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Designing a Market for Secrets

14 Pages Posted: 6 Jun 2017  

Ash Navabi

George Mason University, Students

Date Written: May 15, 2017

Abstract

In a world without intellectual property protection, inventors have an incentive to sell (and firms have an incentive to buy) inventions as secrets. In this paper, I give a general framework about how a market for secret inventions can operate. Specifically, I model the auction as a game between three classes of players: inventors, auctioneers, and firms. An inventor give away their entire idea to the auctioneer, who then sends a noisy signal of the idea to firms in order to entice them to bid. In order to get bids, the signal can't be "too vague" or "too specific." I then suggest that this model is analogous to real world markets.

Keywords: secrets, auctions, intellectual property

JEL Classification: H410, Z100, Z180

Suggested Citation

Navabi, Ash, Designing a Market for Secrets (May 15, 2017). GMU Working Paper in Economics (Forthcoming). Available at SSRN: https://ssrn.com/abstract=2974401

Ash Navabi (Contact Author)

George Mason University, Students ( email )

Fairfax, VA
United States

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