Arrow information paradox

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The Arrow information paradox, named after Kenneth Arrow,[1] 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.

The paradox is that the customer, i.e. the potential purchaser of the information describing a technology (or other information having some value), wants to know the technology and what it does in sufficient detail as to understand its capabilities and decide whether or not to buy it.

Once the customer has this detailed knowledge, however, the seller has in effect transferred the technology to the customer without any compensation.[1]

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, one or both sides overlook side consequences for usage in a given context, or some unknown unknown affects the actual outcome.

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  1. ^ a b Takenaka, Toshiko (2008). Patent Law and Theory: A Handbook of Contemporary Research. Research Handbooks in Intellectual Property. Edward Elgar Publishing. pp. 4–5. ISBN 978-1-84542-413-8.