Micro Economics Course
Project #4
Team 2-7
Kim Yun Seok, Seong Woo Ram
Cho Ha Eun, Lee Han Sae
Chapter17-Oligopoly
<Oligopoly, Prisoners’Dilemma>
Apple v. Samsung: 50 suits, 10 countries -- and counting
http://news.cnet.com/8301-13579_3-57423627-37/apple-v-samsung-50-suits-10-countries-and-counting/
With patent litigation fast turning into the tech industry's favorite pastime, the yearlong legal battle between
Apple and Samsung that began last April now extends to more than 10 countries around the world and at least
50 initial filings. Incredible. Of course, there's always the possibility that these two might be able to work out a
deal. During a conference call last week to discuss the company's quarterly earnings, Apple CEO Tim Cook
offered a general statement of his desire to end the litigation that has engulfed much of the wireless industry,
without mentioning Samsung specifically. "I would highly prefer to settle than to battle," he said. "But it's
important that Apple not become the developer for the world. We need people to invent their own stuff." Both
Cook and his opposite number at Samsung, along with their top lawyers, are supposed to give settlement talks a
shot in front of a judge in San Francisco on May 21 and 22. This long-running legal confrontation began in
April 2011 when Apple filed a lawsuit in California accusing Samsung of copying "the look and feel" of its iPad
tablet and iPhone smartphone. "Rather than innovate and develop its own technology and a unique Samsung
style for its smartphone products and computer tablets, Samsung chose to copy Apple's technology, user
interface, and innovative style in these infringing products," Apple complained. Samsung quickly responded with
a countersuit against Apple, taking the fight overseas to South Korea, Japan, and Germany.
According to this article, a hostile patent litigation between Apple and Samsung
started ever since Apple accused Samsung of copying its designs for smartphones and tablet
PCs. In response, Samsung dodged back with patent lawsuits concerning the mobile
technology. According to CNET News, this litigation chaos augmented into 50 lawsuits
against each other in 10 different countries. Apple became wary of Samsung’s ever-increasing
market share of the smartphones and tablet PCs A smartphone or a tablet PC market can be
said to be an oligopoly. There is only handful of firms offering the product: Apple, Samsung,
HTC, Sony, and so on. As Samsung’s market power is increasing in both the smartphone and
tablet PC market, Apple had opened a Pandora’s Box by filing a lawsuit against Samsung, as
it was mentioned above. This has triggered the problem of Prisoner’s Dilemma, of which the
‘players’ in a ‘game’ chooses the option that makes both of them worse off. In this case, the
‘players’ are Apple and Samsung, and the ‘game’ they are playing is the chicken game of
patent litigations. If both file a lawsuit, both profits decrease. If one file a lawsuit but the
other don’t file a lawsuit, one who files a lawsuit earns more profit and the other who don’t
files a lawsuit earn less profit. If both don’t file a lawsuit, both profits are hold. Whatever the
opponent chooses to do, the best option for a player is to file a lawsuit against the opponent.
That is, they reach a Nash equilibrium, in which both of them file a lawsuit against each other,
making both the firms worse off. They could have achieved the point at which both of them
do not file a lawsuit, which is the best scenario for both the companies through collusion.
Thus, both firms would realize that this situation is making both of them worse off and that
they would sit down at the negotiating table.
Chapter 20- Income inequality and poverty
ILO reports rebound in CEO pay and widening income inequality
Chief executives’ pay has rebounded strongly in many countries since the financial crisis as income inequality
continues to widen in the developed world, the International Labour Organisation said. The UN agency said
emerging economies had seen rising employment and narrowing income gaps, but in many European countries
there was a “disturbing picture” of widening disparities that was straining their social fabric. The ILO found that
income inequalities had risen in 14 out of 26 advanced economies including France, Denmark, Spain and the US
between 2010 and 2011. In seven others, inequality levels remained higher than before the crisis. “These figures
present a positive development in many parts of the developing world, but paint a disturbing picture in many
high-income countries, despite the economic recovery,” said Guy Ryder, director-general. He added: “We need
a global recovery focused on jobs and productive investment, combined with better social protection for the
poorest and most vulnerable groups. And we need to pay serious attention to closing the inequality gap that is
widening in so many parts of the world.” In Germany and Hong Kong, total average pay of chief executive
officers at the 15 largest companies grew more than 25 per cent between 2007 and 2011. As a result, the ratio of
top CEOs’ average total pay to average earnings in the economy grew from 155 to 190 in Germany and from
135 to nearly 150 in Hong Kong. While income gaps had narrowed in developing countries, the gap between
rich and poor remained wide and many families who had managed to rise above the poverty line were at risk of
lapsing back.
<Source: http://www.ft.com/intl/cms/s/0/78568d54-ca19-11e2-af47-00144feab7de.html>
Income inequality is widening in some developed countries these days according to
the report we found. It is because the pay for executives of big firms increases a lot while the
unemployment rate grows in countries which have advance economy.
In the developed countries, the income of high earners grow dramatically; however,
the poor people become poorer than before, and the families that live barely above the
poverty line increase. Therefore, income inequality cannot help increasing.
However, in developing countries, the income gap became smaller. Therefore, it is a
positive development for those countries as the report said.
Because of the widening income inequality of some countries, governments have to
redistribute income. Governments can redistribute income with several ways such as a social
insurance.
A social insurance could be a compulsory enforcement of redistributing income
because one who has higher income than others has to give more money than others so that
income can be given to poorer people.
However, according to arguments of Liberalism, people insure themselves
because of the fear of the possibility that they could be a member of a poor family. In this
view, social insurance is what for one's own safety rather than helping poor people. Therefore,
the social insurance can be maintained as a crucial rule that people follow.
Chapter 20- Income Inequality and Poverty
<The abstruse standard in selecting beneficiary of basic pension>
Government in almost every country provides support fund to national people. For
example, in Korea, there are many national pensions: old-age pension, bereaved family’s
pension, disability pension, lump sum refund. In addition, there is the public assistance. The
objective of these support funds is to help the poor and non-working population to make a
living. But, because of abstruse standard, it is very difficult to achieve their objective through
these support funds. For example,, if the government sets the standard of public assistance
based on amount of one’s income, the problem is that the person who already own
uncountable asset but has no income is also selected as a beneficiary of public assistance. It is
unfair. In other case, if the government sets the standard based on one’s asset below one
million, the person who has asset little more than one million, feels reverse discrimination.
And, it is one example of real situation about honorary president of Samsung ‘Lee Gun Hee’.
Title of Article: “Does the government give
basic pension to Lee Gun Hee president?”
“The government sill agonizes over how much
and to whom it gives basic pension” “The
government wants to give it to all people who
want it, but the property of the government is
not enough, so the government has difficulty in
doing this as a favor”. “It is utmost nuisance since the date of sailing of Park’s government”
<http://news.naver.com/main/read.nhn?mode=LSD&mid=sec&sid1=101&oid=001&aid=000
6284160>
This real problem results from Park’s pledge in president election. She pledged that
all the old over 65 years will take basic pension, and the basic pension is commensurate with
an income level and duration of entitlement to the national pension. Its pledge is blamed for
duration of entitlement. The poor and old are hard to join the national pension, so they are
still discriminated in provision of basic pension because of their poverty. Rather, its pledge
interrupts welfare work of Park’s government. So, Park’s government declares that new
pledge which it is given only the bottom 70~80% of the old will substitute its pledge which
basic pension is commensurate with an income level and duration of entitlement. But despite
the effort, new pledge also has a little thing to be criticized that what percentage of the old
does really need to be assisted? If most of the old (about 90%) need to be assisted, its new
pledge is not excellent strategy. So, Park’s government should examine about real state of
property of the old to make and select an optimal basic pension strategy.
Creative Economy- Declining Industry in Korea
<Hanji Production Industry>
'Hanji' master dedicated to globalization
By Shim Jae-yun
Sometimes, cultural heritage is cherished more overseas than domestically, and
“hanji,” Korean traditional paper, is an example of such. While Koreans have relatively been
ignorant of the unique beauty and diverse uses of the paper, the world has been paying
increasing heed.
Many foreign tourists bustled around the gallery and learning room of Sim Hwa-sook,
chairwoman of the Traditional Korean Paper Artists Association in Bukchon Hanok (a
traditional Korean house) Village in central Seoul, when this reporter visited there Tuesday,
for an interview.
“As you see, a growing number of foreign tourists are dropping by here as it is
included in the tour for those wanting to see and experience Korean traditional beauty,” Sim
said.
Three Japanese women were learning how to make craftwork using hanji as a group
of other foreign visitors curiously watched the manufacturing process.
Dard Hunter (1883~1966), a renowned American paper historian, highly assessed
hanji, claiming, “The Koreans were probably the first artisans to color paper in the vat.”
<Source: http://www.koreatimes.co.kr/www/news/issues/2013/03/139_132190.html>
Hanji, the traditional paper of Korea, has a priceless value as our nation’s own
traditional paper. The article that we take sounds like Hanji is in a very good economic
situation. In article, there is globalization of Hanji. It might sound Hanji is in a good situation.
However, although the article is showing Hanji’s globalization, the globalization actually
means that Hanji production in Korea is already declining, so Hanji producers should change
their strategy from producing inside the country to producing outside of Korea. In other
words, the Hanji production industry in Korea is already declining, and it is not profitable any
more. Therefore the article suggests that people who producing Hanji should change their
strategy. From now on, producers should produce Hanji as a cultural product for visiting
foreigners, not a paper for business offices.
More specifically, in the article, there is some statement like this; “Sometimes,
cultural heritage is cherished more overseas than domestically, and “hanji,” Korean
traditional paper, is an example of such. While Koreans have relatively been ignorant of the
unique beauty and diverse uses of the paper, the world has been paying increasing heed.” It
is saying that recently in Korea, Hanji doesn’t have popularity, and Koreans have been
ignorant of the unique features of Hanji. From these, we can infer that Hanji production
industry is declining in Korea.
For preventing Hanji production from disappearing, we have to find other ways to
promote Hanji production. For that, the article is suggesting that producers should change
their target consumer from Korean to foreigners. They have to create and develop some
exporting strategies and make some profit from it. If they do that, the Hanji production
industry will not extinct.