Supply chain transparency as a signal of ethical production

Abstract

We analyze firms' supply chain transparency and ethical production practices using a game-theoretic approach. If the rival's supply chain is more likely to be ethical and the technology used to ensure supply chain transparency is efficient, ethical suppliers prefer to disclose their supply chain information, whereas unethical suppliers do not. The supply chain transparency level can be a signal of the supplier's ethical quality level, as both consumers' demand for ethical production and R&D efficiency for supply chain transparency increase. Consumers can distinguish ethical suppliers through their level of supply chain transparency because blockchain technology improves R&D efficiency.