A Nash equilibrium with a noncredible threat as a component is:
A) a perfect equilibrium.
B) not a perfect equilibrium.
C) a sequential equilibrium.
D) a somewhat perfect equilibrium.

Question

Quizplus · Accepted Answer

A noncredible threat is a threat that the player making the threat would not follow through with if the other player doesn't respond as desired. In a Nash equilibrium, each player is maximizing their payoff given the other player's action. If one player makes a noncredible threat and the other player responds as desired, this would not be a stable outcome as the player making the threat has no incentive to follow through with their threat in the future. Therefore, a Nash equilibrium with a noncredible threat as a component is not perfect and not stable, making option B the correct answer.

A Nash Equilibrium with a Noncredible Threat as a Component