Assuming that both you and your competitor are rational actors, game theory allows you to take into account your competitor's likely response to your actions in order to make the most profits.
In other words, it allows you to predict your competitor's behavior, and then adjust your own accordingly. This is important because, if you are unaware of your competitor's reaction to your pricing, you may end up in a price war, or selling your product at a loss.
This is not necessarily true. While game theory can help you avoid a price war, it cannot guarantee it. This is because your competitor may also be using game theory to set prices, and so may still end up engaging in a price war with you.
This is also not necessarily true. While lowering your price may lead to higher profits in the short term, it may also lead to lower profits in the long term if your competitor responds by also lowering their prices.
To learn more about competitor's reaction visit:https://brainly.com/question/3146780
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