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Arrow (1959) - Economic Welfare And The Allocation Of Resources For Invention (view source)
Revision as of 19:14, 29 September 2020
, 19:14, 29 September 2020no edit summary
{{Article
|Has page=Arrow (1959) - Economic Welfare And The Allocation Of Resources For Invention
|Has bibtex key=
|Has article title=Economic Welfare And The Allocation Of Resources For Invention
|Has author=Arrow
|Has year=1959
|In journal=
|In volume=
|In number=
|Has pages=
|Has publisher=
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*This page is referenced in [[BPP Field Exam Papers]]
*Arrow, K.J. (1958), "Economic Welfare and the Allocation of Resources for Innovation" in idem., Essays in the Theory of Risk Bearing. [http://www.edegan.com/pdfs/Arrow%20(1959)%20-%20Economic%20Welfare%20and%20the%20Allocation%20of%20Resources%20for%20Invention.pdf pdf]
@misc{arrow1958economic,
title={Economic welfare and the allocation of resources for invention},
author={Arrow, K.},
year={1958},
publisher={Nber}
}
==Abstract==
If a monopolist owner of the information were to sell it, the buyer could reproduce it at little or no cost (i.e. information is non-rival). If the ownjer owner doesn't sell it but uses it, this use will be socially inefficient, as well as possibly privately inefficient (the owner may not be the best user).
*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."
Sourced from wikipedia, June 2010
Both properties will lead to non-optimal purchase of information and non-optimal allocation.
*The price will be positive and should be zero, so demand will be below the optimum
*At any price the nature of information will lead to lower demand
==Invention as the Product of Information==
