@techreport{Bechtold2007economic,
abstract = {The economic analysis of trade-secret protection has traditionally focused on the interests of companies to conceal information from competitors in order to gain competitive advantage through trade-secret law. This has neglected cases in which the interest is not in concealing information from competi- tors, but from trading partners. We investigate the social e\textcent{} ciency e\textcurrency{}ects of trade-secret protection in such cases. Many results from economic theory state that asymmetric information (and therefore also its legal protection) is socially undesirable since it leads to ine\textcent{} cient trade. At the same time, protecting private information might create incentives for socially desirable investments. We model this trade-o\textcurrency{} in a simple buyer-seller model and nd that, indeed, trade-secret protection has ambiguous welfare e\textcurrency{}ects. However, a simple, informationally undemanding rule, conditioning the applicability of legal protection on a minimum investment by the informed party to conceal the information, helps to apply trade-secret protection only when it increases welfare. This rationalizes important features of current legal practice, but sug- gests that the e\textcurrency{}ort to conceal rather than the e\textcurrency{}ort to reveal the information should play a role when deciding whether or not trade secret protection should be granted.},
address = {Bonn},
author = {Stefan Bechtold and Felix H\"{o}ffler},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {K2; D82; 330; disclosure of information; hold-up problems; trade secrets; Gesch\"{a}ftsgeheimnis; Lieferanten-Kunden-Beziehung; Informationsverhalten; Wohlfahrtseffekt; Theorie},
language = {eng},
number = {2007,18},
publisher = {Max Planck Inst. for Research on Collective Goods},
title = {An economic analysis of trade-secret protection in buyer-seller relationships},
type = {Preprints of the Max Planck Institute for Research on Collective Goods},
url = {http://hdl.handle.net/10419/26929},
year = {2007}
}
