PS3

 =Sony begins restoring PlayStation after security breach = Source: Yahoo News, [|http://news.yahoo.com/s/nm/20110515/bs_nm/us_sony;_ylt=AlUwncOGEj4D.VCKEIh4VtyyBhIF;_ylu=X3oDMTI4YmVicjgzBGFzc2V0A25tLzIwMTEwNTE1L3VzX3NvbnkEY3BvcwMzBHBvcwM1BHNlYwN5bl90b3Bfc3RvcnkEc2xrA3NvbnliZWdpbnNyZQ--]  Date of extract: May 14th, 2011

Summary: This article talks about the security breach Sony, a Japanese electronic and entertainment company, encountered about a month ago. With Sony Playstation network (PSN) being hacked by hackers, Sony's users account informations were put in jeopardy as the hackers had "access personal information on 77 million PlayStation Network and Qriocity accounts and may have stolen credit card information." Having this in mind, many Sony users "switched to Mircosoft's Xbox Live game services". As the some of Sony's users now turn to Microsoft's Xbox, the demand curve for Sony's entertainment shifts to the left. The reason why is that substitute is a determinant of demand and that Xbox live services is said to be a substitue for Sony PlayStation Network. With this shift of demand, Sony loses some of its revenue. To fix this problem, Sony "is now offering free game time as compensation for the outage". Here, this particular statement resonates with the law of demand, which states that the quantity demanded for a product will increase as the price of the product decreases (in this case Sony is providing the product for free). As of now, Sony is said to be in a bad shape as it is now facing several lawsuits from the users.

Vocabulary Demand Curve: A graph showing the relationship between the quantity demanded and the price of a good or service, holding everything else constant  Supply Curve: A graph showing the relationship between the quantity supplied and the price of a good or service, holding everything else constant. Law of Demand: A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa. Determinant of Demand: non-price factors that inﬂuence the demand for a product. Revenue: the total income regardless of cost. (revenue does not contain cost; it is not profit).

Graph This graph is an example of the market of Sony's Playstation Network mentioned in the summary. As the PSN encounters a security breach, it loses some of its users. As a result, the demand curve shifts from D1 to D2 and moving the equilibrium from E1 to E2. This shift of equilibrium causes Sony to lose its revenue. In the graph, Sony's initial value was shown through the box P1, E1, Q1, 0. After the shift of demand curve, Sony's revenue shrinks to box P2, E2, Q2, 0. In other words, Sony loses the revenue of the box P1,E1,Q1,Q2,P2. To regain its revenue, Sony now offers free gaming time. This will increase the demand and shift the demand curve to the right. (For convenience, D2 is shifted back to D1.) By shifting back to the right, Sony regains its revenue.

Explanation To some extent, I agree with what Sony did after encountering a security breach. By giving out free gaming time, Sony is able reduce the damage by keeping most of its users. Sony is also currently updating its software, reducing the chance for further hacking of the system. However, according to the article, Sony alerted its users about the security breach a week after it happened; this greatly damages Sony's reputation as well as abusing customers' trust. Hence, with these factors in mind, I agree with Sony's actions to some extent. This particular incident can serve as a reminder for other software companies to update their softwares.