What is a Nash equilibrium? Is this equilibrium necessarily the best outcome for the players? Give an example
What will be an ideal response?
John Nash proposed the concept of an equilibrium in a game where each player takes the best possible action given the action of other players. A Nash equilibrium is not necessarily the best one for the players. This result can be seen in the prisoners' dilemma. Typically the prisoners' dilemma is a game where two prisoners are given rules and payoffs to encourage them to confess to a crime. The prisoners, acting in their own self-interest, confess to the crime to minimize their jail time and so confession is the Nash equilibrium. But if the players can communicate with each other, they can improve their position. If they can communicate, they both deny the crime and so both wind up doing less time in jail.
You might also like to view...
Use the following table to answer the next question.Interest RateTransaction Demand for MoneyAsset Demand for MoneyMoney Supply2%$220$300$46042202804606220260460822024046010220220460The equilibrium interest rate is
A. 4%. B. 2%. C. 8%. D. 6%.
Adam Smith, the father of modern economics wrote in his book, An Inquiry into the Nature and Causes of the Wealth of Nations, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner but from their regard to
their own interest." Explain what he meant by that statement and how such behavior promotes the wealth of a nation.
"Churning" refers to
A) changes in the real wage over the business cycle. B) changes in the markup over the business cycle. C) structural change associated with technological progress. D) the increase in productivity caused by an increase in output. E) the increase in output caused by an increase in productivity.
The problem of overfishing in waters that are commonly owned can be solved when the government determines the total amount of fish can be removed from a given area during each fishing season. Then the fishermen
A) will not be able to fish. B) can trade their rights (shares) to fish or not. C) will externalize their private costs to the government. D) will lower their private costs to fish.