Game Theory
A branch of mathematics and economics that studies strategic interactions between different players, where the outcome for each participant depends on the actions of all.
Implications
A mathematical framework used to model strategic interactions between rational decision-makers, often used in economics, business strategy, and political science to predict outcomes in competitive situations where the actions of one party depend on the actions of others.
Example
Example: A telecommunications company uses game theory to model the potential reactions of competitors if it decides to lower its prices, allowing it to anticipate possible outcomes and choose the most advantageous strategy.
Related Terms
Different from simple decision-making models, game theory specifically accounts for the interdependence of decisions among multiple players, making it a powerful tool for understanding competitive dynamics.
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