The key assumption used in game theory is that each player:
A) pursues his own self-interest, taking into account its rival's behavior.
B) is not affected by other players' actions.
C) seeks to outperform its competitors.
D) seeks to maximize the players' collective profits.
E) maximizes its expected utility independent of the rival's actions.

Question

Quizplus · Accepted Answer

The key assumption used in game theory is that each player pursues his own self-interest while taking into account the rival's behavior. This assumption forms the basis of analyzing and predicting the behavior of players in various strategic situations. Hence, option A is the best choice. Option B is incorrect because players' actions and decisions are influenced by those of their rivals. Option C is partially correct, as players indeed try to outperform their competitors, but their actions are more focused on achieving their own goals. Option D is also incorrect because game theory assumes that each player is primarily concerned with maximizing their own payoff, not the collective profits of all players. Option E is flawed as it assumes that players can maximize their expected utility without considering their rival's strategy, which is rarely the case in reality.

The Key Assumption Used in Game Theory Is That Each