Game theory applications in economics

Game theory is a mathematical framework used to analyze strategic interactions among individuals or entities in economics. It helps understand how decisions are made in competitive environments, such as pricing strategies between companies, bidding in auctions, or negotiating contracts. By modeling these scenarios as "games," economists can predict outcomes based on the choices of all participants. Applications include oligopoly pricing, where firms consider rivals’ potential moves, and public goods provision, where individual contributions affect the overall benefit. Overall, game theory provides insights into cooperation, competition, and optimal strategies in economic behavior.