The essence of competition is interdependence. Interdependence means that the consequences
to a firm of taking an action depend not just on that firm's action, but also on
what actions its competitors take.  Interdependence by itself, however, is not
enough to generate competition. Conflicts of interest also must be present among
the interdependent firms (i.e., the firms must differ in what they would like each
of them to do) and the firms must not be able to collude explicitly (i.e., enter
into binding agreements). Much "horizontal" interdependence involves conflicts
of interest and the inability to collude explicitly; all of the firms are competing
for the same pool of consumers and the antitrust laws (especially the Sherman Act)
deter collusion. This article is a selective exposition of noncooperative game theory.
(Cooperative game theory is the branch of the theory that examines the behavior of
colluding firms; it seeks to predict their binding agreements.) Included are some
basic concepts and their applications to marketing.