GAME THEORY AND THE STRATGIC BEHAVIOR OF OLIGOPOLIES

Abstract

Analysis of market structures is the area of economics, where game theory has made the greatest use. On competitive markets with many participants, each participant seeks the best solution for himself/herself, ignoring the actions of other participants. However, if the number of participants is small and each of them has some market power, then each participant must take into account the behavior of others. The analysis of such market structures especially reflects the use of game theory. This paper analyzes oligopolistic market structure and strategic interaction between the participants in this market. The paper considers a few most important models related to different behaviors of enterprises in oligopolistic environment. It also analyzes how firms in oligopoly can take strategic steps to get an advantage or a better position relative to competitors. The aim of the paper is to examine the possibility of applying game theory to analyze strategic actions of companies in oligopolistic markets.