Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They believe their current strategy is the best given others' choices.
B
They are forced to stick to their strategies by external rules.
C
They have no knowledge of other players' strategies.
D
They want to maximize their payoffs without considering others.
Understanding the Answer
Let's break down why this is correct
Answer
In a Nash Equilibrium, players choose not to change their strategies because doing so would not improve their situation. Each player considers what the others are doing and realizes that if they switch their strategy, they might end up worse off. For example, imagine two companies setting prices for the same product. If both companies have set their prices in a way that maximizes their profits given the other's price, neither will want to change their price because it could lead to lower profits. This mutual best response is what keeps them stable in their choices, creating a balance where everyone is satisfied with their current strategy.
Detailed Explanation
Players think their choice is the best one, given what others are doing. Other options are incorrect because Some might think players are forced to stick to their choices; It's a common mistake to think players don't know what others are doing.
Key Concepts
Nash Equilibrium
Strategic Decision-Making
Game Theory
Topic
Nash Equilibrium Explained
Difficulty
medium level question
Cognitive Level
understand
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