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Nash Equilibrium Homework Solutions

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What is the concept of Nash Equilibrium?

Nash Equilibrium is based on its creator’s name called Jon Nash who was an American mathematician. It is considered to be one of the most important concepts of game theory. It attempts to determine the logic of the player’s actions which are taken to secure the best outcomes for the result.

Nash Equilibrium is based on the optimum outcome of a game and where there is no incentive to derive from the initial strategy of playing. It is the concept of the whole game theory where the players have to base their moves depending on the opponent’s choices and behaviour.

It is the solution to any game where two or more players have any strategy to formulate the whole outcome. There are no incentives to gain depending on the players and their opponent’s choices and moves. Each player is considered to be optimal while considering their individual moves. Every player is set to win because they get the outcome they desire for.

What does the theory of Nash Equilibrium matters?

Economists are subjected to predict the future with the help of the past. One of the most important tools they can use to dispose of their thoughts is with the use of the theory of Nash Equilibrium. Here are some of the reasons why this theory of Nash Equilibrium matters the most.

  • Game theory is the study of strategies so that the moves of every player can be determined through simple logistics and mathematics. It is almost as basic as human interactions, politics and economic law of attraction and the models of religion.
  • It helps to determine whether the different players in the game are cooperative or not. Cooperative games are like forms of partnerships where the players must connect with each other and work together to get the things done.
  • It also helps to rule out the coordination and the level of determination among all the players. The theory of Nash Equilibrium applies when both the players are playing their theories accordingly.
  • There can be multiple choices of equilibrium at a simple state. Each equilibrium point provides a lockout for the players so that they won’t be able to escape quickly. For example, the rivalries between different states or countries can rule out in any state of equilibrium.
  • It provides a precious model of all the theories based on the whole gaming structure. For example, firms like in the oligopoly situations have the perfect balance of Nash Equilibrium with them.
  • It is considered to be one of the most important ideas in the form of economics. It is termed to be a simple tactic in ruling out the different strategies of the opportunists in the gaming logic.

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