If both firms in a duopoly reach a Nash Equilibrium where neither can benefit from changing their bidding strategy, what underlying mechanism is likely influencing this stability?

In a duopoly, two firms compete with each other, and a Nash Equilibrium occurs when both firms choose their strategies in a way that neither can improve their situation by changing their strategy alone. This stability often comes from the idea that each firm is making the best decision they can, given what the other firm is doing. For example, if Firm A and Firm B both decide on a specific price for their products, neither will want to change their price because doing so could lead to less profit if the other firm doesn't change theirs. The firms are aware of each other's strategies and know that any change could lead to a worse outcome for themselves. Thus, the mutual understanding and expectations about each other's actions create a stable environment where both firms stick to their chosen strategies.