Law & Economics Workshop Series
presents
Professor Randal C. Picker
The University of Chicago Law School
The Razors-and-Blades Myth(s)
Tuesday, December 7, 2010
4:10 – 6:00
Solarium (room FA2) – Falconer Hall
84 Queen’s Park
The razors-and-blades story offers a foundational understanding of a key area of economics and strategy: Invest in an installed base by selling the razor handles at low prices or even giving them away, then sell the razor blades at high prices to justify the prior investment. Large chunks of modern technological life—from VCRs and DVD players to video game systems like the Xbox and now ebook readers—seem to operate subject to the same dynamics of razors and blades. The actual history of razors-and-blades is much richer than the standard story suggests. At the point that Gillette could most readily have played the strategy—from 1904-1921 during the period of the initial patents—it did not do so. The firm understood to have invented razors-and-blades as a business strategy did not play that strategy at the point that it was best situated to do so. It was only after the expiration of the patents that Gillette switched to something akin to razors-and-blades and it did that only to match the market. With the expiration of the patents, Gillette seemingly no longer had a way to tie the blades to the handles and thus, at least on paper, seemed to have no good way to play razors-and-blades. Yet with sale of razor sets to the US government during World War I and the jump in handle sales with the introduction of the low-price old-style handle, Gillette’s installed based jumped rapidly and the profits followed.
Randy Picker graduated from the College of the University in 1980 cum laude with a BA in economics and was elected to Phi Beta Kappa. He then spent two years in the Department of Economics, where he was a Friedman Fellow, completing his doctoral course work and exams. He received a master's degree in 1982. Thereafter, he attended the Law School and graduated in 1985 cum laude. He is a member of the Order of the Coif. While at the Law School, Mr. Picker was an Associate Editor of the Law Review. After graduation, Mr. Picker clerked for Judge Richard A. Posner of the U.S. Court of Appeals for the Seventh Circuit. He then spent three years with Sidley & Austin in Chicago, where he worked in the areas of debt restructuring and corporate reorganizations in bankruptcy. Mr. Picker is a member of the National Bankruptcy Conference and served as project reporter for the Conference's Bankruptcy Code Review Project. He is also a commissioner to the National Conference of Commissioners on Uniform State Laws and serves as a member of the drafting committee to revise Article 9 of the Uniform Commercial Code. Mr. Picker's primary areas of interest are the laws relating to intellectual property, competition policy and regulated industries, and applications of game theory and agent-based computer simulations to the law. He is the co-author of Game Theory and the Law. He currently teaches classes in antitrust; network industries; and secured transactions. He also regularly teaches bankruptcy and corporate reorganizations. He served as Associate Dean from 1994-1996.
For more workshop information, please contact Nadia Gulezko at n.gulezko@utoronto.ca.
