7Economists often use game theory to understand oligopoly firm

behavior. It helps to predict likely outcomes when firms engage in

certain behaviors,

Game theory is the study of how and why people make decisions

Players:n7ut A strategic decision-maker within the context of the

game

Strategy: A complete plan of action a player will take given the set
of circumstances that might arise within the game

Payoff: The payout a player receives from arriving at a particular

outcome (The payout can be in any quantifiable form, from
dollars to utility.)

Nash eq: which attempts to determine mathematically and

logically the actions that participants of a game should take to
secure the best outcomes for themselves

an optimal outcome where no player has an incentive to deviate

from his chosen strategy after considering an opponent’s cho

ice.

A particular outcome is called a Nash Equilibrium if neither player

will do better by unilaterally changing his/her strategy.
Game theory concepts have become hugely important in
economics
Game Theory has been used to make decisions on price, output,
product development, product promotion and other business
scenarios