Economists use game theory to analyze:
A) different exclusive options whose payoffs depend on the choices and actions of another entity with the same goals.
B) how people behave with a limited set of options.
C) economic decisions by consumers when income rises.
D) the tax consequences of various investment decisions.

Question

Quizplus · Accepted Answer

Game theory is a tool used to analyze situations where the outcome of an individual's decision depends on the decisions made by others. It is often used in economics to study situations where individuals or firms have a shared set of goals but may also have conflicting interests. Such situations require an understanding of how other decision-makers may respond, and game theory provides a framework for analyzing these possibilities. Option A describes a scenario that is well-suited for game theory analysis. Options B and C are too broad and do not necessarily require game theory analysis, while option D is too narrow, focusing only on tax consequences rather than broader decision-making dynamics.

Economists Use Game Theory to Analyze