| Nash Equilibrium is a fundamental concept in game theory, introduced by mathematician John Nash. It describes a situation in a strategic interaction where no player can unilaterally improve their outcome by changing their strategy, assuming the strategies of the other players remain unchanged.
Key Features of Nash Equilibrium:
Stability: At a Nash Equilibrium, all players are making the best decision they can, given the decisions of the others. No player has an incentive to deviate.
Rationality: It assumes that players are rational and have complete knowledge of the game's structure and the strategies of other players.
Mutual Best Response: Each player's strategy is the best response to the strategies chosen by all other players.
Types of Nash Equilibria:
Pure Strategy Nash Equilibrium: Each player chooses one specific strategy with certainty.
Mixed Strategy Nash Equilibrium: Players randomize over strategies, assigning a probability to each one. |
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