When the behaviour of other firms must be taken into account by another firm in the industry, economists often examine this using:

Question

Quizplus · Accepted Answer

Game theory is the study of decision-making in situations where one person's decision depends on the decisions of others. In an industry where the behaviour of other firms affects a firm's profits, game theory can be used to model and analyze the strategic interactions between firms. Therefore, A is the best choice. The other models listed do not directly consider the strategic interactions between firms.

When the Behaviour of Other Firms Must Be Taken into Account