Answer:-
Game theory in economics studies how individuals or businesses make strategic decisions when their choices depend on others' actions. It models situations where players—whether people, firms, or nations—must anticipate competitors' moves to maximize their own benefits. The famous "Prisoner's Dilemma" shows how rational players might not cooperate, even when it benefits both. John Nash’s equilibrium concept explains how players settle on strategies where no one can improve unilaterally. Game theory applies to markets, auctions, negotiations, and even politics. It helps predict outcomes in competitive and cooperative environments, guiding pricing, business tactics, and economic policies for optimal decision-making.
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