Open publication of a financial model drives its adoption over better but proprietary rivals.

Evidence

Another factor underlying the success of the Black-Scholes-Merton model was simply that it was publicly available in a way many of its early competitors were not. As U.S. law stood in the 1960s and the 1970s, it was unlikely that an options pricing model would be granted patent or copyright protection, so there was a temptation not to disclose the details of a model. Black, Scholes, and Merton, however, did publish the details, as did Kassouf (whose model was described in his Ph.D. thesis, and thus was available for use by options pricing services). Keeping the details private may have been perfectly sensible for those who hoped to make money from their models, but it was a barrier to the adoption of those models by others. — Donald MacKenzie, An Engine, Not a Camera, 727

Categorization

• XREF: Directly echoes the IBM-PC vs Apple architecture comparison later in this chapter; also links to the book’s core performativity thesis — a model shapes markets partly by being diffusible. — connects to: Word-of-mouth reputation systems create high entry barriers that technology-based regimes lower. — Lisa Bernestein, Opting out of the Legal System, 209; A market model can shape markets actively rather than merely describing them — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1165
• CANDY: The legal impossibility of patenting options pricing models in the 1960s-70s is a compact, surprising fact worth sharing.

Broader Connections

• A market model can shape markets actively rather than merely describing them #corroborates (0.82) — Donald MacKenzie, An Engine, Not a Camera, 1165
• Word-of-mouth reputation systems create high entry barriers that technology-based regimes lower. #expands (0.80) — Lisa Bernestein, Opting out of the Legal System, 209