EconSim
Concept

Dominant strategies & Nash equilibrium

A Nash equilibrium is a situation in a strategic game where no player can do better by changing their own move alone, given what everyone else is doing — so it is stable, a natural resting point. A dominant strategy is even stronger: a move that is best no matter what others do. In the prisoner's dilemma, defecting is dominant for each player, so mutual defection is the Nash equilibrium — even though both would be better off cooperating. That gap is the whole lesson: individually rational choices can produce a collectively worse outcome. A Nash equilibrium need not be the best outcome, only a stable one, and a game can have more than one. It is the core tool for predicting behaviour when people's choices depend on each other.

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