Coordination Game between Apple and HTC
This recent article discusses the settlement of the lawsuits of Apple and HTC against each other. The litigations began when Apple sued HTC in 2010 for infringing iPhone patent rights. The settlement entails a 10-year licensing agreement that grants rights to current and future patents held by the two technology companies.
In relation to our course, the article touches upon game theory- more specifically, coordination games. The two players are Apple and HTC. Their two strategies are to either settle or to enter into sueing/countersuing with the other company. The Nash equilibrium for the game must have been for both players to settle, since that was the outcome they chose. If both entered into litigation (as they did for the past two years), then the payoffs for both companies would either be positive from the profit of winning their case or negative from losing and from litigation fees. If one company entered and the other did not enter (“give in” to what they have been accused of), then the company that does not enter would have vastly decreased payoff and the company that does enter would have greater payoffs compared to the other strategies. The payoffs for both to settle in 2012 must have been greater than if both entered into litigation back in 2010 for both companies to have chosen the strategy to settle.
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