Mobile Patent Wars – Offset of Stability in Game Theory
The article discusses how Samsung is using its patents to block off the upcoming iPhone 5 from selling. On the surface, we could say that this is the clear cut move from Samsung. If we look at Samsung’s decisions in response to the release of the iPhone 5, it has two choices: to use its patents or to let the iPhone 5 pass.
| Samsung’s Choices | |
|---|---|
| Use Patent | Don’t use |
| Advantage | Neutral |
In the short term, this is absolutely true; Samsung is gaining an advantage. However, this does not necessarily mean that attacking Apple is necessarily a good thing. For a clearer picture, let us label the full Game Theory table between Samsung and Apple. We will give each the choice of attacking the other company or remaining passive. Thus we will have 4 choices; 2 of which will be similar. We could have both being passive; neither of which will gain an advantage over the other. If one attacks the other while the other is passive, the other will lose a significant amount (let’s say -10) and the other will gain an advantage (+10 for this case) since the former will lose a portion of its customers and some compensation to the latter. If both attack each other, they are both at a disadvantage (-5,-5) due to loss of resources.
| Samsung’s Choices | |||
|---|---|---|---|
| Passive | Attack | ||
| Apple’s Choices | Passive | 0 ,0 | -10, 10 |
| Attack | 10, -10 | -5, -5 | |
As we can see, the dominant strategy for both parties is to attack each other; it is always the best and safest strategy. However, we can also see that the opportunity to attack is an example of Braess’s Paradox; Apple and Samsung would be much better off if they would remain passive with each other. They could concentrate on innovating and creating new devices instead of throwing money at lawsuits and patents. And that’s what they did up until a few months ago. While they were at an unstable, non-Nash Equilibrium point, it was much better for both parties. However, once Apple provoked aggression, the two fell into the stable equilibrium of colliding each other head on in legal battles.
Also interesting to note, Apple and Samsung are unlikely to get out of this stability without outside help. If one or the other try to exit the cycle of attack, the other is still likely to continue aggression and pull further ahead in competition.
-k