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Arrow (1959) - Economic Welfare And The Allocation Of Resources For Invention (view source)
Revision as of 14:38, 20 June 2010
, 14:38, 20 June 2010→Information as a Commodity
*Because information is indivisible, information about production possibilities, for example, may not depend on the rate of production (c.f. price discimination).
*In addition, information transmission and payment suffers from [http://en.wikipedia.org/wiki/Arrow_information_paradox Arrow's information paradox], that is, the buyer doesn't know the value of the information until he has it, but then doesn't want to pay, at least given complete appropriability.
'''Arrow's Information Paradox '''
"the potential purchaser of the information describing a technology (or other information having some value),
needs 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."
Both properties will lead to non-optimal purchase of information and non-optimal allocation.
