Application of Hyperledger Blockchain to Reduce Information Asymmetries in the Used Car Market

Abstract

The used car market has long been an example of a market rife with information asymmetry between sellers and buyers. Since most consumers have little experience and knowledge in buying cars, they rely on the historical vehicle documents provided only by car dealers, which might be insufficient to make pre-purchase judgments. To receive more information about events that occurred in the vehicle’s past, buyers need to spend time collecting other related documents from different sources. The whole process is time-consuming and leads to quality uncertainties causing market inefficiency. Such a problem can be alleviated by blockchain technology by using nodes of a computer network to record the historical information of a car, where the chain of data cannot be falsified, creating transparent, verified, and easy access to all documents. Accordingly, we propose a Hyperledger-based approach and simulate the acquisition time of historical vehicle data to illustrate the blockchain application to reduce information asymmetries in the used car market. In Hyperledger Fabric, all business network transactions are recorded on the smart contracts, allowing the records to coexist among the participants, including dealers, maintenance plants, motor vehicle offices, police offices, and buyers. This blockchain technology application mitigates information asymmetries between buyers and sellers, guarantees the integrity and transparency of data, and shortens the time obtaining historical car information.