Question

Game theory is useful for understanding oligopoly behavior because: there are so many firms in an oligopoly that all are price takers. firms must differentiate their products if they are to remain in business. firms recognize that because there are only a few firms mutual interdependence is important. without it firms would not be able to maintain cartel agreements. it allows firms to develop greater monopoly power.

Answer 1

firms recognize that because there are only a few firms mutual interdependence is important.

Step-by-step explanation:

Game theory is useful for understanding oligopoly behavior because firms recognize that because there are only a few firms mutual interdependence is important.

An oligopoly can be defined as a market structure comprising of a small number of firms (sellers) offering identical or similar products, wherein none can limit the significant influence of others.

Hence, under the game theory, when firms makes a decision about their business, it is expected that they consider how the other firms would react to such decisions.