In business, game theory is beneficial for modeling competing behaviors between economic agents. This may involve how two competitor firms will react to price cuts by the other, if a firm should acquire another, or how traders in a stock market may react to price changes.
In applying game theory to the behaviour of firms, we can suggest that firms face a number of strategic choices i.e. dilemmas which govern their ability to achieve a desired pay-off. Game Theory helps businesses to the predict most likely outcomes.
