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Game-Theoretic Situation

Is a situation where player's in a game do have to take into account the reactions of rival firms when setting their own strategic variable i.e. high level of interdependency between firms. Therefore firms need to reason strategically and form expectations about others' decisions when deciding their own course of action. These situations can be predicted and solved using game theory.

Below highlights three examples of firms in which would be classed a game theoretic situation i.e. rivals in the UK supermarket industry have to consider the pricing strategies of rivals and therefore game theory is a useful concept to analyse these types of situations. The most common examples of this are markets that are charactrised by a high degree of interdependency such as oligopolies.


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