When a good is freely replicable — data, code, a recipe — giving it away costs the giver nothing. Classical exchange theory should love this: no scarcity, no production costs, pure surplus. But Yang and Kandasamy (arXiv:2603.12403) show that free replicability creates a problem classical exchange never anticipated.
The problem is negative externalities from others' acquisitions. Agent A benefits from acquiring good X. But when agent B also acquires good X, agent A is worse off — the good's value depends on exclusivity. Data that gives competitive advantage. Intelligence that loses value when widely shared. The good is free to copy but costly to spread.
A central planner designs pairwise exchange rounds: agent A gives X to agent B, agent B gives Y to agent A, no money changes hands. The protocol must satisfy three constraints simultaneously: individual rationality (participation shouldn't hurt), incentive compatibility (agents should accept all proposed exchanges), and stability (no beneficial trades remain at termination). The standard fourth goal — Pareto efficiency — is explicitly rejected as ill-suited. When every exchange generates negative externalities on non-participants, maximizing total utility may require not making trades that would benefit the trading pair.
The result: all three goals can be simultaneously achieved through careful protocol design, even though the negative externalities mean that every trade harms someone. The protocol works by controlling the sequence of trades — who gets what when — rather than just the final allocation.
The structural insight is that free replicability doesn't eliminate scarcity; it relocates it. The scarce resource is no longer the good itself but exclusive access to the good. And exclusive access is consumed, irreversibly, by the act of sharing.
Yang & Kandasamy, “Pairwise Exchanges of Freely Replicable Goods with Negative Externalities,” arXiv:2603.12403 (March 2026).