We first define formally the new concept from last time: Nash equilibrium. Then we discuss why we might be interested in Nash equilibrium and how we might find Nash equilibrium in various games. As an example, we play a class investment game to illustrate that there can be many equilibria in social settings, and that societies can fail to coordinate at all or may coordinate on a bad equilibrium. We argue that coordination problems are common in the real world. Finally, we discuss why in such coordination problems--unlike in prisoners' dilemmas--simply communicating may be a remedy.

📑 Lecture Chapters:

Nash Equilibrium: Definition [00:00:00]
Nash Equilibrium: Examples [00:09:31]
Nash Equilibrium: Relation to Dominance [00:23:13]
Pareto Efficient Equilibria in Coordination Games: The Investment Game [00:31:53]
Pareto Efficient Equilibria in Coordination Games: Other Examples [00:53:11]

Source: Ben Polak, Game Theory (Yale University: Open Yale Courses). Licensed under CC BY-NC-SA 3.0.