The Nash Equilibrium

John F. Nash (1951) defined the most widely-used equilibrium concept. A set of strategies is called a

Nash Equilibrium if, holding the strategies of all other firms constant, no firm can obtain a higher payoff (profit) by choosing a different strategy. Thus, in a Nash equilibrium, no firm wants to change its strategy.

In the Cournot & Stackelberg models, firms' strategies concern setting quantities.

In the Bertrand model, firms set prices.

The Nash equilibrium concept is useful when strategies include setting advertising, or other variables in addition to output or price.

Sources :

Modern Industrial Organization, 2nd edition, Dennis .W. Carlton , Jeffrey .M. Peroloff, Addfison-Wesley, 1994

Economie Industrielle ( traduction de la 2ème édition par Fabrice Mazerolle), Dennis .W. Carlton , Jeffrey .M. Peroloff, de Boeck Université, 1998

Gaining and Soustaining Competitive Advantage, Jay. B. Barney, Addison-Wesley, 1997

Contemporary Strategic Analysis, Robert M. Grant, 3th edition, Blackwell, 1998

Strategic Management, Raphael Amit, Professor at Wharton University of Pennsylvania, US

Cours de Microéconomie, Prof Bernard Jaquier, 2003

© ECOFINE - Bernard Jaquier, Professor Emeritus & Dr Honoris Causa, Lausanne, Switzerland, 2020