Sword or Futility? Blockchain-Based Competition in Refurbished Market Considering Consumer Reference Behaviors

In addition to competition from independent refurbishers, consumer distrust of refurbished product quality is a major bottleneck for brand manufacturers when selling refurbished products. This paper focuses on a duopoly competition consisting of a brand manufacturer and an independent refurbisher. Considering the direct and indirect reference quality effects triggered by consumers’ reference quality behavior in such an environment and their interaction with consumers’ prevalent reference price behavior, this paper explores the effectiveness of manufacturers’ responses to quality disclosure using blockchain and its impact on the competition in the refurbished market. The results show that when the market competitiveness increased by blockchain is high enough, it increases competition in the quality dimension by facilitating the brand manufacturer to improve the quality of the original product but reduces competition in the price dimension through the brand premium effect. When the degree of refurbishment by the brand manufacturer is high and the direct reference quality effect is large, the implementation of the blockchain manifests itself as an advertising effect that expands the market size but fails to combat the independent refurbisher. Conversely, when the brand manufacturer has a low degree of refurbishment and the direct reference quality effect is dominant, the adoption of blockchain can be used as a competitive tool for the brand manufacturer to combat the independent refurbisher in the refurbishment market. For consumers, the application of blockchain may not necessarily result in a more cost-effective refurbished product. Furthermore, whether consumer surplus and social welfare can be improved after the implementation of blockchain depends on the degree of refurbishment by the brand manufacturer and the reference quality effect.