IDEAS home Printed from https://ideas.repec.org/p/cdf/wpaper/2013-2.html
   My bibliography  Save this paper

Arrow's paradox and markets for nonproprietary information

Author

Listed:

Abstract

Arrow's information paradox asserts that demand for undisclosed information is undefined. Reassessing the paradox, I argue that the value of information for the buyer depends on its relevance, which can be known ex ante, and the uncertainty shifts to the capability of the seller to acquire the knowledge and her reliability in disclosing it. These three together form the buyer s reservation price. Consequently, differences in capability and reliability between the sellers may revoke the appropriation problem of nonproprietary information, where the original source loses her monopoly after the first purchase.

Suggested Citation

  • Lepp l , Samuli, 2013. "Arrow's paradox and markets for nonproprietary information," Cardiff Economics Working Papers E2013/2, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2013/2
    as

    Download full text from publisher

    File URL: http://carbsecon.com/wp/E2013_2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Yeon-Koo Che & Navin Kartik, 2009. "Opinions as Incentives," Journal of Political Economy, University of Chicago Press, vol. 117(5), pages 815-860, October.
    2. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09iatr74eao is not listed on IDEAS
    3. Emeric Henry, 2009. "Disclosure of research results: the cost of proving your honesty," SciencePo Working papers Main hal-01023670, HAL.
    4. Sudipto Bhattacharya & Sergei Guriev, 2006. "Patents vs. Trade Secrets: Knowledge Licensing and Spillover," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1112-1147, December.
    5. Emeric Henry, 2009. "Strategic Disclosure of Research Results: The Cost of Proving Your Honesty," Economic Journal, Royal Economic Society, vol. 119(539), pages 1036-1064, July.
    6. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
    7. Michele Boldrin & David Levine, 2002. "The Case Against Intellectual Property," American Economic Review, American Economic Association, vol. 92(2), pages 209-212, May.
    8. Boldrin, Michele & Levine, David K., 2008. "Perfectly competitive innovation," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 435-453, April.
    9. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09iatr32p81 is not listed on IDEAS
    10. Muto, Shigeo, 1986. "An Information Good Market with Symmetric Externalities," Econometrica, Econometric Society, vol. 54(2), pages 295-312, March.
    11. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March.
    12. Matsushima, Hitoshi, 2008. "Role of honesty in full implementation," Journal of Economic Theory, Elsevier, vol. 139(1), pages 353-359, March.
    13. William J. Baumol, 2004. "Entrepreneurial Enterprises, Large Established Firms and Other Components of the Free-Market Growth Machine," Small Business Economics, Springer, vol. 23(1), pages 9-21, August.
    14. Gans, Joshua S. & Stern, Scott, 2003. "The product market and the market for "ideas": commercialization strategies for technology entrepreneurs," Research Policy, Elsevier, vol. 32(2), pages 333-350, February.
    15. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-387, May.
    16. James J. Anton & Dennis A. Yao, 2002. "The Sale of Ideas: Strategic Disclosure, Property Rights, and Contracting," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 513-531.
    17. Bauke Visser & Otto H. Swank, 2007. "On Committees of Experts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 337-372.
    18. Emeric Henry & Carlos J. Ponce, 2011. "Waiting to Imitate: On the Dynamic Pricing of Knowledge," Journal of Political Economy, University of Chicago Press, vol. 119(5), pages 959-981.
    19. Hellwig, Martin & Irmen, Andreas, 2001. "Endogenous Technical Change in a Competitive Economy," Journal of Economic Theory, Elsevier, vol. 101(1), pages 1-39, November.
    20. Tyler Cowen & Eric Crampton (ed.), 2002. "Market Failure or Success," Books, Edward Elgar Publishing, number 2759.
    21. Hirshleifer, Jack, 1973. "Where Are We in the Theory of Information?," American Economic Review, American Economic Association, vol. 63(2), pages 31-39, May.
    22. James J. Anton & Dennis A. Yao, 2005. "Markets For Partially Contractible Knowledge: Bootstrapping Versus Bundling," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 745-754, 04/05.
    23. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09iatr32p81 is not listed on IDEAS
    24. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
    25. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    26. Robert Dur & Otto H. Swank, 2005. "Producing and Manipulating Information," Economic Journal, Royal Economic Society, vol. 115(500), pages 185-199, January.
    27. Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 1998. "Standard State-Space Models Preclude Unawareness," Econometrica, Econometric Society, vol. 66(1), pages 159-174, January.
    28. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2008. "Coarse Thinking and Persuasion," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 577-619.
    29. Samuli Leppälä, 2012. "An Epistemological Perspective on Knowledge Transfers: From Tacitness to Capability and Reliability," Industry and Innovation, Taylor & Francis Journals, vol. 19(8), pages 631-647, November.
    30. Matthew Gentzkow & Jesse M. Shapiro, 2006. "Media Bias and Reputation," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 280-316, April.
    31. repec:hal:spmain:info:hdl:2441/3jesolrqda8pl9qj4osla4hevt is not listed on IDEAS
    32. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    33. Ram T. S. Ramakrishnan & Anjan V. Thakor, 1984. "Information Reliability and a Theory of Financial Intermediation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 415-432.
    34. Mariagiovanna Baccara & Ronny Razin, 2007. "Bargaining Over New Ideas: The Distribution of Rents and the Stability of Innovative Firms," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1095-1129, December.
    35. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-574, September.
    36. Joshua S. Gans & Scott Stern, 2010. "Is there a market for ideas?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 19(3), pages 805-837, June.
    37. Jim Giles, 2005. "Internet encyclopaedias go head to head," Nature, Nature, vol. 438(7070), pages 900-901, December.
    38. King, John T., 2003. "The sale of unprotected inventions under alternative models of contracting behavior," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 57-77, January.
    39. Allen, Franklin, 1990. "The market for information and the origin of financial intermediation," Journal of Financial Intermediation, Elsevier, vol. 1(1), pages 3-30, March.
    40. Muto, Shigeo, 1987. "Possibility of relicensing and patent protection," European Economic Review, Elsevier, vol. 31(4), pages 927-945, June.
    41. Schmidt, Andreas U., 2006. "Multi-level markets and incentives for information goods," Information Economics and Policy, Elsevier, vol. 18(2), pages 125-138, June.
    42. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    43. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09iatr74eao is not listed on IDEAS
    44. Admati, Anat R & Pfleiderer, Paul, 1990. "Direct and Indirect Sale of Information," Econometrica, Econometric Society, vol. 58(4), pages 901-928, July.
    45. von der Fehr, Nils-Henrik Morch & Kuhn, Kai-Uwe, 1995. "Coase versus Pacman: Who Eats Whom in the Durable-Goods Monopoly?," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 785-812, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Samuli Leppälä, 2015. "Economic Analysis Of Knowledge: The History Of Thought And The Central Themes," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 263-286, April.
    2. Hedlund, Jonas, 2017. "Bayesian persuasion by a privately informed sender," Journal of Economic Theory, Elsevier, vol. 167(C), pages 229-268.
    3. Hedlund, Jonas, 2014. "Bayesian signaling," Working Papers 0577, University of Heidelberg, Department of Economics.
    4. Irene Valsecchi, 2013. "The expert problem: a survey," Economics of Governance, Springer, vol. 14(4), pages 303-331, November.
    5. Gregor Martin, 2015. "To Invite or Not to Invite a Lobby, That Is the Question," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(2), pages 143-166, July.
    6. Ajay Agrawal & Joshua S. Gans & Scott Stern, 2021. "Enabling Entrepreneurial Choice," Management Science, INFORMS, vol. 67(9), pages 5510-5524, September.
    7. Raphael Boleslavsky & Christopher Cotton, 2011. "Learning more by doing less," Working Papers 2012-1, University of Miami, Department of Economics.
    8. Benoît, Jean-Pierre & Galbiati, Roberto & Henry, Emeric, 2017. "Investing to cooperate: Theory and experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 1-17.
    9. Emeric Henry & Carlos J. Ponce, 2008. "Waiting to Copy: On the Dynamics of the Market for Technology," Working Papers hal-01066192, HAL.
    10. repec:hal:spmain:info:hdl:2441/d3pr45c1e8egae1q88dc5jo6u is not listed on IDEAS
    11. Thomas Hellmann & Enrico Perotti, 2011. "The Circulation of Ideas in Firms and Markets," Management Science, INFORMS, vol. 57(10), pages 1813-1826, October.
    12. repec:hal:spmain:info:hdl:2441/10121 is not listed on IDEAS
    13. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2011. "The Effect of Newspaper Entry and Exit on Electoral Politics," American Economic Review, American Economic Association, vol. 101(7), pages 2980-3018, December.
    14. Karsten Mause, 2009. "Too Much Competition in Higher Education? Some Conceptual Remarks on the Excessive‐Signaling Hypothesis," American Journal of Economics and Sociology, Wiley Blackwell, vol. 68(5), pages 1107-1133, November.
    15. Raphael Boleslavsky & Christopher Cotton, 2018. "Limited capacity in project selection: competition through evidence production," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 385-421, March.
    16. Joshua S. Gans & Lars Persson, 2013. "Entrepreneurial commercialization choices and the interaction between IPR and competition policy," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(1), pages 131-151, February.
    17. Hong Luo, 2014. "When to Sell Your Idea: Theory and Evidence from the Movie Industry," Management Science, INFORMS, vol. 60(12), pages 3067-3086, December.
    18. Herresthal, Claudia, 2022. "Hidden testing and selective disclosure of evidence," Journal of Economic Theory, Elsevier, vol. 200(C).
    19. Bergemann, Dirk & Ottaviani, Marco, 2021. "Information Markets and Nonmarkets," CEPR Discussion Papers 16459, C.E.P.R. Discussion Papers.
    20. Martin Gregor, 2014. "Receiver's access fee for a single sender," Working Papers IES 2014/17, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised May 2014.
    21. repec:hal:spmain:info:hdl:2441/59r8grug28881rf8or7715f88g is not listed on IDEAS
    22. Sylvain Bourjade & Bruno Jullien, 2011. "The roles of reputation and transparency on the behavior of biased experts," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 575-594, September.
    23. Herresthal, C., 2017. "Hidden Testing and Selective Disclosure of Evidence," Cambridge Working Papers in Economics 1712, Faculty of Economics, University of Cambridge.

    More about this item

    Keywords

    Arrow s information paradox; markets for information; knowledge; reliability; appropriability;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdf:wpaper:2013/2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Yongdeng Xu (email available below). General contact details of provider: https://edirc.repec.org/data/ecscfuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.