Nash equilibrium


An equilibrium in game theory in which each player's action or strategy is optimal given the actions or strategies of the other players. E.g., in a tariff-and-retaliation game, with each country able to improve itsterms of trade with a tariff, zero tariffs are not Nash, since each can do better by raising its tariff. A Nash equilibrium, with positive tariffs, is likely to be inferior to free trade for both.

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