How is game theory applied in economics?

Game theory is a mathematical framework for analyzing strategic interactions between rational decision-makers. In economics, game theory is applied to study various situations where the outcome of one decision depends on the decisions of others. It helps economists understand and predict behavior in markets, oligopolies, auctions, and other situations where individuals or firms must make strategic choices. By analyzing the incentives, payoffs, and possible strategies of different players in a game, economists can provide insights into optimal decision-making and the likely outcomes of complex economic interactions. Ultimately, game theory provides a powerful tool for understanding and predicting behavior in economics.

This mind map was published on 12 July 2024 and has been viewed 54 times.