juniorGame Theory
What is Nash Equilibrium?
Updated May 16, 2026
Short answer
Nash Equilibrium is a state where no player can improve their payoff by changing strategy unilaterally.
Deep explanation
In Nash Equilibrium, every player’s strategy is optimal given the strategies of others. It represents a stable outcome where no deviation is beneficial unless others also change their strategies.
Real-world example
Used in pricing wars where companies settle into stable pricing strategies.
Common mistakes
- Assuming Nash Equilibrium is always socially optimal.
Follow-up questions
- Can multiple Nash equilibria exist?
- Is Nash equilibrium always efficient?