Nash equilibrium
A bluffing game solved on one square: best replies, the point where neither player can gain, and why a third of bets are bluffs.
- 01, open this step in the interactive version
One spot, two players. They bet $100 into a $100 pot, with strong hands or bluffs. You call or fold.
- 02, open this step in the interactive version
Every point on this square is a pair of strategies: how often they bluff, and how often you call.
- 03, open this step in the interactive version
Your best reply depends on them. Left of the black line, fewer than a third of their bets are bluffs, so you fold. Right of it, you call.
- 04, open this step in the interactive version
Their best reply depends on you. Below the red line you call less than half the time, so they bluff more. Above it, they stop.
- 05, open this step in the interactive version
Now let each side keep switching to its best reply. You fold, so they bluff more. So you call, so they stop bluffing…
- 06, open this step in the interactive version
It never settles. Every switch is punished by the next one.
- 07, open this step in the interactive version
Except at one point, where the two lines cross. They bluff a third of the time, you call half the time. Neither of you gains by changing alone. That’s a Nash equilibrium.
- 08, open this step in the interactive version
Set both strategies yourself. Away from the crossing point, someone can always profit by changing.