Understanding Nash Equilibrium In Simple Most Language With Examples

Imagine a few people are playing a game (poker, rock-paper-scissors, choosing which movie to watch together, deciding whether to study or copy homework, companies choosing prices, countries choosing tariffs… anything where everyone’s choice affects everyone else).

Nash Equilibrium = a situation where:Nobody wants to change their own decision alone
because whoever changes unilaterally
→ ends up worse off (or at best the same).

Everyone is doing the best reply they can, given what the others are already doing. So no single person has any reason to switch strategy by themselves.

Everyday examples

1. Two people driving on a road
   • Both drive on the right side → safe and smooth
   • If one suddenly switches to the left side alone → crash → Neither wants to change → Nash equilibrium
2. Everyone standing up at a concert
   • If everyone else is standing, and you sit down → you see nothing
   • If everyone else sits and you stand → you see better, but annoy people → Once almost everyone stands → no single person wants to sit → Nash equilibrium (unfortunately a bad one)
3. Two shops next to each other selling the same ice cream
   • Both set price = ₹50
   • If one secretly drops to ₹45 while the other stays at ₹50 → he steals almost all customers
   • But the other one will immediately also drop to ₹45 (or lower) → They both end up at a low price (often around cost) → neither wants to raise price alone → Nash equilibrium
4. Prisoner’s Dilemma (classic example)
   • Two criminals caught
   • Each can stay silent or confess
   • Best for both = both stay silent
   • But if the other stays silent, I am better off confessing (I go free, he gets long sentence)
   • So both confess → both get medium sentence → Neither wants to unilaterally change to “silent” → Nash equilibrium (but bad for both)

Nash equilibrium is the point where every player is already playing their best possible move assuming everyone else keeps doing what they’re currently doing. No one has an incentive to change just by themselves.That’s it, the whole idea in the simplest words.