Information disclosure in hotelling competition: advertisement vs. blockchain

Advertising is a widely used tool for (e-commerce) firms to disclose information, while blockchain has emerged as another choice in recent years. Under the framework of the Hotelling model, this paper studies (e-commerce) firms’ selection of information disclosure tools and pricing strategy in a competitive market. We begin with the scenario where only advertising or blockchain is available to firms. Our analysis shows that excessive advertising may occur under advertising while there may exist multiple equilibria under blockchain. We then study the interplay between these two tools, and some interesting results are obtained. First, there may be a unique equilibrium, no equilibrium, or multiple equilibria of the game when choosing an information disclosure tool. Second, in the equilibrium where firms use different tools, the level of excessive advertising may be higher than in the scenario without blockchain. Third, counterintuitively, an increase in the advertising cost may discourage blockchain adoption but encourage advertisement. Finally, using the situation where both firms use advertising as a benchmark, we show that while the industry profit and social welfare can be either higher or lower, consumers are always worse off with blockchain adoption.