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The Sale of Ideas: Strategic Disclosure, Property Rights, and Contracting

James J. Anton and Dennis A. Yao
The Review of Economic Studies
Vol. 69, No. 3 (Jul., 2002), pp. 513-531
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/1556708
Page Count: 19
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The Sale of Ideas: Strategic Disclosure, Property Rights, and Contracting
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Abstract

Ideas are difficult to sell when buyers cannot assess an idea's value before it is revealed and sellers cannot protect a revealed idea. These problems exist in a variety of intellectual property sales ranging from pure ideas to poorly protected inventions and reflect the nonverifiability of key elements of an intellectual property sale. An expropriable partial disclosure can be used as a signal, allowing the seller to obtain payment based on the value of the remaining (undisclosed) know-how. We examine contracting after the disclosure and find that seller wealth is pivotal in supporting a partial disclosure equilibrium and in determining the payoff size.

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