If two firms in an oligopoly reach a Nash Equilibrium where neither firm has an incentive to change their strategy, which underlying cause best explains this stability in their decision-making?

In an oligopoly, a Nash Equilibrium occurs when two firms choose their strategies in such a way that neither wants to change their decision because doing so would not lead to a better outcome for them. This stability often comes from the interdependence of the firms; each firm knows that its profits depend on the actions of the other. For example, if Firm A and Firm B both decide to set a certain price for their products, neither will want to change their price because lowering it might lead to a price war, which would hurt both firms’ profits. This mutual understanding and the desire to avoid negative consequences create a stable situation where both firms stick to their strategies. Thus, the underlying cause of stability in their decision-making is the recognition of how their choices affect each other.