Nash equilibrium

Nash equilibrium: no unilateral gain

A Nash equilibrium occurs when no player can improve their outcome by changing their strategy alone, assuming others' strategies remain unchanged. This concept is fundamental in game theory as it describes a stable state in non-cooperative games where players' strategies are optimal given the strategies of others. It highlights the interdependence of players' decisions and the strategic balance that arises.

Example

In a game where Alice chooses strategy A and Bob chooses strategy B, (A, B) is a Nash equilibrium if Alice cannot increase her payoff by switching to another strategy while Bob keeps his strategy unchanged. Similarly, Bob cannot improve his payoff by changing his strategy if Alice sticks to A.

Understanding Nash equilibrium is crucial for predicting outcomes in strategic interactions and designing effective strategies in various fields, including economics, politics, and business.

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