Oligopolistic game theory is a method of analysing strategic interaction. It is concerned with how individuals (firms) make decisions when they are aware that their actions affect each other and when each individual takes this into account.
Oligopolistic Game theory is also a mathematical tool that helps to study strategic situations in which players optimize a variable not only on the basis of their own preferences, but also on other’s decisions and reactions
Games are characterised by the number of players or decision makers who interact and even threaten each other and at times establish coalition and take actions under uncertain conditions. Different types of moves taken by different players (firms) in various games are systematically and structurally used to explain economic theory specifically to understand the behaviour firm’s
Nash proposes a strategy for each player such that no player has the incentive to change their action unilaterally, given that the other player follows the proposed action. Nash equilibrium is the optimal collective strategy in a game involving two or more players, where no player has anything to gain by changing his/ her strategy.
Often, people (firms) fail to cooperate with one another even when cooperation would make them better off. The prisoners’ dilemma is a particular “game” between two captured prisoners that illustrate why cooperation is difficult to maintain even when it is mutually beneficial
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