Which of the following is a key characteristic of game theory?

• A. Focus exclusively on individual decision-making without considering others
• B. Assumption that all players act randomly
• C. Strategic interaction among rational decision-makers
• D. Analysis limited to games with more than two players

Answer: (C)

Verified step by step guidance

1. Understand that game theory studies situations where multiple decision-makers (players) interact strategically, meaning each player's outcome depends not only on their own decisions but also on the decisions of others.
2. Recognize that a key characteristic of game theory is the concept of 'strategic interaction,' where players anticipate and respond to the actions of others rather than acting in isolation.
3. Note that game theory assumes players are rational, meaning they aim to maximize their own payoffs based on the information available and the expected behavior of other players.
4. Eliminate options that contradict these ideas, such as focusing exclusively on individual decision-making without considering others, or assuming players act randomly, since these do not capture the strategic nature of game theory.
5. Conclude that the defining feature of game theory is the analysis of strategic interaction among rational decision-makers, regardless of the number of players involved.