What is Nash Equilibrium in economics?

What is Nash Equilibrium in economics?

Nash Equilibrium is a concept in game theory where no player can benefit by changing their strategy while others keep theirs unchanged.

Can you give me an example of Nash Equilibrium?

Sure! A classic example is the Prisoner's Dilemma, where two criminals must decide whether to cooperate or betray each other.

How does it apply to real-world situations?

In real-world scenarios, Nash Equilibrium can be seen in markets where companies choose pricing strategies that competitors are unlikely to change.

Are there any limitations to the Nash Equilibrium concept?

Yes, one limitation is that it assumes rational behavior, which may not always reflect real human decision-making.