A Nash equilibrium is a situation:
A) that maximizes the collective gains to both players.
B) in which neither player in the game has an incentive to change strategies given the strategy of the other player.
C) in which one player could benefit from changing strategies given the strategy of the other player.
D) in which players play nondominant strategies.

Question

Quizplus · Accepted Answer

A Nash equilibrium is a state where neither player has an incentive to change strategies given the strategy of the other player. It is a stable state, where both players are satisfied with their strategies, and any deviation from the equilibrium would result in a worse outcome for at least one of the players. While a Nash equilibrium may not necessarily maximize the collective gains of both players, it is the point of equilibrium that both players would naturally gravitate towards. Choices A and C are incorrect because a Nash equilibrium may not necessarily maximize collective gains or allow one player to benefit from changing strategies, respectively. Choice D is incorrect because players may play dominant or nondominant strategies in a Nash equilibrium depending on the specific game.

A Nash Equilibrium Is a Situation