The Nash Equilibrium (A Beautiful Mind, John Nash): Definition, Explanation & Examples in One Minute

First of all, here's the link I've mentioned at the end of this video:

Many people were "kinda, sorta" exposed to the Nash equilibrium as a result of watching the movie or reading the book "A Beautiful Mind" about John Forbes Nash Jr. but the Nash equilibrium example provided there is better suited for an improved artistic experience than for understanding the Nash equilibrium properly.

Through a far more simplified approach, I've tried to explain that understanding the Nash equilibrium doesn't have to be unbelievably complicated.

The most popular contribution to game theory of John Nash, the Nash Equilibrium, can actually be understood through a simple explanation involving... lemonade :)

What does lemonade have to do with John Nash or the Nash equilibrium?

Let's find out!

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[ToxicGamer]

I have a feeling this was greatly simplified.

[andrewj]

If Bill knows that Rachel will follow his pricing scheme, then they're not actually competing. It could be just as easily said that he could raise his price to $100 per glass of lemonade, and make 100 times more money because then Rachel would do the same.

The real calculation of equilibrium involves how much more or less lemonade would be sold at different prices. If lemonade is very expensive, less lemonade will be sold overall (consumers will opt for water). If lemonade is very cheap, more lemonade will be sold (consumers will be able to afford more, and choose lemonade over other beverages).

If Bill and Rachel are truly competing, and consumers have no reason to prefer one seller to another (i.e. every single consumer would only purchase from the seller who offered it cheaper), the sellers would both lower their prices to one cent above the price at which it would become not worth their time to produce and sell it. That's the equilibrium.

[wcsxwcsx]

It sounds so simple, but everyone thinks they can beat the Nash Equilibrium. That's what really drives prices to where they are.

[adamrobc]

This is almost certainly happening with traditional retail as trading conditions are so volatile

[ubuntuposix]

Yet the US 2 party system argues 2 parties are enough to compete and offer the public what it wants.
If there was multiple parties like in Europe, then yes, they would have to compete to make the best offer to what the public wants. But, that's exactly what trying to be prevented.

[rpdswgr]

This is not a good definition of Nash equilibrium

[CandyLemon]

The narrative of this content is impactful. A book with akin themes was transformative beyond words. "Game Theory and the Pursuit of Algorithmic Fairness" by Jack Frostwell

[karanveer]

Hi loved your content, though I had a question. How do I differentiate between a case of Nash Equilibrium, prisoners dilemma and Game theory, I seem to have trouble doing that. Thanks

[prabodhwankhede]

Can you make a video on Coase theorem?

[johns.]

So is this the reason I can't afford a big mac anymore?

[NateDecker]

I believe that if this is literally done in practice, this is called "price fixing" and is illegal.

[mrepix]

It’s illegal for companies to collude to set prices with their competitors

[ragnarlothbrok]

Damn Im so stupid I still dont get it 😅😅 I need to do more research.

[kidtuber]

This was long ago when business competitors almost didn't exist. Now if you wanna start a business you have at least 500 similar companies and competitors in the industry so what do you do? The theory does not apply in modern society sorry folks.

[OneMinuteEconomics]

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[sapsion]

pleass try to speak more clearly and not as fast