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There are cases in which the Nash equilibrium is a counter-intuitive outcome (and where the intuitive outcome is not a Nash equilibrium). The reason for this is the assumption that a participant assumes that nobody except for him will potentially change strategies.

There are cases in which the Nash equilibrium is a counter-intuitive outcome (and where the intuitive outcome is not a Nash equilibrium). The reason for this is the assumption that a participant assumes that nobody except for him will potentially change strategies.

One notable example is the [[Prisoner's dilemma]], in which the Nash equilibrium is a sub-optimal result that could be improved if both participants cooperated and changed their decisions. But left on his own, no single participant would change his decision.

One notable example is the [[Prisoner's dilemma]], in which the Nash equilibrium is a sub-optimal (non-[[Pareto optimal]]) result that could be improved if both participants cooperated and changed their decisions (by neither confessing to the crime). But left on his own, no single participant would change his decision because he would be individually worse off for doing so.

 

Observe that in situations where the Nash equilibrium fails to attain the most efficient outcome for the individual participants, it does deliver the most benefits to the customer (in the case of an oligopoly) or to the prosecutor (in the case of the [[Prisoner's dilemma]]).

[[category:mathematics]]

[[category:mathematics]]

[[category:economics]]

[[category:economics]]