How can game theory help explain firm behavior in oligopolies?

• A. By assuming firms ignore rivals and behave as price takers, using competitive market models to set prices and output.
• B. By modeling strategic interactions among interdependent firms to predict outcomes such as Nash equilibria, collusion incentives, and optimal price/quantity strategies.
• C. By focusing only on firms' cost structures and marginal cost pricing without accounting for strategic responses from competitors.
• D. By providing a single prescriptive rule that all firms must follow regardless of competitors' actions to maximize industry profit.

Answer: (B)