Some exampleswhich
will be analysed inmore detail concern the tragedy of the commons, contracting
between firms, contracting between an employer and employee, and oligopolistic
situations in terms of determining price and output, and limiting entry.
The essence of these interdependent decision-making situations is that
when A makes a decision (for example regarding price, entry into a market,
whether to take a job), it will consider the reactions of other persons or firms to
its different strategies, usually assuming that they act rationally, and how
these reactions will affect their own utility or profit. It must also take into
account that the other parties (from now on called players), in selecting their
reactive strategies, will consider how A will react to their reactions.