Author Question: As this chapter explains, the movie A Beautiful Mind is a biography of John Nash. There is a ... (Read 60 times)

melina_rosy · **on:** Jun 29, 2018

As this chapter explains, the movie A Beautiful Mind is a biography of John Nash.

There is a scene in the movie where the John Nash character (played by Russell Crowe) is at a bar with several friends and has the insight that becomes what we now call a Nash equilibrium. Here is a game that summarizes what happened in that scene. Several women enter the bar; one of the women is very beautiful. All of the men would prefer to dance with the beautiful woman. They know that if one man asks the beautiful woman to dance that she will accept but that if two of the men ask her to dance she will refuse to dance with either of them. The John Nash character argues that none of the men should ask the beautiful woman to dance but should instead ask the other women. Do you think the director of this movie has studied game theory?

Question 2

What is an externality?

What will be an ideal response?

nathang24 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Probably not. The John Nash character has not described a Nash equilibrium. In a Nash equilibrium, each player chooses a strategy that is a best response to the other players' strategies. If none of the other men have asked the beautiful woman to dance, then each of the men's best response is to ask her to dance. Perhaps the moral of the story is that Hollywood should not discuss economics and economists should not make movies.

Answer to Question 2

An externality is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.