Supply chain equilibrium on a game theory-incentivized blockchain network

In the supply chain ecosystem, trust among transacting parties is a critical component to ensure profitability. However, participating parties act selfishly in their interest resulting in a sub-optimal output for transactions. This makes it difficult for trust to be established and an effective equilibrium to be reached among parties. Therefore, it is essential to ensure coordination among all parties and for all parties to collaborate effectively to avoid this problem. This helps to create a favourable environment and ensures profitability on the supply chain. Previous works have attempted to achieve this by making use of contracting mechanisms to regulate IoT devices and nodes on the network. In these systems, parties are enticed to act in a way so that profit achieved in the supply chain is maximized. However, these contracting mechanisms utilized are centralized and can easily be compromised. Also, these contracts are not enforced by a framework that ensures the effective establishment of trust among parties on the supply chain. Also, equilibrium remains in-established due to the complexity and lack of an effective system to regulate behaviour effectively. In this work, we design a blockchain-adaptive framework that incentivizes participants to work together on the supply chain to establish an equilibrium. We show through a proof of Concept, that the blockchain possesses the necessary attributes needed in establishing a Nash Equilibrium and can be used to coordinate the supply chain in complex scenarios to ensure security, trust, and profit. Using game theory models, we develop novel approaches and prove mathematically that the blockchain is more efficient in establishing a supply chain equilibrium among parties, ensuring fairness among various parties. Additionally, we utilize smart contracts to calculate each participating party's expected payoff and profit. We also attempt to reduce the level of uncertainties across the supply chain by presenting profit-maximizing parties. Here the transparency provided by the blockchain provides a means to collate information relevant for making effective decisions on the blockchain which proves relevant in multi-complex supply chain networks such as aircraft, and vehicle manufacturing and assembling networks. Here, parties are thus incentivized to make the right decisions. We observe through our test that the blockchain provides all parties with the best payoff that satisfies all parties by incorporating each individual's decisions on the supply chain, ensuring trust and equilibrium are established. The implementation of our work was achieved using standard blockchain networks. Our results show the cost-efficiency and feasibility of our proposed idea.

Automated summary

This article discusses the challenges in establishing equilibrium in the supply chain and the importance of a blockchain framework. By utilizing blockchain and smart contracts, cooperation among parties can be facilitated, leading to maximizing efficiency and establishing trust in the supply chain.