Friday, January 16, 2009

Dilemma of the Day

Paradox of disclosure (Arrow, 1962; Anton and Yao, 1994): when trading in ideas, the willingness-to-pay of potential buyers depends on their knowledge of the idea, yet knowledge of the idea implies that potential buyers need not pay in order to exploit it. Disclosure increases the buyer’s intrinsic valuation but reduces the inventor’s bargaining power In the absence of formal intellectual property, potential buyers can claim that an idea was known, expropriating innovators once they have disclosed their technology. 
quoted from "The product market and the market for 'ideas': commercialization strategies for technology entrepreneur." Joshua S. Gans and Scott Stern. doi:10.1016/j.physletb.2003.10.071