Game theory is based on the idea that
A)government determines the rules of the game
B)firms are strategically independent
C)firms are price takers
D)a player's strategy must take account of the strategies followed by other players
E)a player's strategy must be independent of the strategies followed by other players

Question

Quizplus · Accepted Answer

Game theory is based on the idea that a player's strategy must take account of the strategies followed by other players. In other words, players must anticipate the behavior of their rivals and make decisions accordingly. This is essential to understanding the dynamics of competitive markets, where firms must consider the actions of their competitors when deciding how to price their products or invest in new technologies. Government rules, firm independence, and price-taking behavior are all important concepts, but they are not the central focus of game theory.

Game Theory Is Based on the Idea That