Nash equilibrium

(noun)

The set of players' strategies for which no player can benefit by changing his or her strategy, assuming that the other players keep theirs unchanged.

Related Terms

  • Pareto optimal
  • Strategic dominance
  • Prisoner's dilemma
  • game theory

Examples of Nash equilibrium in the following topics:

  • Game Theory Applications to Oligopoly

    • This is known as a Nash equilibrium.
    • The Nash equilibrium is an important concept in game theory.
    • If a player knew the strategies of the other players (and those strategies could not change), and could not benefit by changing his or her strategy, then that set of strategies represents a Nash equilibrium.
    • If any player would benefit by changing his or her strategy, then that set of strategies is not a Nash equilibrium.
  • Duopoly Example

    • The result of the firms' strategies is a Nash equilibrium--a pair or strategies where neither firm can increase profits by unilaterally changing the price.
    • However, not colluding and charging the marginal cost, which is the non-cooperative outcome, is the only Nash equilibrium of this model.
  • The Prisoner's Dilemma and Oligopoly

    • This set of strategies is thus a Nash equilibrium in the game--no player would be better off by changing his or her strategy.
    • Analyze the prisoner's dilemma using the concepts of strategic dominance, Pareto optimality, and Nash equilibria
  • Macroeconomic Equilibrium

    • In economics, the macroeconomic equilibrium is a state where aggregate supply equals aggregate demand.
    • In economics, equilibrium is a state where economic forces (supply and demand) are balanced.
    • Without any external influences, price and quantity will remain at the equilibrium value .
    • The result is the economic equilibrium for that good or service.
    • Similar to microeconomic equilibrium, the macroeconomic equilibrium is the point at which the aggregate supply intersects the aggregate demand.
  • The Equilibrium Interest Rate

    • In a economy, equilibrium is reached when the supply of money is equal to the demand for money.
    • Equilibrium is reached when the supply of money is equal to the demand for money.
    • Changes in expectations will therefore affect the equilibrium interest rate.
    • In economics, equilibrium is a state where economic forces such as supply and demand are balanced and without external influences, the equilibrium will stay the same.
    • Use the concept of market equilibrium to explain changes in the interest rate and money supply
  • Equilibrium

    • Equilibrium as "a point from which there is no endogenous ‘tendency to change'
    • There are no forces (from buyers or sellers) that will alter the equilibrium price or equilibrium quantity.
    • This is a mechanical, static conception of equilibrium.
    • General equilibrium is a condition where all agents acting in all markets are in equilibrium at the same time.
    • Neoclassical microeconomics tends to focus on partial equilibrium.
  • Aggregate Expenditure at Economic Equilibrium

    • An economy is said to be at equilibrium when aggregate expenditure is equal to the aggregate supply (production) in the economy.
    • Classical economics assumes that the economy works on a full-employment equilibrium, which is not always true.
    • In reality, many economists argue that the economy operates at an under-employment equilibrium.
    • In this graph, equilibrium is reached when the total demand (AD) equals the total amount of output (Y).
    • The equilibrium point is where the blue line intersects with the black line.
  • Introduction to Demand and Supply in a Market System

    • The economic analysis that is used to analyze the overall equilibrium that results from the interrelationships of all markets is called a "general equilibrium" approach.
    • Partial equilibrium is the analysis of the equilibrium conditions in a single market (or a select subset of markets in a market system).
    • In principles of economics, most models deal with partial equilibrium.
    • In a partial equilibrium model, usually the process of a single market is considered.
  • Long Run Market Equilibrium

    • The long-run equilibrium of a perfectly competitive market occurs when marginal revenue equals marginal costs, which is also equal to average total costs.
    • As with any other economic equilibrium, it is defined by demand and supply.
    • In a perfectly competitive market, long-run equilibrium will occur when the marginal costs of production equal the average costs of production which also equals marginal revenue from selling the goods.
    • So the equilibrium will be set, graphically, at a three-way intersection between the demand, marginal cost and average total cost curves.
  • Open Economy Equilibrium

    • In an open economy, equilibrium is achieved when no external influences are present; the state of equilibrium between the variables will not change.
    • In an open economy, equilibrium is achieved when supply and demand are balanced .
    • In the case of market equilibrium in an open economy, equilibrium occurs when a market price is established through competition.
    • In an open economy, equilibrium is reached through the price mechanism.
    • The interest rates also adjust to reach equilibrium.
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