Game Theory and Strategic Decision Making in Economics

Game theory provides a powerful mathematical framework to analyze strategic interactions among rational agents in economic settings. This paper investigates how core game-theoretic models can be applied to real-world economic decisionmaking scenarios, focusing specifically on Cournot duopoly and auction mechanisms. The Cournot model illustrates how competing firms determine optimal production quantities under interdependence, reaching a Nash equilibrium that balances competition and market efficiency. In contrast, the first-price sealed-bid auction represents strategic behavior under incomplete information, where bidders shade their bids based on private valuations to maximize expected payoff. Both case studies are explored through formal mathematical analysis and simulation to demonstrate how players' strategies adapt to market structure and available information. The results highlight that understanding equilibrium outcomes not only improves predictive power in economics but also aids policymakers and firms in designing more efficient and fair market mechanisms. Ultimately, this research underscores the value of game theory as a foundational tool for modeling strategic decision-making across diverse economic applications