Nash equilibrium

The concept of equilibrium was first used by Antoine Auguste Cournot. He showed how to find what is called the Nash equilibrium in the Cournot game. John Nash was the first to prove that such equilibria must exist for all finite games with any number of players. This was done in his dissertation on non-cooperative games in 1950. Equilibrium theory became the topic of John Nash's dissertation, which he wrote when he was 21 years old. Thus was born a new strategy game called "Nash Equilibrium", which earned the Nobel Prize many years later - in 1994.

Since the Nash equilibrium theory explains the behavior of people in interaction conditions, it is worth considering the basic concepts of game theory. Game theory studies the behavior of players in the conditions of interaction with each other by the type of game, when the outcome depends on the decisions and behavior of several people. The participant makes decisions based on his predictions about the behavior of others, which is called a game strategy.

John Nash's equilibrium has become revolutionary in its own way. Especially vividly this theory influenced the opinion of economists about how market players make choices, taking into account the interests of others, with close interaction and intersection of interests. Nash equilibrium is a point of contact of interests, where each participant chooses an option that is optimal for him only if other participants choose a certain strategy. The theory of Nash equilibrium has given amazing conclusions that have refuted the principles that existed before. For example, Adam Smith viewed the behavior of each of the participants as absolutely selfish, which brought the system into balance. This theory was called the "invisible hand of the market." John Nash saw that if all participants act in pursuit of only their own interests, this will never lead to an optimal group result. Given that rational thinking is inherent in each participant, the choice offered by the Nash equilibrium strategy is more likely. Making decisions in real conditions is very similar to a game when you expect certain rational behavior from other participants. In business, at work, in a team, in a company, and even in a relationship with the opposite sex. From big deals to ordinary life situations, everything is subject to one law or another.