The Nash Equilibrium

The Nash Equilibrium is a concept in game theory where each player chooses their best strategy, considering what others are doing, and no one can improve their outcome by changing their own strategy alone. It means everyone’s decisions are stable because no one has an incentive to change unilaterally. For example, in a situation where two companies set prices, a Nash Equilibrium occurs when both settle on prices where neither can benefit by changing their price independently, given the other's choice. It represents a state of strategic balance where all players’ choices are mutually consistent.