Please respond with 2 in text citations, 2 references and at least 200 words.
Game theory is associated with analyzing organizational decision-makers’ activities when they make rational decisions, competitively or cooperatively, that could have contradictory outcomes. Game theory involves three primary components: players, who are the organizational decision-makers; strategies, which are comprised of the actions the decision-makers make, such as pricing adjustments; and outcomes, which are the results of the decision-makers’ actions. The connection between game theory and organizational strategy is that organizational decision-makers apply game theory, for example, toward determining the organizational strategies that will yield the highest economic benefit to the firm (Sun et al., 2021, p. 2666). In perfectly competitive markets, there are many buyers and sellers, the products and services are identical, there is perfect information available to buyers and sellers (Khan Academy, 2019), and the market players do not set their prices (Kramer et al., 2021, p. 3). Game theory applies to the analysis of organizational strategy in a perfectly competitive market, not related to price but rather the quantity of goods or services the firm makes available in the market to maximize profit. Using game theory, the maximum amount the firm should produce is related to the intersection of the market price and market demand; that is, the company produces the amount of goods and services related to the maximum demand at the set price point (Khan Academy, 2019).
References
Khan Academy. (2019, March 4). Perfect Competition. Microeconomics. [Video]. YouTube. https://youtu.be/B_49lQxwMaM
Kramer, A., Krebs, V., & Schmidt, M. (2021). Strictly and Γ-robust counterparts of electricity market models: Perfect competition and Nash–Cournot equilibria. Operations Research Perspectives, 8, 1–16. https://doi.org/10.1016/j.orp.2021.100197
Sun, Z., Liu, Y., Wang, J., Li, G., Anil, C., Li, K., … & Cao, D. (2021). Applications of game theory in vehicular networks: A survey. IEEE Communications Surveys & Tutorials, 23(4), 2660–2710. https://doi.org/10.1109/COMST.2021.3108466
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