Keeping Secrets: The Economics of Access Deterrence
- (pp. 95-118)
Abstract
Keeping valuable secrets requires costly protection efforts. Breaking them requires costly search efforts. In a dynamic model in which the value of the secret decreases with the number of those holding it, we examine the secret holders' protection decisions and the secret breakers' timing of entry, showing that the original secret holder's payoff can be very high, even when protection appears weak, with implications for innovators' profits from unpatented innovations. We show that the path of entry will be characterized by two waves, the first of protected entry followed by a waiting period, and a second wave of unprotected entry.Citation
Henry, Emeric, and Francisco Ruiz-Aliseda. 2016. "Keeping Secrets: The Economics of Access Deterrence." American Economic Journal: Microeconomics, 8 (3): 95-118. DOI: 10.1257/mic.20140190Additional Materials
JEL Classification
- C73 Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
- D74 Conflict; Conflict Resolution; Alliances; Revolutions
- D82 Asymmetric and Private Information; Mechanism Design
- L13 Oligopoly and Other Imperfect Markets
- L25 Firm Performance: Size, Diversification, and Scope
- O31 Innovation and Invention: Processes and Incentives
- O34 Intellectual Property and Intellectual Capital
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