Equilibrium in Economics: Why No One Benefits from Changing Their Behavior

In most economic situations, you are not the only person trying to optimize. Other people's actions will affect your decision-making. Economists see the world as a group of economic agents who interact and influence each other's efforts to optimize. As mentioned earlier, equilibrium is a special state where everyone is optimizing simultaneously and no one can benefit from changing their behavior.

We need an important clarification on this concept. When we say that no one can benefit from changing their behavior, we mean that no one believes they will benefit from such a change. In equilibrium, given all the information they have, including their beliefs about others' behavior, all economic agents make the best feasible choices. We can restate this concept as follows: in equilibrium, no one thinks they will benefit from changing their behavior.

To build intuition for the concept of equilibrium, consider the length of the regular payment queue at a local supermarket (ignoring the express checkout). If any queue is shorter than the others, optimizing agents will choose that queue. If any queue is longer than the others, optimizing agents will avoid that queue. Thus, shorter queues attract shoppers, and longer queues prompt them to go to other queues. Moreover, the length of the queue is not the only important factor. When you choose to queue, you estimate which queue will check out the fastest, and your estimate includes everything you can see, including how many items are in each person's shopping cart. Economists say that 'in equilibrium', the waiting times for all payment channels will be roughly the same. When the expected waiting times are the same, no shopper has an incentive to switch queues. In other words, no one thinks they will benefit from changing their behavior.