Applied game theory (A9 chip edition)

Successful firms tend to employ a wide variety of creative strategies for maintaining their “competitive advantage,” i.e. their dominance in a given market without running afoul of antitrust or unfair competition laws. Apple’s A9 chip for the iPhone 6 is a case in point. According to this insightful essay by Tom Whitwell (para. 51, emphasis in original), for example, we learned that “Apple’s new A9 processor for iPhones devices is … manufactured by two different companies, using two entirely different chip designs.” As Mr Whitwell notes, this dual-sourcing strategy “allows Apple to negotiate incredibly hard on price in future, as each company has invested billions in their plants.” (You can read more about Apple’s dual-sourcing strategy here.) So, if you were one of these suppliers to Apple, what counter-strategy would you employ in order to neutralize or offset Apple’s manufacturing strategy?

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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