Economics Game Theory In Behavioral Economics Questions
Nash equilibrium is a concept in game theory that represents a stable outcome in a game where each player's strategy is optimal given the strategies chosen by the other players. In other words, it is a situation where no player has an incentive to unilaterally deviate from their chosen strategy, as doing so would not improve their outcome.
The relevance of Nash equilibrium in game theory is that it helps predict the likely outcomes of strategic interactions between rational individuals or firms. By identifying the Nash equilibrium, we can understand the strategic choices that players are likely to make and the resulting outcomes. This concept is widely used in various fields, including economics, political science, and biology, to analyze and understand decision-making in situations involving multiple players with conflicting interests.