Strategies and Benefits of Vertical Enterprises in a Three-echelon Blockchain Technology R&D Game

Abstract

As an underlying technology, blockchain is beneficial to reduce transaction costs and improve trading efficiency in the supply chain. This study has established a secondary supply chain model of upstream monopoly and downstream oligopoly. Initially, the game equilibrium of the market output, price and profits of upstream and downstream enterprises has been calculated in three stages. Following this, the study comparatively analyzed the market equilibrium between original status and upstream independent R&D. It has been found that upstream independent R&D has a technical spillover effect on the downstream market. Also, this paper discussed the satisfying relationship between cost-sharing and price concession for cooperative R&D from the perspective of upstream and downstream enterprises. Likewise, it can be a win-win situation and the optimal choice for enterprises if the cooperative conditions meet the requirements bilaterally. Finally, the study investigates the influence of vertical participating scope on the integral welfare of society and highlight that when all downstream enterprises take part in cooperation, social welfare will be maximized. Some implications of the study are also discussed.