Arrow Information Paradox
Encyclopedia
The Arrow information paradox, named after Kenneth Arrow
, 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
.
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.
Kenneth Arrow
Kenneth Joseph Arrow is an American economist and joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972. To date, he is the youngest person to have received this award, at 51....
, is a problem that companies face when managing intellectual property
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
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
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
, 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
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
.
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
Unknown unknown
"There are known knowns" are the most well-known words of a statement to the press made by the former United States Secretary of Defense Donald Rumsfeld in February 2002.- Usage :...
affects the actual outcome.