The tools of "game theory" are most helpful to economists in markets characterized by:

Question

Quizplus · Accepted Answer

Game theory is most helpful in analyzing interaction and behavior of firms in oligopoly markets where there is interdependence and strategic interaction among the firms in terms of pricing, advertising, innovation, and other strategies. Perfect competition and monopolistic competition markets are characterized by many small firms that act independently and do not necessarily interact strategically, while a monopoly market has only one firm and no interdependence with other firms.

The Tools of "Game Theory" Are Most Helpful to Economists