Arrow Information Paradox

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Definition: Arrow Information Paradox

Arrow Information Paradox is named after Kenneth Arrow, Nobel Laureate in Economics from USA. This paradox asserts that the demand for undisclosed information is undefined. For a company dealing with intellectual property, this poses a big problem. When companies seek external technology for their business or external parties/markets for their own technologies, this paradox presents some implications for the value of technology and innovations as well as their development by more than one party posing higher need for patent protection.

As per this paradox, customer who is the potential purchaser of some valuable information or facts describing a technology wants to understand the technology in sufficient details to understand its capabilities before making a decision to buy the information. By giving some enquiry or detailed information about the technology to the customer, the seller effectively transfers the knowledge without getting any compensation. It is because of this paradox that the patent protection is needed.



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