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.
Henry, Emeric, and Francisco Ruiz-Aliseda.
"Keeping Secrets: The Economics of Access Deterrence."
American Economic Journal: Microeconomics,
Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
Conflict; Conflict Resolution; Alliances; Revolutions
Asymmetric and Private Information; Mechanism Design
Oligopoly and Other Imperfect Markets
Firm Performance: Size, Diversification, and Scope
Innovation and Invention: Processes and Incentives
Intellectual Property and Intellectual Capital