In five pages economics is examined in an explication of game theory as it applies to oligopoly companies and actual world situations. Three sources are cited in the bibliography.
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and Oskar Morgenstern (1902-1977) in a book entitled The Theory of Games and Economic Behavior (1944). Standard microeconomics provides a theory of decision-making where the outcomes of various
decisions are known. Game theory provides rational solutions when the outcomes are uncertain. Game theory has proven very useful in the study of oligopoly markets where each participant
must take account of the reactions of its competitors. Games are usually described as being either zero sum or nonzero sum. Zero-sum games are those where one players gain
is another persons loss. Non-zero-sum games open the door to collusion or cooperative action because all players may gain from a certain course of action. In the game described
in this question, the strategy that Person A will choose depends on (1) the information available concerning Bs likely strategy, and (2), As preferences for risk. A dominant strategy
is one that is best no matter what the opposition does. In this game, if both players have a dominant strategy it is likely that both will win. Interestingly,
the result will be different if the game is played over and over again. If B decided to simply math As strategy, both people might, with no explicit collusion,
end up doing the same thing after person A figures out what B is doing. If Person A does not have a dominant strategy, then if B plays the left
strategy, A will play the top strategy. If B plays the right strategy, A will play the bottom strategy. But the question is still, what strategy will Person
B choose to play. If Person C knows the options they will see that B has a dominant strategy and is likely to play it. Person B does