Modern finance · 1950s–1990s
1950
The Nash equilibrium
John Nash shows every game has a stable outcome where no one wants to change.
In 1950 John Nash proved that games have an equilibrium where no player gains by changing strategy alone. The same year, researchers at RAND devised the prisoner's dilemma.
💡 Why it made sense then
It gave a way to predict outcomes when every side is reacting to the others.
Ideas it gave us
- 🏗️ Nash equilibrium
A Nash equilibrium is a set of strategies in which no player can do better by changing their own strategy while the others keep theirs. It's the stable outcome of a game.
- 🏗️ Game theory
Game theory is the study of strategic decisions, where each player's best choice depends on what the others do. The prisoner's dilemma is its most famous example.
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