Can Price Still Be an Honest Signal of Product Quality? A Blockchain Adoption Perspective

Highlights

Explores strategies for quality information disclosure and factors influencing blockchain adoption in agriculture.
Authentic quality disclosure remains the optimal strategy for farmers.
Planting costs significantly affect supermarkets' willingness to adopt blockchain.
Blockchain adoption may reduce profits for high-quality farmers.

Abstract

Achieving high-quality development in agricultural supply chains hinges on transparent pricing and authentic quality signals. However, misinformation often disrupts price mechanisms, eroding consumer trust. Blockchain technology offers a solution by enabling tamper-proof quality disclosure. This paper examines:

On-chain information quality and its impact on price signals.
Optimal timing for blockchain adoption under different disclosure strategies.

Key Findings:

Farmers and supermarkets adopt divergent blockchain strategies.
Authentic disclosure maximizes farmer profits without blockchain.
Supermarkets adopt blockchain only when traceability yields high gains, particularly under low planting costs.
High-quality farmers may face profit losses post-adoption.
Increasing information-sensitive consumers can lead to Pareto-optimal supply chain performance.

Introduction

Consumer demand for high-quality agricultural products is rising, yet price-signaling failures persist due to information asymmetry. Examples like the European horse meat scandal and U.S. organic grain fraud highlight systemic issues. Blockchain’s immutable ledger ensures transparency, restoring trust in price-quality correlations.

Research Questions:

RQ1: How can blockchain-enabled disclosure strategies achieve price-quality equilibrium?
RQ2: How does on-chain information quality influence pricing?
RQ3: What determines blockchain adoption timing for supply chain members?

Literature Review

Quality Information Disclosure

Studies show misinformation distorts markets, necessitating robust disclosure mechanisms (Arya et al., 2014).

Signaling Game Theory

Price signals often fail for credence goods like agricultural products (Bian et al., 2022).

Blockchain Adoption

Blockchain mitigates asymmetry but adoption hinges on cost-benefit analysis (Babich & Hilary, 2020).

Methodology

We model a two-tier supply chain (farmers + supermarket) using a signaling game to analyze:

Separating Equilibrium: High/low-quality products priced differently.
Pooling Equilibrium: Uniform pricing obscures quality differences.

Variables:

Planting cost (c).
Traceability value (V).
Consumer sensitivity (β).

Key Insights

Without Blockchain

Authentic disclosure (separating equilibrium) maximizes farmer profits.
Pooling equilibrium occurs only if planting costs are low (c < threshold).

With Blockchain

Supermarkets adopt blockchain if V > adoption cost.
High-quality farmers may see profit reductions due to traceability eliminating price premiums.

👉 How Blockchain Transforms Supply Chains

Extended Analysis

Consumer Sensitivity: More information-sensitive consumers improve supply chain efficiency.
Block Investment: Higher block counts enhance traceability accuracy but raise costs.
On-Chain Costs: Farmers’ adoption depends on cost affordability.

FAQs

Q1: Why do farmers prefer authentic disclosure without blockchain?
A1: Separating equilibria allow high-quality farmers to command price premiums, maximizing profits.

Q2: When will supermarkets adopt blockchain?
A2: When traceability gains outweigh costs, typically under low planting costs (c).

Q3: Can blockchain harm high-quality farmers?
A3: Yes, by eliminating price premiums once quality is transparently disclosed.

👉 Blockchain Adoption Strategies Explained

Conclusion

Blockchain restores price-signaling integrity but requires careful adoption timing. Key recommendations:

Farmers: Disclose authentically to maintain trust.
Supermarkets: Adopt blockchain only for high traceability value.
Policymakers: Incentivize blockchain use to balance stakeholder interests.

Future Work:

Empirical validation across diverse agricultural markets.
Dynamic cost-benefit models for blockchain scalability.

References

(Include APA-style citations for cited studies.)