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Reconciling blackmail and nondisclosure agreements: An economic approach

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  • Thomas J. Miceli

Abstract

The different legal treatment of blackmail and nondisclosure agreements (NDAs) is puzzling. Although both are aimed at concealing potentially valuable information, NDAs are legal, but blackmail is not. This paper offers an economic explanation that reconciles this difference. The setting is a relationship involving adverse selection in which a third party acquires information about another party's quality. The key to distinguishing between the practices is the manner in which the third party discovers the information: in blackmail, it occurs casually or as a result of costly search; in the NDA context, it occurs as a by‐product of an employment relationship.

Suggested Citation

  • Thomas J. Miceli, 2021. "Reconciling blackmail and nondisclosure agreements: An economic approach," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(2), pages 268-274, March.
    • Handle: RePEc:wly:mgtdec:v:42:y:2021:i:2:p:268-274
    DOI: 10.1002/mde.3232
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    References listed on IDEAS

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    1. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-1346, December.
    2. Thomas J. Miceli, 2020. "Trading in Information: On the Unlikely Correspondence Between Patents and Blackmail Law," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(4), pages 637-650, June.
    3. Miceli, Thomas J., 2011. "The real puzzle of blackmail: An informational approach," Information Economics and Policy, Elsevier, vol. 23(2), pages 182-188, June.
    4. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    5. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
    6. Charles Wilson, 1980. "The Nature of Equilibrium in Markets with Adverse Selection," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 108-130, Spring.
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