The analytical framework in which two or more firms compete for certain payoffs that depend on the strategy that the others employ is
A) game theory.
B) the concentration ratio.
C) a horizontal merger.
D) network effect.

Question

Quizplus · Accepted Answer

Game theory is the analytical framework in which two or more firms compete for certain payoffs that depend on the strategy that the others employ. It is a tool used by economists to study decision-making in strategic situations where one person's decision depends on the actions of others. The concentration ratio is a measure of market concentration, a horizontal merger is a type of merger between firms in the same industry, and network effect refers to the value a product or service gains as more users adopt it. None of these options describe the analytical framework of firms competing for certain payoffs based on other firms' strategies, which is characteristic of game theory.

The Analytical Framework in Which Two or More Firms Compete