Concept Origin: The Arrow information paradox is a theory introduced by economist Kenneth Arrow, highlighting a fundamental dilemma in the economics of information. Arrow posited that the value of information for the buyer is not evident until the information is revealed, but once disclosed, the buyer has essentially acquired it without compensation.
Economic Implications: This paradox presents a challenge in transactions involving proprietary or sensitive information. Sellers may be reluctant to share enough detail to convince buyers of the information's value, fearing that the potential buyer could use the disclosed information without paying for it, thereby creating market inefficiencies and potential mistrust.
Application in Marketing: In marketing, the paradox underscores the difficulty of selling unique insights or data-driven products. Businesses must balance transparency and protection of intellectual property, often relying on mechanisms like non-disclosure agreements or demonstrations that provide limited information to entice potential buyers while protecting the core value of the offering.
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