Microeconomics › Section J · Monopolistic competition and oligopoly › Topic J.3
The prisoners' dilemma and Nash equilibrium
When everyone's best move depends on everyone else's, good individual decisions can add up to a bad collective result. The prisoners' dilemma - the most famous game in economics - shows exactly how, and the Nash equilibrium names the outcome no player can improve alone.
In this topic
- What a game is
- Reading a payoff matrix
- Dominant strategies
- The prisoners' dilemma
- Worked example: verifying the dilemma
- The lesson: rational individually, wasteful together
- Nash equilibrium
- Worked example: an advertising war
- Games without dominant strategies
- Common mistakes to avoid
- Key takeaways
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