Oracle’s Acquisition of Tiktok and Game Theory
https://www.nytimes.com/2020/09/19/technology/trump-oracle-and-tiktok.html
The news of TikTok and WeChat being banned has proliferated media outlets in recent weeks. This article discusses President Trump’s approval of Oracle and Walmart’s recent acquisition of the TikTok app, which would delay the blocking of the app. There have been national security concerns surrounding the usage of the social media platform, which has also contributed to mounting tensions between China and US. With the argument that TikTok is funneling sensitive user information to China, the US has been trying to negotiate a deal to transfer the control of TikTok to American investors. Originally, politicians have pushed for the full sale of Tiktok; however, this new negotiation suggests that TikTok Global would “be made up of 53 percent American investors”. While this news is promising for TikTok users, this article highlights how there are further logistics before a deal can be made.
In the second and third weeks of class, we learned about game theory and Nash Equilibrium. We can think about the negotiations between ByteDance and the US as a two-player game, where:
In this two-player game, the ideal situation would be for both ByteDance and US to have possession of Tiktok; with previous deals where US wanted full sale of TikTok, the US could expect ByteDance to not play the “No TikTok” strategy. Since TikTok is an asset for ByteDance, there are positive monetary payoffs for the company; however, the likelihood of the company wanting to pass up their asset is very low. If the US can expect ByteDance to play the strategy of not giving up TikTok, then the US has two options: come to a negotiation to gain ownership of TikTok or to ban it. The choice to ban TikTok would result in a negative payoff for the US, as there are millions of U.S users on the app. Therefore, the US would choose to negotiate a deal to acquire TikTok (even if it means not a full ownership of the platform). Thus, analyzing the situation from a game theory perspective, the best response strategies in the situation (which would result in Nash equilibrium) would be the current deal that Oracle has with ByteDance – where both players have ownership of the platform, and it’s a win-win situation for both.