The impact of blockchain technology on equilibrium financing guarantee strategy in a three-tier supply chain

Deep-tier buyers of the core manufacturer in a supply chain often face capital constraints, which may lead to the disruption of the whole supply chain. In a three-tier supply chain without blockchain technology, the core manufacturer provides financing guarantee for the distributor to help it obtain financing from banks, and in turn, the distributor offers trade credit for the capital-constrained retailer, which is the financing guarantee between adjacent supply chain tiers (FGAT) scheme. Blockchain technology enables the core manufacturer to provide financing guarantee crossing supply chain tiers (FGCT) for the capital-constrained retailer to help it obtain bank financing. We analyze the impact of blockchain technology on equilibrium financing guarantee strategy and find that FGAT does not mitigate the supply chain triple marginalization compared to the case where the retailer has sufficient capital. However, FGCT mitigates the triple marginalization significantly and thus achieves a higher supply chain efficiency than FGAT, owing to the risk-sharing effect brought by smart contracts. The manufacturer, as both the guarantor and Stackelberg game leader, prefers FGCT over FGAT when the retailer’s initial capital is at small and medium levels. When the retailer’s initial capital is medium-sized, all supply chain participants obtain larger profits under FGCT than under FGAT. We further present a Pareto improvement zone regarding the debtors’ no-default probabilities (i.e., credit ratings) where all supply chain participants prefer FGCT over FGAT. To maintain Pareto improvement zones of FGCT, blockchain platforms should charge technology usage fees under certain thresholds. Moreover, compared to the new FGAT scheme with full repayments and debt management costs (NFGAT), FGCT still has better performance in mitigating the supply chain triple marginalization and realizing Pareto improvement under certain conditions. Our findings can guide participants to choose the optimal guarantee strategy and benefit supply chain operations.