A dominant strategy equilibrium is a strategy combination consisting of all players dominant strategies. It can be arrived at by iterative deletion of dominated strategies, i.e. eliminating all actions that the players will not choose. This requires common knowledge of rationality. The idea here is that no single player has the incentive to deviate. We can have equilibria in pure or mixed strategies.
Nash equilibrium is the single game theoretic concept most frequently applied in economic examples.
The Games Consider this first example, known as the Prisoners Dilemma. We have two prisoners in separate cells, faced with the dilemma of whether or not to inform. Each player has defect as best response to any action by the other. This general sort of situation arises in many contexts in economics. For example, where we have two firms selling the same product and deciding whether to advertise or not.