The Arrow information paradox (information paradox for short, or AIP[1]), and occasionally referred to as Arrow's disclosure paradox, named after Kenneth Arrow, American economist and joint winner of the Nobel Memorial Prize in Economics with John Hicks,[2] is a problem faced by companies when managing intellectual property across their boundaries.
It has implications for the value of technology and innovations as well as their development by more than one firm, and for the need for and limitations of patent protection.
[3] Cornell Law School professor Oskar Liivak has written in a paper for a conference at Stanford University that Arrow's article "has been one of the foundational theoretical pillars of the incentive based theory of patents as Arrow’s work is thought to rule out a strictly market-based solution".
[4] 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.
Discussions of the value of patent rights have taken Arrow's information paradox into account in their evaluations.