In which of these cases does game theory BEST apply?
A) a perfect competitor deciding whether to leave a market
B) Ford deciding what GM's response would be to a new rebate program
C) a Chinese fast-food restaurant deciding whether the demand for its product will grow
D) an electric utility computing its marginal cost

Question

Quizplus · Accepted Answer

Game theory is best applied in situations where strategic interactions between rational decision-makers occur. In choice B, Ford's decision-making process regarding GM's potential response to a new rebate program involves anticipating the actions of a competitor, which is a classic scenario for the application of game theory principles.

In Which of These Cases Does Game Theory BEST Apply