An economic analysis of trade-secret protection in buyer-seller relationships

The economic analysis of trade-secret protection has traditionally focused on the interests of companies to conceal information from competitors in order to gain a competitive advantage through trade-secret law. This has neglected cases in which the interest is not in concealing information from competitors, but from trading partners. We investigate the social efficiency effects 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 inefficient trade. At the same time, protecting private information might create incentives for socially desirable investments. We model this trade-off in a simple buyer-seller model and find that, indeed, trade-secret protection has ambiguous welfare effects. 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.disclosure of information, hold-up problems, trade secrets

The Endowment Effect in Groups with and without Strategic Incentives

The realization of market transactions often depends on decisions in groups in which members are anonymous and cannot communicate, but have interrelated outcomes. In a comprehensive study, we investigated the interaction of group effects, strategic effects and endowment effects in different group situations. We show that groups display an endowment effects for uncertain goods which is reduced by about 50% compared to the endowment effect in individuals in corresponding situations. In group situations with additional strategic incentives to overprice the endowment effect completely diminished. The strategic effects and group effects on pricing in group situations cannot be found for participants’ personal valuations of the good, whereas the endowment effect for personal valuations prevailed in both group conditions. This indicates that the endowment effect might be more fundamental than group effects and strategic effects. A paramorphic model for pricing in strategic group situations is suggested and practical implications are discussed.Decision Making, Endowment Effects, Groups, Strategic Incentives

An Economic Analysis of Trade-Secret Protection in Buyer-Seller Relationships

The economic analysis of trade-secret protection has traditionally focused on the interests of companies to conceal information from competitors in order to gain a competitive advantage through trade-secret law. This has neglected cases in which the interest is not in concealing information from competitors but from trading partners. We investigate trade-secret protection in such cases. Frequently, asymmetric information will lead to inefficient trade; at the same time, protecting private information might create incentives for socially desirable investments. We model this trade-off in a simple buyer-seller model and find that the optimal fine for violations of trade secrets is positive. In general, however, the welfare effects of increasing a fine are ambiguous. We discuss conditioning the legal protection on a minimum investment by the informed party to conceal the information and argue that this helps to apply trade-secret protection only when it increases welfare. This rationalizes important features of current legal practic

Trademarks, Triggers, and Online Search

Internet search engines display advertisements along with search results, providing them with a major source of revenue. The display of ads is triggered by the use of keywords, which are found in the searches performed by search engine users. The fact that advertisers can buy a keyword that contains a trademark they do not own has caused controversy worldwide. To explore the actual effects of trademark and keyword advertising policies, we exploit a natural experiment in Europe. Following a decision by the Court of Justice of the European Union, Google relaxed its AdWords policy in continental Europe in September 2010. After the policy change, Google allowed advertisers to select a third party's trademark as a keyword to trigger the display of ads, with only a limited complaint procedure for trademark owners. We use click-stream data from European Internet users to explore the effect this policy change had on browsing behavior. Based on a data set of 5.38 million website visits before and after the policy change, we find little average change. However, we present evidence that this lack of average effect stems from an aggregation of two opposing effects. While navigational searches are less likely to lead to the trademark owner's website, non-navigational searches are more likely to lead to the trademark owner's website after the policy change. The effect of changing keyword advertising policies varies with the purpose of the consumers using the trademark, and it is more pronounced for lesser-known trademarks. The article points to tradeoffs trademark policy is facing beyond consumer confusion. More generally, the article proposes a novel way of analyzing the effect of different allocations of property rights in intellectual property law

The Nature of Sequential Innovation

When creators and innovators take up a new task, they face a world of existing creative works, inventions, and ideas, some of which are governed by intellectual property (IP) rights. This presents a choice: Should the creator pay to license those rights? Or, alternatively, should the creator undertake to innovate around them? Our Article formulates this “build on/build around decision” as the fundamental feature of sequential creativity, and it maps a number of factors—some legal, some contextual—that affect how creators are likely to decide between building on existing IP or building around it. Importantly, creators are influenced by more than just formal IP rights. We identify three other sets of factors—(1) Technological and Artistic, (2) Market, and (3) Creator—that can also affect the path of sequential innovation by encouraging either building on or building around. Our focus on creators’ build on/build around decisions offers a richer, but more complex, account of the nature of sequential innovation and, in so doing, yields insights into its efficient legal regulation

Innovation Heuristics: Experiments on Sequential Creativity in Intellectual Property

All creativity and innovation build on existing ideas. Authors and inventors copy, adapt, improve, interpret, and refine the ideas that have come before them. The central task of intellectual property (IP) law is regulating this sequential innovation to ensure that initial creators and subsequent creators receive the appropriate sets of incentives. Although many scholars have applied the tools of economic analysis to consider whether IP law is successful in encouraging cumulative innovation, that work has rested on a set of untested assumptions about creators’ behavior. This Article reports four novel creativity experiments that begin to test those assumptions. In particular, we study how creators decide whether to copy, or “borrow,” from existing ideas or to innovate around them

A Recessive Mutation Resulting in a Disabling Amino Acid Substitution (T194R) in the LHX3 Homeodomain Causes Combined Pituitary Hormone Deficiency

Background/Aims: Recessive mutations in the LHX3 homeodomain transcription factor gene are associated with developmental disorders affecting the pituitary and nervous system. We describe pediatric patients with combined pituitary hormone deficiency (CPHD) who harbor a novel mutation in LHX3. Methods: Two female siblings from related parents were examined. Both patients had neonatal complications. The index patient had CPHD featuring deficiencies of GH, LH, FSH, PRL, and TSH, with later onset of ACTH deficiency. She also had a hypoplastic anterior pituitary, respiratory distress, hearing impairment, and limited neck rotation. The LHX3 gene was sequenced and the biochemical properties of the predicted altered proteins were characterized. Results: A novel homozygous mutation predicted to change amino acid 194 from threonine to arginine (T194R) was detected in both patients. This amino acid is conserved in the DNA-binding homeodomain. Computer modeling predicted that the T194R change would alter the homeodomain structure. The T194R protein did not bind tested LHX3 DNA recognition sites and did not activate the a-glycoprotein and PRL target genes. Conclusion: The T194R mutation affects a critical residue in the LHX3 protein. This study extends our understanding of the phenotypic features, molecular mechanism, and developmental course associated with mutations in the LHX3 gene. copyright (C) 2012 S. Karger AG, Base

Sensorimotor synchronization to music reduces pain

Pain-reducing effects of music listening are well-established, but the effects are small and their clinical relevance questionable. Recent theoretical advances, however, have proposed that synchronizing to music, such as clapping, tapping or dancing, has evolutionarily important social effects that are associated with activation of the endogenous opioid system (which supports both analgesia and social bonding). Thus, active sensorimotor synchronization to music could have stronger analgesic effects than simply listening to music. In this study, we show that sensorimotor synchronization to music significantly amplifies the pain-reducing effects of music listening. Using pressure algometry to the fingernails, pain stimuli were delivered to n = 59 healthy adults either during music listening or silence, while either performing an active tapping task or a passive control task. Compared to silence without tapping, music with tapping (but not simply listening to music) reduced pain with a large, clinically significant, effect size (d = 0.93). Simply tapping without music did not elicit such an effect. Our analyses indicate that both attentional and emotional mechanisms drive the pain-reducing effects of sensorimotor synchronization to music, and that tapping to music in addition to merely listening to music may enhance pain-reducing effects in both clinical contexts and everyday life.publishedVersio