📚 Learning Guide
Nash Equilibrium and Strategy Adjustments
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In a repeated game context, if two players consistently choose strategies that lead to a Nash Equilibrium, what is the most likely outcome over time?

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Choose the Best Answer

A

They will continually change their strategies to improve payoffs.

B

They will eventually reach a different equilibrium.

C

Their strategies will remain stable, maintaining the equilibrium payoff.

D

One player will always dominate the other in the long run.

Understanding the Answer

Let's break down why this is correct

Answer

In a repeated game context, when two players consistently choose strategies that lead to a Nash Equilibrium, they will likely continue to maintain that equilibrium over time. This happens because both players understand that if they change their strategy unilaterally, they would end up worse off, as the equilibrium is a stable state where neither player has an incentive to deviate. For example, imagine two friends deciding how to split a pizza; if they both agree on splitting it evenly and are happy with that, they will keep choosing that option in future orders. As they keep playing, their trust in each other grows, which reinforces their commitment to that strategy. Therefore, the most likely outcome is that they will keep sticking to the Nash Equilibrium, leading to stable and predictable results in their interactions.

Detailed Explanation

When players reach a Nash Equilibrium, they find a stable strategy. Other options are incorrect because Some might think players will always try to change to get better results; It's a common mistake to think players will find a new equilibrium.

Key Concepts

Nash Equilibrium
repeated games
Topic

Nash Equilibrium and Strategy Adjustments

Difficulty

medium level question

Cognitive Level

understand

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