The most iconic game in game theory is the prisoner’s dilemma, which I covered in a previous post. But the most fundamental concept is the Nash equilibrium.
The pure definition of the Nash equilibrium seems convoluted. According to Oxford/Google’s definition, it is “a stable state of a system involving the interaction of different participants, in which no participant can gain by a unilateral change of strategy if the strategies of the others remain unchanged.”
I like to simplify - it’s an outcome where no one wants to change their choice unilaterally. At a Nash equilibrium, everyone is content to stay with their particular strategic choices and nobody would switch to another outcome.
The Nash equilibrium concept is powerful in game theory, and you see it often. The games we start studying in the course contain “pure strategy” Nash equilibria. These are games where players don’t randomize their choices. As we progress through the course/semester, I’ll cover mixed strategy Nash equilibria.
For more on the Nash equilibria, including an example, check out the video I made:
Game theory 101: The Nash Equilibrium and The Prisoner's Dilemma