Economic Strategy

Strategy in economics:	Analysis of how actions result in outcomes, given a set of circumstances.
Game Theory:	The framework and models which allow the study of these interactions.
Nash Equilibrium:	The optimal combination of strategies of each player, given the choices of other players.

Prisoners' Dilemma

The Prisoner’s Dilemma is a common way of illustrating the application of game theory:

If both prisoners cooperate and stay silent, they both go to prison for 1 year.
If they both betray the other, they both get 2 years. You can see why one would then choose to betray.
But if the other prisoner stays silent, they go free.
The Nash Equilibrium is both criminals betraying each other.