Nash's interpretations of equilibrium: Solving the objections to Cournot

Arbeitspapier

A Nash equilibrium can also be seen as a Cournot-Nash equilibrium, though this is debated because Cournot provided a specific application, not a general formulation. In my view, another of Nash's fundamental contributions stands out when contrasting him to Cournot. Cournot treated economic decisions as optimization problems, but his stability analysis of duopoly led to endless discussions because players did not use the available information. Nash solves this with his rational interpretation: when players know the structure of the game, they can use the solution to predict the equilibrium. He thus introduces rational expectations. Nash additionally offers an adaptive interpretation: when players do not know the structure of the game, they can adjust their strategies to maximize payoffs. These adaptive expectations were anticipated by Cournot in his analysis of monopoly. In brief, Nash was not only extraordinary as a mathematician; his deep insights allow solving decades-long debates in economics.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Serie Documentos de Trabajo ; No. 575

Classification and Topics

• Classification: Wirtschaft
• Subject: equilibrium ; rational players ; consistent beliefs ; adaptive expectations ; rational expectations

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Streb, Jorge M.
• Event: Veröffentlichung
• (who): Universidad del Centro de Estudios Macroeconómicos de Argentina (UCEMA)
• (where): Buenos Aires
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/130826
• Last update: 10.03.2025, 11:44 AM CET