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Economics of Permissioned Blockchain Adoption

Author

Listed:
  • Garud Iyengar

    (IEOR Department, Columbia University, New York, New York 10027)

  • Fahad Saleh

    (School of Business, Wake Forest University, Winston-Salem, North Carolina 27109)

  • Jay Sethuraman

    (IEOR Department, Columbia University, New York, New York 10027)

  • Wenjun Wang

    (IEOR Department, Columbia University, New York, New York 10027)

Abstract

We construct an economic framework for understanding the incentives of the participants of a permissioned blockchain for supply chains and other related industries. Our study aims to determine whether adoption of blockchain is socially beneficial and whether such adoption arises in equilibrium. We find that blockchain reduces information asymmetry for consumers, thereby enhancing consumer welfare. Consumer welfare gains can be sufficiently large that blockchain adoption is socially beneficial; nonetheless, we find that blockchain adoption does not arise in equilibrium. This situation arises because blockchain adoption costs are borne by manufacturers, and manufacturers cannot extract consumer gains through prices due to the competitive nature of the manufacturing sector. We offer a system of transfers to generate blockchain adoption in equilibrium when it is socially beneficial.

Suggested Citation

  • Garud Iyengar & Fahad Saleh & Jay Sethuraman & Wenjun Wang, 2023. "Economics of Permissioned Blockchain Adoption," Management Science, INFORMS, vol. 69(6), pages 3415-3436, June.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:6:p:3415-3436
    DOI: 10.1287/mnsc.2022.4532
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    References listed on IDEAS

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    Cited by:

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    3. Davies, Jennifer & Sharifi, Hossein & Lyons, Andrew & Forster, Rick & Elsayed, Omar Khaled Shokry Mohamed, 2024. "Non-fungible tokens: The missing ingredient for sustainable supply chains in the metaverse age?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 182(C).
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    5. Ma, Deqing & Wu, Xueping & Li, Kaifu & Hu, Jinsong, 2025. "Can blockchain implementation combat food fraud: Considering consumers’ delayed quality perceptions," European Journal of Operational Research, Elsevier, vol. 324(3), pages 908-924.
    6. Zhu, Shichao & Xia, Yusen & Yu, Lean & Li, Jian, 2025. "Leveraging blockchain technology to prevent deceptive disclosure of ESG compliance," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 203(C).
    7. Bruno Biais & Agostino Capponi & Lin William Cong & Vishal Gaur & Kay Giesecke, 2023. "Advances in Blockchain and Crypto Economics," Management Science, INFORMS, vol. 69(11), pages 6417-6426, November.
    8. Awasthy, Prakash & Haldar, Tanushree & Ghosh, Debabrata, 2025. "Blockchain enabled traceability — An analysis of pricing and traceability effort decisions in supply chains," European Journal of Operational Research, Elsevier, vol. 321(3), pages 760-774.
    9. Li, Ling & Yan, Shiyi & Peng, Shuxia & Hou, Pengwen, 2025. "The interplay of blockchain and channel structure with consideration of cyber-security in a platform supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 197(C).
    10. Li, Hui & Kannan, Devika & Xu, Qi, 2025. "Online operations in a multichannel supply chain under service cost difference: The adoption of blockchain technology," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 199(C).
    11. Yao, Jian & Yang, Cunyi, 2025. "Financial technology and climate risks in the financial market," International Review of Financial Analysis, Elsevier, vol. 99(C).
    12. Björn Hanneke & Oliver Hinz & Jella Pfeiffer & Wil M. P. Aalst, 2024. "The Internet of Value: Unleashing the Blockchain’s Potential with Tokenization," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 66(4), pages 411-419, August.
    13. Li, Dengjia & Ma, Chaoqun & Li, Hao & Yang, Jinglan, 2024. "The adoption of blockchain and financing constraints: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 96(PB).
    14. Avinadav, Tal & Shamir, Noam, 2025. "Truth, trust, and trade-offs: When blockchain in supply chains backfires," European Journal of Operational Research, Elsevier, vol. 326(3), pages 467-480.
    15. Kumar, Aalok & Kumar, Sourabh & Tiwari, Sunil, 2025. "Unlocking blockchain technologies potential in supply Chains: A study on cost governance and dynamic capabilities perspective," International Journal of Production Economics, Elsevier, vol. 290(C).
    16. Deqing Ma & Pengcheng Ma & Jinsong Hu, 2024. "The Impact of Blockchain Technology Adoption on an E-Commerce Closed-Loop Supply Chain Considering Consumer Trust," Sustainability, MDPI, vol. 16(4), pages 1-41, February.
    17. Wang, Minxue & Li, Bo & Song, Dongping, 2024. "The impact of blockchain on restricting the misuse of green loans in a capital-constrained supply chain," European Journal of Operational Research, Elsevier, vol. 314(3), pages 980-996.
    18. Xu, Xiaoping & Li, Nan & Zheng, Shengming & Cheng, T.C.E. & Liu, Hua, 2025. "Blockchain adoption under integrated and differentiated pricing strategies in the farm-adopted mode," International Journal of Production Economics, Elsevier, vol. 290(C).
    19. Sun, Xuting & Kuo, Yong-Hong & Xue, Weili & Li, Yanzhi, 2024. "Technology-driven logistics and supply chain management for societal impacts," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 185(C).
    20. Garud Iyengar & Fahad Saleh & Jay Sethuraman & Wenjun Wang, 2024. "Blockchain Adoption in a Supply Chain with Manufacturer Market Power," Management Science, INFORMS, vol. 70(9), pages 6158-6178, September.
    21. Jens Gudmundsson & Jens Leth Hougaard & Jay Sethuraman, 2026. "Managing Cascading Disruptions Through Optimal Liability Assignment," Management Science, INFORMS, vol. 72(3), pages 1904-1917, March.
    22. Li, Qing & Hadj-Hamou, Khaled & Rekik, Yacine, 2026. "Blockchain traceability valuation for perishable agricultural products: Balancing economic benefit and social impact," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 206(C).

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