In this section, the problem description, some model assumptions, terminologies, and symbols are given to construct the evolutionary game model.
3.1. Problem Description
Traditional game theory often assumes that the participants are completely rational and under the condition of complete information, but in a real economic life, it is very difficult to realize the conditions of complete rationality and complete information of the participants. In the cooperative competition of enterprises, there is a difference between the participants, and the problem of incomplete information and limited rationality of the participants caused by the complexity of the economic environment and the game problem itself is also obvious. Unlike traditional game theory, evolutionary game theory does not require the participants to be fully rational, nor does it require the condition of complete information. Evolutionary game theory is a theory that combines the analysis of game theory with the analysis of dynamic evolutionary processes. In terms of methodology, it differs from game theory in focusing on static equilibrium and comparative static equilibrium, emphasizing a dynamic equilibrium.
In the traditional SCF framework, there exists a notable information asymmetry among financial institutions, core enterprises, and SMEs. This discrepancy necessitates that financial institutions incur substantial costs in vetting the credentials of SMEs. Despite these efforts, there is no guarantee the information furnished by SMEs is authentic, which consequently elevates the barriers to secure financing for these small businesses.
Financial institutions adopt blockchain technology to manage their supply-chain financing operations; they could employ the blockchain’s consensus mechanism to verify the credentials of SMEs. The integration significantly bolsters the efficiency of the supply-chain financing process. SMEs, aiming to optimize their gains, may strategically choose between defaulting on their obligations or adhering to the terms of their agreements.
Moreover, the role of core enterprises extends beyond mere participants. Their credit backing is pivotal within the supply chain. By offering guarantees for the financing endeavors of SMEs, core enterprises can substantially elevate the collective profitability of the supply chain. The application of blockchain technology endows the supply-chain financing process with enhanced transparency, security, and traceability, as depicted in
Figure 1, which illustrates the streamlined and efficient financing process made possible by the integration of blockchain technology into the supply-chain management system. The blockchain platform eliminates the cumbersome auditing process, and after the contract is signed between the SME and the core business, the system is synchronized, as shown in Step 2 in
Figure 1, speeding up the financing process and shortening the financing cycle significantly.
In this study, we consider a supply-chain financing system composed of core enterprises, SMEs, and financial institutions, all of which are characterized by bounded rationality. Financial institutions have two strategic behaviors at their disposal: adopting a blockchain model and adhering to a traditional model. The revenue derived from supply-chain financing operations by financial institutions is denoted as .
Under the traditional model, financial institutions are tasked with assessing the creditworthiness of SMEs, incurring a supervisory cost . In contrast, under the blockchain model, the institutions incur an initial deployment cost to establish the blockchain infrastructure. This upfront investment, however, eliminates the need for subsequent regulatory costs associated with document review and verification. Additionally, the deployment of blockchain technology enhances the institutional reputation of the financial institutions, yielding an additional benefit from the adoption of blockchain technology. In the event that SMEs honor their contractual obligations, financial institutions provide them with a compliance reward . Conversely, should SMEs default on their agreements, financial institutions face a financial loss due to their inability to recoup the loaned funds on schedule. Furthermore, financial institutions impose a penalty on SMEs for such breaches of contract.
Core enterprises within the supply-chain financing system have two strategic behaviors: providing a guarantee for SMEs’ financing operations and opting not to provide such a guarantee. The revenue that core enterprises gain from engaging in supply-chain financing activities is represented by . When a core enterprise elects to guarantee the financing of SMEs, it can earn a guarantee benefit denoted as ; however, in the event of an SME defaulting, the core enterprise is obligated to compensate for the losses incurred by the bank and will also levy a penalty upon the SME. Upon the adoption of blockchain technology, core enterprises have the opportunity to upload their information onto the blockchain technology, which can lead to an information incentive benefit for them, signified by . This inclusion enhances transparency and can potentially improve the core enterprise’s credibility and access to financing within the supply-chain ecosystem.
SMEs within the financing system have two behavioral strategies at their disposal: defaulting on repayments and making timely repayments. The revenue that SMEs gain from engaging in supply-chain financing activities is designated as . Should SMEs choose to default on their repayments, they may secure a default benefit represented by , but they will also face penalties and imposed by the core enterprise and the financial institution, respectively. Additionally, under the blockchain model, where information is more transparent, the SMEs’ default can lead to a loss of reputation and incur additional damages, denoted as . Conversely, if SMEs adhere to the repayment schedule, the financial institution will provide them with a compliance reward .