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Decision-Theoretic Situation

These are situations in which the player's involved do not have to take into account the reaction of rival player's when setting their own startegic variable such as price or quantity. Therefore in these situations game theory cannot help predict the equilibrium condition to the game as interdependency does not exist. The most commonly used situations for these are extreme market structures such as a monopoly or perfectly competitive markets.

Below highlights three examples of firms in which would be classed a decision theoretic situation i.e. Microsoft Windows have such a dominant position in the PC market that they often do not have to consider the pricing strategies of rivals and therefore game theory would not be a useful concept to analyse these types of situations.

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