Retailer blockchain adoption with strategic consumers facing counterfeit entry

We study when a retailer should adopt blockchain authentication in a two-period market facing entry by a deceptive counterfeiter. Using a game-theoretic model, we solve a rational-expectations equilibrium via backward induction to quantify pricing, demand timing, and profit effects. Blockchain shifts consumers’ beliefs about authenticity and when they buy, so the profit effect is not one-way: gains in one period may be offset by losses in the other, depending on authentication cost and market conditions. Adoption is optimal either (i) at low cost, as a quality signal that protects second-period margins; or (ii) at moderately high cost, as a demand-shifting lever that pulls sales into the first period. Counterintuitively, a retailer may rationally forgo adoption even at zero cost when differentiation or pricing power is weak (e.g., high counterfeit quality or high acquisition costs for the authentic good), and adoption can raise counterfeit share if it induces aggressive low-price repositioning by fakes. These results challenge the view that traceability is universally beneficial and underscore the need to align blockchain adoption with consumer patience, counterfeit quality, and authentication costs. We conclude with actionable guidance for retailers and policymakers.