The Arrow information paradox named
after Kenneth Arrow, American economist and joint winner of the Nobel Memorial
Prize in Economics with John Hicks, is a problem that companies face when
managing intellectual property across their boundaries. This happens when they
seek external technologies for their business or external markets for their own
technologies. It has implications for the value of technology and innovations
as well as their development by more than one firm and for the need for and
limitations of patent protection. A fundamental tenet of the paradox is that the
customer, i.e. the potential purchaser of the information describing a
technology (or other information having some value, such as facts), wants to
know the technology and what it does in sufficient detail as to understand its
capabilities or have information about the facts or products to decide whether
or not to buy it.If the buyer trusts the seller, or is protected via contract,
then they only need to know the results that the technology will provide, along
with any caveats for its usage in a given context. A problem is that sellers
lie, they may be mistaken.
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