So therefore the overall profits of this company are 100

consumers because we sell both to the high willingness to pay and

the low willingness to pay consumers at a price of 299.

Which gives us a profit margin of 299 minus 200,

so therefore it's going to be 100 times 99, or 9900.

So the profits of the company, the profits of the innovator are going to be 9900.

All the other companies do not sell anything and they make zero profit.

So with that simple calculation, we can calculate, we can figure out what

the value of an innovation is for a firm that is currently in a competitive market.

So the total innovation is simply by comparing the profits with innovation

with the profits without innovation.

So the profits with innovation we know are 9900.

Profits without innovation are 0.

And so therefore the difference and

the value of innovation is simply 9900-0, right?

So that's going to take us to 9900, that is the value of innovation.

That is how much each firm is going to be willing to pay to get

the patent that reduces the production cost from 300 to 200 Euros.