝜙[a(2−b)+bc2 ] 2
} . Then we compare the global S (0) = − 64(4 − b2 )2 F + D(b) < 0. As a conclusion, we
2−b2
can have S(0) < 0 in this case.
2
(4−b2 )
brand’s profit in these two above situations and get 𝜋GB
B −
2
When 𝜉 = 1, we have S (1) = −64(4 − b2 )2 F < 0.
According to the monotony of S(𝜉), when 0 < 𝜉 < 𝜙, we can
2 2 2 2
N = a b [16−b(8+b)](1−𝜉)𝜙+8(1−𝜉)𝜙{−8c1 [a(2−b)−c1 ]+b(ab −8c1 )c2 }−64(4−b ) F
𝜋GB .
2
64(4−b2 )
get S(𝜉) < 0.
1
Therefore, we have 𝜋GBB
< 𝜋GBN
when c1 ≥ a.
Note that 64(4 − b2 )2 > 0, we only need to dis- 8
cuss the numerator. Let S (𝜉) = 𝜉{a2 b2 [b(8 + b) − 16]
1
𝜙 + 8𝜙{8c1 [a(2 − b) + c1 ] + b(8c1 − ab2 )c2 }} − 64(4 − 1. c1 < a
8
b2 )2 F − a2 b2 [b(8 + b) − 16]𝜙 − 8𝜙{8c1 [a(2 − b) − c1 ] + b
(8c1 − ab2 )c2 } and J (𝜙) = a2 b2 [b(8 + b) − 16]𝜙 + 8𝜙{8c1 < 0. Solve T (b)
In this case we have T(1)√ √= 0
[a(2 − b) + c1 ] + b(8c1 − ab2 )c2 }. It is easy to find J(𝜙) 2c1 2c1
and we obtain bT1 = − 2 , bT2 = 2 ,
is a linear function of 𝜙. Then we let T (b) = a2 b2 √ a a
[b(8 + b) − 16] + 8{8c1 [a(2 − b) − c1 ] + b(8c1 − ab2 )c2 }. 2(2c2 −2a− 2(4a2 −ac1 −4ac2 +2c22 ))
bT3 = and bT4 =
a
30 NIU ET AL.
√ 1 1
2(2c2 −2a+ 2(4a2 −ac1 −4ac2 +2c22 )) When 𝜙 = , we have S ( ) = − 64(−4 + b2 )2 F −
. We have showed that 2 2
a 1
bT1 < 0, bT3 < 0 and bT4 > 1 in the proof of Proposition 4. (ab2 − 8c1 )[a(−16 + 8b + b2 ) + 8c1 − 8bc2 ].
4
Thus bT2 is the only√
real root in the feasible region. Solve
1
S( )= 0 and we obtain F4 =
2c1 2
When 0 0 and S(𝜉) is (ab2 −8c 1 )(16a−8ab−ab −8c1 +8bc2 )
2
a .
monotonically increasing in 𝜉. And when 𝜉 = 0, we can 256(4−b2 )
2
also obtain D′ (b) = − T ′ (b) > 0, then D(b) is monotoni- When F > F4 , we have S(𝜙) < 0. So there exist a
cally increasing in b according to the proof above. When 𝜉1 to make S (𝜉) = 0. Solving it and we obtain 𝜉1 =
2
b√ = 0, we obtain D √ (0) = 64c1 (c1 − 2a) < 0. When b = 1+
64(−4+b2 ) F
. Thus, when c1 < a,
1
√ 𝜙(ab −8c1 )(a(−16+b(8+b))+8c1 −8bc2 )

2c1 2c1 2 8
2 , we have D (2 ) = 0. Thus, we have D(b) < 0 2c1
a √ a 2 𝜋GB
N
.
a
in 𝜙. When 𝜙 = 0, we get S(0)|𝜙 = 0 = −64(4 − b2 )2 F < 0. When 0 < F < F4 , we can find there exist two real
When 𝜙 = 1, we have S (0) = −64(4 − b2 )2 F + D(b) < 0. roots. Solve S (𝜙) = 0 and we obtain 𝜙6 = −
1 1
When 𝜉 = 1, we have S (1) = −64(4 − b2 )2 F < 0. So this √ 2 2

8a2 b3 −16a2 b2 +a2 b4 +4096F−2048b2 F+256b4 F+128ac1 −64abc1 −64c2 −8ab3 c2 +64bc1 c2
case is the same as we have
√ showed before, and we have (ab2 −8c1 )(8ab−16a+ab2 +8c1 −8bc2 )
1
2c1
S(𝜉) < 0 when 0 < b < 2 . It is easy to get 𝜋GB
B
< 𝜋GB
N
and 𝜙7 =
1
+
1
a
following the √ 2 2
√ proof above. 8a2 b3 −16a2 b2 +a2 b4 +4096F−2048b2 F+256b4 F+128ac1 −64abc1 −64c2 −8ab3 c2 +64bc1 c2
2c1 1 .
When 2 < b < 1, we have T(b) < 0 and J(𝜙) is (ab2 −8c1 )(8ab−16a+ab2 +8c1 −8bc2 )
a
monotonically decreasing in 𝜙. When 𝜙 = 0, we get J (0) = Then we obtain 𝜙6 − 𝜙 5 =
1
+
0. When 𝜙 = 1, we have J (1) = T(b) < 0. Thus we have 2
√
2
2
J(𝜙) < 0 in the feasible region and S(𝜉) is monotonically 64(4−b2 ) F

−
1
1+ 2
256(4−b2 ) F
.
(ab2 −8c1 ){a[b(8+b)−16]+8c1 −8bc2 } 2 (ab −8c1 ){a[b(8+b)−16]+8c1 −8bc2 }
decreasing in 𝜉.
2 2
When 𝜉 = 0, we have S (0) = a2 b2 [16 − b(8 + b)]𝜙 − Let t = −
64(4−b ) F 1
∈ (0, ), 𝜙6 − 𝜙5
(ab2 −8c1 ){a[b(8+b)−16]+8c1 −8bc2 }
8𝜙{8c1 [a(2 − b) − c1 ] + b(8c1 − ab2 )c2 } − 1 1
√ 4
64(4 − b2 )2 F and D (b) = a2 b2 [16 − b(8 + b)] − can be rewritten as K (t) = −t− 1 − 4t. Then, we
2 2
8{8c1 [a(2 − b) − c1 ] + b(8c1 − ab2 )c2 }. We have showed have K ′ (t) = − 1 + √
1
and K ′′ (t) =
2
> 0. So
that D′ (b) = − T ′ (b) > 0, then D(b) is monotoni- 1−4t (1−4t)3∕2
cally increasing K ′ (t)
is monotonically increasing in t. When t = 0, we
√ in b according to √ the proof above.
have K ′ (0) = 0 and K ′ (t) > 0 in the feasible region, which
2c1 2c1
When b = 2 , we have D (2 ) = 0. Thus indicates K(t) is monotonically increasing in t. When t = 0,
√ a a
when 2
2c1
 0 and S(0) we have K (0) = 0. Thus K(t) > 0 and 𝜙6 > 𝜙5 always hold.
a When 𝜙5 < 𝜙 < 𝜙6 , we have S(𝜙) < 0. Continuing to solve
is monotonically increasing in 𝜙. When 𝜙 = 0, we 1
get S(0)|𝜙 = 0 = − 64(4 − b2 )2 F < 0. When 𝜙 = 1, S (𝜉) = 0 and we obtain 𝜉 = 𝜉1 . Thus, when c1 < a,
√ 8
we have S(0)|𝜙 = 1 = − 64(4 − b2 )2 F + D(b). It is no 2
2c1
 𝜋GB
N
.
decreasing in F. Solve S(0)|𝜙 = 1 = 0 and we derive
When 𝜙6√< 𝜙 < 𝜙7 , we have S(𝜙) > 0. As a result, when
16a2 b2 −8a2 b3 −a2 b4 −128ac1 +64abc1 +64c2 +8ab3 c2 −64bc1 c2
F5 = 1
. c1 < a, 2
1 2c1
 0 when we intend to find
can prove 𝜋GB
B
> 𝜋GB
N
.
the interval of 𝜋GB
B
− 𝜋GB
N
> 0, we need 0 < F < F5 When 𝜙√ < 𝜙 < 1, we have S(𝜙) < 0. Therefore, when
7
to make S(0)|𝜙 = 1 > 0. Solving S (0) = 0 we obtain 1 2c1
2 c1 < a, 2 𝜋GB
N
.
(ab −8c1 ){a[b(8+b)−16]+8c1 −8bc2 }
√ 8
2c1 Till now, Proposition 6 is proven.
2 0.
When 𝜉 = 𝜙, we have S (𝜙) = − 64(4 − b2 )2 F − Equilibrium outcomes of Extension 5.4
𝜙(ab2 − 8c1 )[a(8b + b2 − 16) + 8c1 − 8bc2 ] + Proof of Proposition 7. The difference of the customer
𝜙2 (ab2 − 8c1 )[a(8b + b2 − 16) + 8c1 − 8bc2 ] which surplus with and without blockchain is CSB − CSN =
√ is a 1
2 𝜙{(64 − 48b )c1 + 16c1 {b(4 + b )c2 − a{8 + b
2c1 2 2 2
quadratic function. Note that ab2 − 8c1 > 0 due to 2 < 128(4−b2 )
a
b < 1, S(𝜙) is concave and its axis of symmetry is 𝜙S =
1
. [4 − (6 − b)b]}} − b2 {a2 [48 − b(8 + 11b)] + 8a(16 − b −
2 5b2 )c2 − 4(16 − 5b2 )c22 }}. It is obvious that the sign of
When 𝜙 = 0, we have S (0) = − 64(4 − b2 )2 F < 0.
CSB − CSN depends on G (c2 ) = (64 − 48b2 ) c21 + 16c1
When 𝜙 = 1, we get S (1) = − 64(4 − b2 )2 F < 0.
{b(4 + b2 )c2 − a{8 + b[4 − (6 − b)b]}} − b2 {a2 [48 − b(8 + ing in c2 . When c2 =
5
a, we have G (c2 =
5
a) =
11b)] + 8a(16 − b − 5b2 )c2 − 4(16 − 5b2 )c22 }. 1
7
32
7
a2 b2 (528 + (112 − 361b)b) − a{28 + b[4 − (21 − b)
49 7
5
Then taking the first order condition of G(c2 ) b]}c1 + (64 − 48b2 )c21 .
It’s easy to confirm that G( c2 = a)
𝜕G(c2 ) 7
with respect to c2 , we obtain = b{16(4 + b2 ) is monotonically decreasing with c1 . So if c1 takes its
𝜕c2
c1 + 8b[a(16 − b − 5b2 ) − (16 − 5b2 )c2 ]}. Continuing to minimum value, which is approaching to c2 ’s maximum
5
take the second-order condition of G(c2 ) with respect to value due to c1 > c2 , we have G( c2 = a) |c → 5 a =
7 1
𝜕 2 G(c2 ) 𝜕G(c2 ) 7
c2 , we derive = −8b2 (16 − 5b2 ) < 0. So is 1
− a2 {2880 + b{640 − b[2688 − b(48 + 361b)]}} < 0.
𝜕c2 2 𝜕c2 49
monotonically decreasing in c2 . Due to c2 < a, we have
5
Therefore, it can be shown that G(c2 ) < 0 and CSB − CSN <
𝜕G(c2 ) 5
7
0. Clearly, CSB − CSN = 0 when 𝜙 = 0.
|c 5 = b{16(4 + b2 )c1 − 8b[ a(16 − 5b2 ) − a
𝜕c2 2= 7 a 7
(16 − b − 5b2 )]} when c2 =

5
a. It is easy to show Equilibrium outcomes of Extensions 5.5
7 Proof of Lemma 5. The difference between two manufac-
𝜕G(c2 ) 𝜕G(c2 )
that |c 5 > 0, so > 0 always holds in turing prices is wND − wYND =
b2 𝜎2 (a−ab+bc2 )
𝜕c2 2= 7 a 𝜕c2 . It’s
(4−b2 )(1+f )[(4−b2 )𝜇2 +4𝜎2 ]
feasible region and G(c2 ) is monotonically increas- obvious that wND − wYND > 0.

Enabling Emergency Production Shifting The Value of Blockchain

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Enabling Emergency Production Shifting The Value of Blockchain

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DOI: 10.1111/risa.

Enabling emergency production shifting: The value of blockchain

Baozhuang Niu Lingfeng Wang Jian Dong

School of Business Administration, South China Abstract

Risk Analysis. 2023;1–31. wileyonlinelibrary.com/journal/risa © 2023 Society for Risk Analysis. 1

FIGURE 1 Application of blockchain in confronting COVID-19.

FIGURE 2 Supply chain structures.

wl The manufacturing price in Scenario l, l ∈ {NN, ND, BN, BD}

FIGURE 3 The sequence of events.

4 ANALYSIS AND RESULTS 𝜕wNN 𝜕wND

Lemma 2(1) presents that, without blockchain adoption, 1. 𝜋GB

pND − c < qND

ently, the low-cost CM in Scenario BN takes advantage of the 2. < 0;

TA B L E 3 Estimated parameters in numerical studies.

Local stable CM’s unit cost of emergency order c1 $3

[ B ] [ B2 ] [ B ]2 In practice, even the forecast accurately says that things,

Otherwise, we have U(𝜋GB B

a = 12 000 a = 17 000 a = 24 000

and Depending on the outbreak of pandemic in both areas and

TA B L E 5 Eight scenarios of production delay.

Scenario Description Probability

NNN Simultaneous game (1 − 𝜉)(1 − 𝜙)

when it faces production delay but could not make emergency

TA B L E A 1 Equilibrium outcomes in main model.

a2 {320+b[64−(4−b)b(44+9b)]}−8a{64+b[8−(28−b)b]}c2 +16(16−7b2 )c22

a2 (2−b)2 [20+b(24+5b)]−2a{64+b{8−b[44−b(2+5b)]}}c2 +(64−44b2 +5b4 )c22

a2 (2−b)(34+3b)+20c21 −4c1 [a(10−7b)+7bc2 ]−c2 [96a−2ab(14+3b)−3(16−b2 )c2 ]

𝜕wND Lastly, we take the first-order condition of the competitor’s

𝜕qND a[(2−b)b−4]+(4+b2 )c2 3a2 −8ac2 +4c22 𝜕qND

7c2 𝜕𝜋C NN 𝜕𝜋C

; 2 2 where − > 0 when

profit with respect to b in Scenario ND and derive = √ 5 2 2 5 a(a−c2 )

order condition of 𝜙 + (1 − 𝜙)𝜙 with respect to 𝜙, we 𝜙4 < 1, 0 < F < F3 is needed.

√ 𝜙(ab −8c1 )(a(−16+b(8+b))+8c1 −8bc2 )

When 𝜉 = 1, we have S (1) = −64(4 − b2 )2 F < 0. So this √ 2 2

J(𝜙) < 0 in the feasible region and S(𝜉) is monotonically 64(4−b2 ) F

(16 − b − 5b2 )]} when c2 =

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