Students of our textbook will recognize Nash equilibrium of strategic games from Chapter 15 and his non-strategic characterization of bargaining from Chapter 16.
Up until Nash's work on the theory of games, all we had were models of monopoly (one firm) and "perfect competition" (many small firms). This was not very useful because most of the interesting problems arise in oligopoly (competition between a few firms), and Professor Nash gave us a way to characterize competition in this setting.
Insights from his models have been distilled into advice given to generations of MBA students:
Use game theory to figure out where self interest is taking you; and if you don't like where that is, change the rules of the game.
Likewise his strategic and non strategic (axiomatic) models of bargaining have been distilled into bargaining insights:
The alternatives to agreement determine the terms of agreement.
John and Alicia Nash, RIP
Until this MBA course in economics, I had not really had the opportunity to learn of John Nash. I have enjoyed learning of his concepts and how they apply to so many things we do. Just understanding the fact that there exists an “equilibrium” where no side would benefit by changing its course has been very enlightening to me. The best Nash Equilibrium example that I have read about was how the U.S. and the U.S.S.R. were at an equilibrium, because each could have destroyed each other and knew exactly where the others positions were, but still didn't start a war. His contributions to game theory will be useful to me as I progress through my career.
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