Essay: The Nash Equilibrium
The Nash Equilibrium is applicable to economics in that it tries to prove how impossible it is to dominate the market (Shoham & Leyton-Brown, 2009). It shows that before any individual in the market makes any decisions, he or she has to consider all the decisions made by the other players in the industry.
For instance, considering the case of two entrepreneurs in the same industry who have to decide on their prices, it may follow that all have to come to a consensus on the price to sell at. If entrepreneur A sells at $3 while B sells at $1, A will make losses while B makes profits and attracts sales. This will force entrepreneur A decrease his prices to $1 from where the profits for entrepreneur B decreases while those of A increases and the two have equal gains. Neither A nor B is able to increase the price without considering the other entrepreneur.
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