TB: Nash Equilibrium

A Nash equilibrium is a state in which no player can improve their outcome by unilaterally changing their strategy, given the strategies of all other players. It is a stable point: each player is playing a best response to the others. Named after mathematician John Nash.

Nash equilibria explain why individually rational behavior often produces collectively suboptimal outcomes. The prisoner's dilemma, arms races, and price wars all have Nash equilibria that leave everyone worse off than if they could credibly coordinate. Understanding the equilibrium structure of a situation reveals what behavior to expect and what interventions (contracts, regulations, norms) can shift it.

• AI: A Modern Approach: multi-agent systems converge to Nash equilibria — explains why coordination problems are hard and why binding agreements or mechanism design is often necessary.

• Expected Value
• Incentives Matter
• Decision Making