What is a Nash equilibrium?

It’s a state in a game where no player can improve their outcome by changing strategy alone, given what everyone else does. It’s a stable standoff — the predictable resting point of strategic interaction.

What is an example of a Nash equilibrium?

Both players confessing in the prisoner’s dilemma: given the other confesses, each is better off confessing, so neither will switch — even though mutual silence would be better for both. A stable but suboptimal outcome.

Is a Nash equilibrium always the best outcome?

No. It only means no one can do better by acting alone — it can be collectively terrible (as in the prisoner’s dilemma). Games can also have several equilibria, some far better than others.

Nash equilibrium

Game theory

A Nash equilibrium is a state in a game where no player can do better by changing their strategy alone, given what everyone else is doing. It’s a stable standoff — not necessarily the best outcome for anyone, just one no one can unilaterally improve on.

How it works

To find the equilibrium, ask of each player: given everyone else’s choices, would they want to change theirs? When no one would, you’ve found a Nash equilibrium — the predictable resting point of strategic interaction, even when it’s collectively bad.

How to use it

Predicting where a strategic situation will settle, even if the result is suboptimal.
Understanding why bad-but-stable outcomes persist (no one can fix it alone).
Designing rules so the equilibrium players settle into is a good one.

Worked example

In the prisoner’s dilemma, both confessing is the Nash equilibrium: given that the other confesses, each is better off confessing too, so neither will switch — even though both would be better off staying silent. The stable outcome is the bad one.

Where it fails

A Nash equilibrium says nothing about whether the outcome is good, fair, or efficient — only that it’s stable. Games can have multiple equilibria, and real people don’t always play to equilibrium, so it predicts resting points, not morality or guaranteed behaviour.

The deeper point

Its sobering insight is that stability and desirability are different things: a situation can be locked in place precisely because no one can fix it alone, even when everyone would prefer a different outcome. Escaping a bad equilibrium almost always requires coordination or changed rules — never just one person trying harder.

Frequently asked

What is a Nash equilibrium?: It’s a state in a game where no player can improve their outcome by changing strategy alone, given what everyone else does. It’s a stable standoff — the predictable resting point of strategic interaction.
What is an example of a Nash equilibrium?: Both players confessing in the prisoner’s dilemma: given the other confesses, each is better off confessing, so neither will switch — even though mutual silence would be better for both. A stable but suboptimal outcome.
Is a Nash equilibrium always the best outcome?: No. It only means no one can do better by acting alone — it can be collectively terrible (as in the prisoner’s dilemma). Games can also have several equilibria, some far better than others.

Game theory Prisoner's dilemma Incentives

Editorial synthesis © ReadGlobe 2026, drawing on the mental-models tradition (Charlie Munger, Farnam Street) and the primary sources for each model. · Last reviewed 2026-05-29.