Economics Game Theory Questions
The difference between dominant strategy and Nash equilibrium lies in their definitions and concepts within game theory.
Dominant strategy refers to a strategy that yields the highest payoff for a player, regardless of the strategies chosen by other players. In other words, it is the best strategy for a player regardless of what the other players do. A dominant strategy exists when a player has a clear choice that is always better than any other available option, regardless of the actions of other players.
On the other hand, Nash equilibrium is a concept that describes a situation in which each player in a game chooses the best strategy given the strategies chosen by all other players. It is a stable outcome where no player has an incentive to unilaterally deviate from their chosen strategy. In a Nash equilibrium, each player's strategy is the best response to the strategies of the other players.
In summary, the main difference is that dominant strategy focuses on the best strategy for an individual player, while Nash equilibrium considers the best strategy for all players collectively, taking into account the strategies chosen by others.