Blockchain Technology and Physical Oracles in the Collectibles Industry: A Dynamic Game Approach

Abstract

In this study, we present a dynamic game model that utilizes blockchain technology in a distribution channel in which a supplier sells chips—called physical oracles in blockchain language—to a football club, which are then embedded within players’ jerseys. This enables data collection during matches, which is recorded on the blockchain, making the product original and non-imitable. In the event of defective chips, the jerseys are sold through traditional and official stores rather than the blockchain platform, which still provides lucrative business opportunities for the goods although it is defective. The study compares two pricing mechanisms: smart wholesale pricing, which compensates suppliers based on defect-free rates, and traditional profit sharing, which pays based on digital market sales. We demonstrate that, although the wholesale price contract is “smart”, it requires a traditional profit-sharing mechanism to coordinate a channel, conditioned to the levels of the current contractual agreements. Overall, our dynamic game model demonstrates the potential of blockchain technology to enhance the distribution channel of collectibles and incentivize total quality management through oracles.