Game theory examines how firms try to maximize their profits by making decisions based on the actions of their competitors.

Question

Quizplus · Accepted Answer

This statement accurately describes the focus of game theory, which is to analyze how rival firms' decisions affect each other's profit and market share. By modeling different scenarios and strategies using mathematical models, game theory helps firms make strategic decisions that take into account the actions and reactions of their competitors.

Game Theory Examines How Firms Try to Maximize Their Profits