Impacts of Fairness Concern and Non-Linear Production Cost on Investment Strategy for Blockchain-Based Shipping Supply Chain

In recent years, blockchain has been increasingly used in shipping supply chains, enabling supply chain members to track the production process of shipping products, thereby increasing visibility for firms and boosting their competitiveness. When firms decide whether to invest in blockchain, they crucially consider the cost of development and fairness of profit distribution along the supply chain, with a particular focus on non-linear production cost and fairness concern. We build a Stackelberg game model for four scenarios utilizing a two-echelon supply chain made up of a single shipping company and a single freight forwarder, taking into account fairness concern and non-linear production cost. We analyze how participants in the shipping supply chain make decisions when the shipping company has non-linear production cost and the freight forwarder has fairness concern. The findings suggest that the interaction between the non-linear production cost of the shipping company and the level of fairness concern of the freight forwarder affects the managerial decisions of both the freight forwarder and the shipping company. In the presence of economies of scale or diseconomies of scale, fairness concern can effectively help the freight forwarder to increase its share of profits within the supply chain, while the shipping company changes in the opposite direction. Furthermore, when the freight forwarder takes fairness concern into account, its profit and utility do not always rise in direct proportion to the fairness concern degree. Interestingly, there is always an inverse relationship between the shipping company’s profit and the degree of fairness concern, regardless of whether there are economies of scale or diseconomies of scale. This paper provides management insights for companies considering blockchain in their plans, highlighting the importance of combining non-linear production cost and fairness concern to achieve profit goals.