1919. Does Smart Contract Add Value to a Retailer with Buyback Risk?
Invited abstract in session TC-53: New Trends in Game Theory VI, stream Game Theory and Mathematical Economics.
Tuesday, 12:30-14:00Room: Liberty Moot Court
Authors (first author is the speaker)
| 1. | Zhengping Wu
|
| Syracuse University | |
| 2. | Ao Zhuo
|
| Renmin University of China | |
| 3. | Wanshan Zhu
|
| Renmin University of China |
Abstract
Retailers face buyback risk in supply chains when manufacturers fail to honor their buyback commitments. A smart contract can mitigate this risk by reserving a portion of the manufacturer’s wholesale revenue in a dedicated account exclusively for buyback purposes. Intuitively, the smart contract benefits the retailer by reducing buyback risk. However, our analysis shows that the smart contract adds value to the retailer only if she is highly risk-averse and the smart contract must be carefully designed. In certain cases, the retailer suffers from the implementation of a smart contract because it allows the manufacturer to charge a higher wholesale price and to benefit consistently. Therefore, a “win-win” situation can be achieved for the supply chain only with a well-designed smart contract and a risk-averse retailer. In addition, a supply chain with a low-margin product is more likely to benefit from the deployment of a smart contract. Furthermore, an attractive investment opportunity can lead to a “lose-lose” situation when the buyback risk arises from investment constraints, as the smart contract prevents the manufacturer from pursuing a more lucrative opportunity. Although smart contracts are reliable technology for streamlining transactions, our research advises supply chain managers to carefully assess their implementation to avoid potential losses. When well designed, smart contracts significantly enhance overall supply chain efficiency.
Keywords
- Supply Chain Management
- Game Theory
- Inventory
Status: accepted
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