Applications of Game Theory in Microeconomics

Abstract

Game theory has been used as a potent analytical tool by numerous areas since its inception. It has been more popular in microeconomic analysis in recent years. It is not an exaggeration to claim that it completely rewrites microeconomics. The major ideas of game theory are summarized in this paper, as well as their application in microeconomics. This study examines the three elements and key types of game theory in its fundamental material. The Nash equilibrium and other equilibria expanded by Nash equilibrium are then reviewed in game theory equilibrium. Then, the Cournot model, Stackelberg model, and Bertrand model are discussed in game theory and market analysis. Finally, in the section on game theory and auction, it explained that, within the context of the game, English auctions and second-price sealed-bid auctions should use comparable strategies, however Dutch auctions and first-price sealed-bid auctions should conceal their own valuations.