The Social Efficiency of Fairness: An Information Economics Approach to Innovation
University of Houston Law Center
Marshall W. Van Alstyne
Boston University - Department of Management Information Systems; Massachusetts Institute of Technology (MIT) - Sloan School
August 15, 2005
Our key argument is that commitment to a fairness mechanism is socially efficient. The capacity for innovation rises as parties with complementary resources, particularly information, find ways to agree to combine their resources. Traditional mechanisms that focus on ownership and control as a means to eliminating opportunism risk overlook this form of efficiency gain. We show this proposition formally both for individual two-party transactions and more generally for repeated and multi-party interactions.
Number of Pages in PDF File: 41Accepted Paper Series
Date posted: July 30, 2012 ; Last revised: October 2, 2012
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