Nash Equilibrium

A situation where no player can gain by changing strategy while others keep theirs.

A Nash equilibrium, named for mathematician John Nash, is a set of strategies where every participant is doing the best they can given what everyone else is doing — so no one has an incentive to deviate alone. It explains why competitors can get stuck in mutually harmful patterns, like price wars or advertising arms races, that none can exit unilaterally. The concept underpins modern auction design, antitrust analysis, and OPEC-style cartel behavior, and earned Nash the 1994 Nobel Prize in economics.

Both airlines matching each other's fares reached a Nash equilibrium where neither could profit by cutting prices alone.