Nash Equilibrium in Economics: Definition & Examples

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question 1 of 3

Amy and Crystal are cousins and both are getting married the same weekend. They both face choosing from the same two wedding dates, either on the same Friday or Saturday afternoons. Having their wedding near the same time has put a strain on their relationship and they are making the choice of wedding dates without cooperating with each other. Because they share a lot of the same guest list their wedding attendance will depend on the day they select. Both brides would like a big wedding, so the more the better when making their choice. Which of the following is a Nash equilibrium?

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1.

Which of the following is a requirement in order to have a Nash equilibrium?

A) It must be a non-cooperative game

B) Players make choices without considering the probable choices of others in the game

C) Each player, knowing the choices of other players, must not have an incentive to change their strategy

D) None of the above

2. An established company has been the sole provider of services in a small market. A new company has decided to open to compete with the established company. Both companies face an issue of what to do about prices. Below you see the different payoff amounts facing each company depending on whether they choose to keep the current price on the market or to choose a lower price. Which of the following is a Nash equilibrium?

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About This Quiz & Worksheet

Through these practice questions, you will improve your knowledge with questions on how to identify the Nash equilibrium from a given set of problems and what a Nash equilibrium requires.

Quiz & Worksheet Goals

Test your knowledge through the following:

  • Various Nash equilibrium problems
  • Requirements for a Nash equilibrium
  • Field of economics featuring the Nash equilibrium
  • A classic example of the Nash equilibrium

Skills Practiced

  • Interpreting information - verify you can read information regarding the field of economics featuring the Nash equilibrium and interpret it correctly
  • Knowledge application - use your knowledge to answer a question about the requirements for a Nash equilibrium
  • Problem solving - use acquired knowledge to solve various Nash equilibrium problems

Additional Learning

The lesson titled Nash Equilibrium in Economics: Definition & Examples is a good resource to have on this topic. With the lesson, you can expect to accomplish the following:

  • Understand who John Nash was
  • Identify his contribution to game theory
  • Describe the fundamentals behind the Nash equilibrium
  • Explain the situation faced by those in the prisoner's dilemma
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