What does NE mean in UNCLASSIFIED

Nash Equilibrium (NE) is a game theory concept that describes a situation in which no player can benefit from unilaterally changing their strategy while the other players' strategies remain unchanged. In other words, it is a point where no player has an incentive to deviate from their current strategy given the strategies of the other players.

A Nash Equilibrium exists if the following conditions are met:

• Rationality: Each player acts rationally to maximize their own payoff.
• Common knowledge: Each player knows the strategies of the other players and understands that they are rational.

Finding a Nash Equilibrium can be done using various methods, depending on the complexity of the game:

• Analytical method: Solve the game algebraically or graphically.
• Iterative method: Use iterative techniques, such as the best response dynamics or fictitious play, to find a point where no player has an incentive to deviate.
• Computer simulations: Simulate the game repeatedly and track the strategies that lead to the highest average payoffs.

Common examples of Nash Equilibrium include:

• The Prisoner's Dilemma: Both players confessing to a crime despite it being in their mutual interest to remain silent.
• Bertrand Duopoly: Two firms setting their prices to match each other, resulting in zero profits for both.
• Traffic equilibrium: Drivers choosing the shortest route based on the current traffic conditions, leading to congestion.

Nash Equilibrium has some limitations:

• Multiple equilibria: A game can have multiple Nash Equilibria, making it difficult to predict the outcome.
• Non-cooperative: NE assumes that players act independently without considering cooperation or communication.
• Unstable: In some games, Nash Equilibrium can be unstable, and players may deviate from their strategies if they believe others will do the same.