One of the most tools that help economists explain the past and sometimes predict the future is the Nash equilibrium. The concept behind Nash equilibrium allows how competing firms set their prices, how governments should design auctions to squeeze the most from bidders and how to explain the sometimes self-defeating decisions that groups make. Nash equilibrium helps us understand how decisions that are good for an individual can be bad for the group. In some instances, this kind of outcome is explained using phrases such as "tragedy of the commons". What is your understanding of or how do you relate tragedy of the commons to Nash equilibrium's non-cooperative solution ?

Answer rating: 100% (QA)

The tragedy of the commons refers to a situation where individuals acting in their own selfinterest deplete or degrade a shared resource leading to ne... View the full answer