Economics • Economic BasicsMedium
In the context of game theory, what defines a 'Nash Equilibrium'?
A. A situation where all players choose the exact same strategy.
B. A state where no player has an incentive to unilaterally change their chosen strategy given the strategies of other players.✓ Correct Answer
C. An outcome that maximizes the total welfare of all players combined.
D. A situation where one player has a dominant strategy that leads to a cooperative outcome.
💡 Solution & Explanation
A Nash Equilibrium is a fundamental concept in game theory named after mathematician John Nash, representing a steady state where no player can improve their payoff by unilaterally changing strategy. It differs from cooperative outcomes or dominant strategies, which are not mandatory for an equilibrium to exist.
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