How does game theory differ from microeconomics?
Because game theory can be used to model almost any economic situation, it might seem redundant to study both microeconomics and game theory. However, microeconomics tends to focus on cases in which there are many buyers and sellers or there is one seller (or buyer) and many buyers (or sellers). Yet there are many instances in which there are a few buyers or sellers. Markets in which more than one but still only a few firms compete are known as “oligopolies.” Oligopolists are acutely aware of their interdependence. Each firm’s decisions in the market depend on the specific assumptions it makes about how its rivals make pricing and output decisions. In addition, there are other situations in which there is one buyer and one seller. Microeconomics without game theory does not adequately address these matters. Consider a market in which the number of producers is small. In aircraft manufacturing, two firms, Boeing and Airbus, control 100 percent of the world market for commercial aircraft
