Game Theory Perspective on the Patent War between Apple and Samsung
Apple and Samsung are the largest producers of smart phones and tablets in the current market. However, these two firms are far from ever forming a partnership. The animosity between Apple and Samsung is deeply embedded in our modern market. Even consumers of the products partake in the war by battling to defend the honor of either Iphones or Androids.
One of the drivers of the “Apple vs Samsung Patent War” is the current duopolsitic market. This market occurs when a few firms produce a large output; thus each firm becomes concerned with the reactions of its rival. In this way, Apple and Samsung face the Prisoner’s Dilemma as they attempt to strategically decide on lawsuits. As we learned in class, the Prisoner’s Dilemma is when two players each have two options whose outcome depends on the simultaneous choice made by the other.
The following diagram will details the consequences of each company’s individual choice on their decision to while a lawsuit against the other:
The Nash equilibrium is for both companies to file a suit whereas the Nash solution is for both companies to restrain from filing a suit. However, the latter solution, which would result in increasing the two companies’ joint profits does not seem likely. Each firm will take decisions that maximize their own profits instead of colluding to maximize joint profits. Therefore, Nash equilibrium is likely to occur where both firms file patent lawsuits against each other.
Unfortunately, this means that the war between Apple and Samsung will persist. The internet will be inundated with memes comparing the products of the two companies this month following the release of the Iphone 7. Brace yourselves.
Applying Game Theory to the patent war between Apple and Samsung