So here we are faced with a situation of two Nash Equilibria.

Okay? So, for example one of the

real life cases that was looking at precisely such a situation was Sony and

Phillips. When they started developing the compact

disc in the late 1970s and early 80s, both of them knew they wanted to

standardize, but it was difficult to see which of the two standards was going to

be chosen. Sony, of course, wanted to get as much as

possible of their own standard into the system.

Phillips wanted to build as much of their own system into the standard.

In the end they ended with a sort of combination of both and were very

successful. So the CD was one of the most successful

introductions in consumer electronics. So we've just learned about the Nash

Equilibrium as the natural resting point of the game.

So at this point, in a Nash Equilibrium, no player can gain higher payoffs by

playing another strategy. So, in a competitive situation, we would

expect two rational rivals to choose their strategies such that they will end

up in a Nash Equilibrium. So, of course, in some situations, there

may be no Nash Equilibrium at all, as we've seen in the game of football and

soccer. In other settings, we have two or even

more Nash Equilibria. So, what's interesting there is that, how

do we select? How do we solve these sorts of games?

So in the next video, we'll have a closer look at these kinds of games.

But first, do have a look at the following game, and put down how many

Nash Equilibria there are.

Okay? Thanks very much, and see you very soon.