Game theory pricing behavior may be best described as the decision by a firm to
A) accommodate the competition by cutting price when they cut and increasing price when they do so that the firm is not caught in a situation where it prices low while its competitors price high
B) disregard competitors when formulating price since it cannot control the behavior of its competitors
C) price its good in order to maximize profit, assuming the firm anticipates correctly (that's a big assumption) how its competitors will respond
D) lower the price until there is no profit left in order to drive its competitors out of the market, then raise price to its former level
E) collaborate with competitors prior to making pricing decisions to avoid unnecessary competition

Question

Quizplus · Accepted Answer

Game theory in pricing behavior involves strategic decision-making where a firm prices its goods with the anticipation of how its competitors will respond, aiming to maximize profit. This approach considers the actions and reactions of competitors in a strategic manner.

Game Theory Pricing Behavior May Be Best Described as the Decision