When firms are faced with making strategic choices in order to maximise profit, economists typically use:
A)the theory of monopoly to model their behaviour
B)game theory to model their behaviour
C)cartel theory to model their behaviour
D)the theory of aggressive competition to model their behaviour

Question

Quizplus · Accepted Answer

Game theory is the most appropriate tool to model the strategic choices made by firms because it allows for an analysis of the interactions between firms and the potential outcomes of those interactions. It considers each firm's actions and reactions in response to their competitors' actions, and provides strategic insights that can guide a firm's decision-making process towards maximizing profits.

When Firms Are Faced with Making Strategic Choices in Order