Patent # Patent # 7,089,893 Patent # 7,287,496 >> 4 – stroke internal combustion.
Reward Theory: Patent - Harvard University Theory Patent.pdf• By obtaining a patent, the innovator...
Transcript of Reward Theory: Patent - Harvard University Theory Patent.pdf• By obtaining a patent, the innovator...
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Reward Theory: Patent
William Fisher
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Who Are Your Customers?
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Daron Rahlves
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Sam
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Brandon
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Marginal Cost
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Marginal Cost
Willingness and ability to pay of consumer X
P(D)
D
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
P(S)
S
Marginal Cost
Willingness and ability to pay of consumer Y
P(D)
D
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
P(S)
S
Marginal Cost
Willingness and ability to pay of consumer Z
P(D)
D
P(B)
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
Aggregate Consumer Demand
P(D)
D
P(B)
B
What will happen if I do not have IP protection?
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
In the absence of patent, copying and competition will drive the price down close to marginal cost
P(D)
D
P(B)
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
In the absence of patent, copying and competition will drive the price down close to marginal cost
P(D)
D
P(B)
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
In the absence of patent, copying and competition will drive the price down close to marginal cost
P(D)
D
P(B)
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
In the absence of patent, copying and competition will drive the price down close to marginal cost
P(D)
D
P(B)
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
In the absence of patent, copying and competition will drive the price down close to marginal cost
P(D)
D
P(B)
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
In the absence of patent, copying and competition will drive the price down close to marginal cost
P(D)
D
P(B)
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
In the absence of patent, copying and competition will drive the price down close to marginal cost
P(D)
D
P(B)
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
In the absence of patent, copying and competition will drive the price down close to marginal cost
P(D)
D
P(B)
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
In the absence of patent, copying and competition will drive the price down close to marginal cost
P(D)
D
P(B)
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
P(D)
D
P(B)
B Q
In the absence of patent, copying and competition will drive the price down close to marginal cost
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Quantity
P(S)
S
Marginal Cost
In the absence of patent, copying and competition will drive the price down close to marginal cost
P(D)
D
P(B)
B
Resultant Consumer Surplus
Q
• By obtaining a patent, the innovator can prevent this dynamic
• If there are no close substitutes for the invention, the patent gives the innovator market power
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Improved Knee Brace
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Improved Knee Brace
• By obtaining a patent, the innovator can prevent this dynamic
• If there are no close substitutes for the invention, the patent gives the innovator market power
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
• By obtaining a patent, the innovator can prevent this dynamic
• If there are no close substitutes for the invention, the patent gives the innovator market power
• He can then set a price without fear of corrosion through competition
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
• By obtaining a patent, the innovator can prevent this dynamic
• If there are no close substitutes for the invention, the patent gives the innovator market power
• He can then set a price without fear of corrosion through competition
• Assume, for the moment, he charges all consumers the same price
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
C G
H
Marginal Cost
O
A
I
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
C G
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Marginal Cost
O
A
I
p
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
C G
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Marginal Cost
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A
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p
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
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Revenues
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
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Marginal Cost
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Costs
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
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Quantity
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Marginal Cost
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Profits
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
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Quantity
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Marginal Cost
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
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Quantity
C G
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Marginal Cost
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
C G
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Marginal Cost
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
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Quantity
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Revenue loss
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
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Quantity
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Marginal Cost
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Revenue loss
Revenue gain
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
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Quantity
C G
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Marginal Cost
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Profits
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
C G
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Marginal Cost
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
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Marginal Cost
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
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Marginal Cost
O
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Revenue loss
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
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Marginal Cost
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A
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Revenue loss
Revenue gain
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
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Marginal Cost
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Profit
In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
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Quantity
C G
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Marginal Cost
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
C G
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Marginal Cost
Marginal Revenue
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
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Quantity
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
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Marginal Cost
Profit-maximizing output
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Marginal Revenue
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
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Monopoly Profits
Marginal Revenue
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 1: Profit-Maximizing Behavior by a Patentee
$
Quantity
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Marginal Cost
Profit-maximizing output
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Monopoly Profits
Marginal Revenue
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In the absence of Price Discrimination
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 2: Economic Effects of Profit-Maximizing Behavior by a Patentee
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Consumer Surplus
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Figure 2: Economic Effects of Profit-Maximizing Behavior by a Patentee
$
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Profit-maximizing output
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Monopoly Profits
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Consumer Surplus
Deadweight Loss (foregone consumer surplus)
E