Game theory (Business).

Situations arise all the time prompting individuals to consider whether their own choices or collaborative actions will yield greater payouts. Game theory provides a rich framework for studying interactive decision-making processes. Most decisions, whether collective or individual, usually lead to actions, but games require two or more players acting and reacting in a strategic manner. In our dual roles as employees and as customers, we often exhibit certain behaviors in the marketplace that correspond with those roles and the structures of markets in which we conduct our transactions. Competition and free enterprise are ingrained ideals that favor low prices and wide varieties of consumer goods and services all the while inciting producers to use scarce resources as efficiently and effectively as possible. Digging a little deeper behind the competitive market scene, however, we may find producers who are competitive in appearance but who really have the capacity to charge high prices, maintain market shares, and devise arrangements that empower them to behave as if they were monopolists. A market structure in which a few sellers behave likewise while providing goods or service characterizes an oligopoly. A key feature common amongst oligopolies is their interdependence and their perpetual search for prices. This essay improves the reader's ability to ponder and to answer the question: How do producers know when the price is right?