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Which of the following statements is always correct about Nash equilibrium

  • A.Any player has the incentive to change its action unilaterally
  • B.It is suboptimal collective strategy
  • C.There can be two equilibriums when both the firms simultaneously play the same strategy
  • D.No player has anything to gain by changing its strategy given the strategy of the other player

Answer: D

A Nash equilibrium is a situation in which each player is doing the best he can given the strategy of the other player, so no player gains by changing his strategy alone. So it is correct to say that no player has anything to gain by changing its strategy given the strategy of the other player. The statement that a player has an incentive to change unilaterally is the opposite, and a Nash equilibrium need not be collectively optimal or unique. The answer is option D.

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