A psychological equilibrium consists of both players have realistic beliefs and the strategies chosen by each player is a Nash Equilibrium, given those beliefs.

Question

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Psychological equilibrium refers to a state in a game where each player's beliefs about the other players' strategies are correct, and each player's strategy is a best response to those beliefs, which aligns with the concept of a Nash Equilibrium where no player has an incentive to unilaterally change their strategy.

A Psychological Equilibrium Consists of Both Players Have Realistic Beliefs