Define the term Nash equilibrium. In general, what can be claimed about the existence, uniqueness, and...

Define the term Nash equilibrium. In general, what can be claimed about the existence, uniqueness, and Pareto optimality of Nash equilibria? Support your answers with an appropriate illustration. (graph)

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Expert Solution

Nash Equilibrium

Players do not gain anything by changing their strategy unilaterally.

Every person plays a pure strategy - Pure strategy Nash Equilibrium. Each player plays only one action with probability 1.

Existence
Uniqueness

Unique, non-symmetric pure Nash Equilibrium - rent-seeking games

Assumptions - production function of agents for lotteries are concave, strictly increasing, and, twice differentiable. Exact solutions can be obtained for numerous examples.

Pareto optimality - It is a notion of efficiency. It is not possible to make a player better off by hurting another player.

Pareto-optimal

Rahul Sunny answered 1 year ago

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