Reconciling blackmail and nondisclosure agreements: An economic approach

Thomas J. Miceli

Managerial and Decision Economics, 2021, vol. 42, issue 2, 268-274

Abstract: The different legal treatment of blackmail and nondisclosure agreements (NDAs) is puzzling. Although both are aimed at concealing potentially valuable information, NDAs are legal, but blackmail is not. This paper offers an economic explanation that reconciles this difference. The setting is a relationship involving adverse selection in which a third party acquires information about another party's quality. The key to distinguishing between the practices is the manner in which the third party discovers the information: in blackmail, it occurs casually or as a result of costly search; in the NDA context, it occurs as a by‐product of an employment relationship.

Date: 2021
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https://doi.org/10.1002/mde.3232

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:42:y:2021:i:2:p:268-274

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