Module 3 Simultaneous Games 3.7 Explaining Nash Equilibrium abstractly
When we use dominance reasoning in a simultaneous game we also used best response reasoning to help discover whether there were, or were not, dominant strategies in a game. Along the way we frequently met the idea of mutual best responses – particular strategy combinations – profiles- where each player’s strategy is a best response to each other player’s strategy, i.e. mutual best responses. This short clip elaborates on that idea , since it is the basis for a definition of a Nash Equilibrium in a game. Nash Equilibrium is what we – theorists – predict will be the outcome of intelligent rational play in a game of strategy. It is a deep unifying concept, and this short clip explains how nash equilibria (plural) or nash equilibrium (singular) is a prediction not only of how people behave but what they will believe about how others will behave. Behaviour and beliefs, both elements are important.