DJ Ortho

DJ Ortho
William Fisher
June 2, 2014
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Knee
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Knee
© 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.
20,000 ACL tears per year from skiing in the United States;
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
20,000 ACL tears per year from skiing in the United States;
On French National Ski Team, rate of ACL injuries is 8.5 per skier season
© 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.
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
$
Willingness and ability to pay of Daron
P(D)
Marginal Cost
D
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Willingness and ability to pay of Sam
P(D)
P(S)
Marginal Cost
D
S
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Willingness and ability to pay of Brandon
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
Aggregate Consumer Demand
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
What will happen if Ortho does
not have IP protection?
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Market for Knee Brace
$
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
In the absence of patent, copying and competition
will drive the price down close to marginal cost
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
In the absence of patent, copying and competition
will drive the price down close to marginal cost
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
Q
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Market for Knee Brace
$
In the absence of patent, copying and competition
will drive the price down close to marginal cost
Resultant Consumer Surplus
P(D)
P(S)
P(B)
Marginal Cost
D
S
B
Q
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
•  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
© 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.
•  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.
$
A
C
O
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
p
C
O
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
p
C
O
u
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Revenues
p
C
O
u
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Costs
p
C
O
u
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Profits
p
C
O
u
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
p
C
O
u
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
p
q
C
O
u
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
p
q
C
O
uv
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Revenue loss
p
q
C
O
uv
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Revenue loss
Revenue gain
p
q
C
O
uv
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Profits
p
q
C
O
uv
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
p
q
r
C
O
uv
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
p
q
r
C
O
uv
w
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Revenue loss
p
q
r
C
O
uv
w
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Revenue loss
p
q
Revenue gain
r
C
O
uv
w
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
p
q
Profit
r
C
O
uv
w
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
C
O
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Marginal Revenue
C
O
G
Marginal Cost
H
I
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
D
B
C
O
Marginal Revenue
G
Marginal Cost
H
I
E
F
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Profit-maximizing price
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
D
B
C
O
Marginal Revenue
G
Marginal Cost
H
I
E
F
Profit-maximizing output
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Profit-maximizing price
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Monopoly Profits
D
B
C
O
Marginal Revenue
G
Marginal Cost
H
I
E
F
Profit-maximizing output
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
2011
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
2011
© 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.
=$787.89
(as of June 3, 2014)
© 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.
Profit-maximizing price
$
A
Figure 1: Profit-Maximizing Behavior by a Patentee
In the absence of Price Discrimination
Monopoly Profits
D
B
C
O
Marginal Revenue
G
Marginal Cost
H
I
E
F
Profit-maximizing output
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Figure 2: Economic Effects of Profit-Maximizing Behavior
by a Patentee
Profit-maximizing price
$
A
B
C
O
Consumer Surplus
Monopoly Profits
D
E
F
G
Marginal Cost
H
I
Profit-maximizing output
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Figure 2: Economic Effects of Profit-Maximizing Behavior
by a Patentee
Profit-maximizing price
$
A
Consumer Surplus
Monopoly Profits
D
B
C
O
E
Deadweight Loss (foregone
consumer surplus)
G
Marginal Cost
H
I
E
F
Profit-maximizing output
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Quantity
Figure 2: Economic Effects of Profit-Maximizing Behavior
by a Patentee
$
Consumer Surplus
Monopoly Profits
Deadweight Loss (foregone
consumer surplus)
E
Marginal Cost
Quantity
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Value Stick
WTP
πc
P
π
C
πs
WTS
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
Value Stick
Willingness to pay
WTP
Price
Cost
Willingness to Sell
(suppliers’ opportunity cost)
πc
Customers’ margin
π
Margin
πs
Suppliers’ Margin
P
C
WTS
© 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
$
Consumer Surplus
Monopoly Profits
Deadweight Loss (foregone
consumer surplus)
E
Marginal Cost
Quantity
© 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
$
Consumer Surplus
Monopoly Profits
Deadweight Loss (foregone
consumer surplus)
P
E
Marginal Cost
Quantity
© 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
$
Consumer Surplus
Monopoly Profits
Deadweight Loss (foregone
consumer surplus)
P
MC
E
Marginal Cost
Quantity
© 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
$
Consumer Surplus
Monopoly Profits
Deadweight Loss (foregone
consumer surplus)
P
C
MC
E
Marginal Cost
Quantity
© 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
$
WTP
Consumer Surplus
Monopoly Profits
Deadweight Loss (foregone
consumer surplus)
P
C
MC
E
Marginal Cost
Quantity
© 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
$
WTP
Consumer Surplus
Monopoly Profits
Deadweight Loss (foregone
consumer surplus)
P
C
MC
E
Marginal Cost
WTS
Quantity
© 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
$
Consumer Surplus
Monopoly Profits
Deadweight Loss (foregone
consumer surplus)
E
Marginal Cost
Quantity
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.
End
© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.