Focal point (game theory)
In game theory, a focal point (or Schelling point) is a solution that people tend to choose by default in the absence of communication. The concept was introduced by the American economist Thomas Schelling in his book The Strategy of Conflict (1960).[1] Schelling states that "people can often concert their intentions or expectations with others if each knows that the other is trying to do the same" in a cooperative situation (at page 57), so their action would converge on a focal point which has some kind of prominence compared with the environment. However, the conspicuousness of the focal point depends on time, place and people themselves. It may not be a definite solution.Schelling's questions
Here is a subset of the questions raised by Schelling to prove the existence of a focal point. [1]
- Head-tail game: Name "heads" or "tails". If the two players name the same, they win an award, otherwise, they get nothing.
- Letter order game: Give an order to letters A, B, and C. If the three players give the same order, they win an award, otherwise they get nothing.
- Split money game: Two players share $100. They first write down their individual claims on a sheet of paper. If their claims add to $100 or less, both of them will get exactly what they claimed, but if the sum is higher than $100 they get nothing.
The results of the informal experiments are
- For the two players, A and B, in head-tail game. 16 out of 22 A and 15 out of 22 B chose "heads".
- For the three players, A, B, and C, in letter order game. 9 out of 12 A, 10 out of 12 B, and 14 out of 16 C wrote "ABC".
- For the players to claim part of the $100. 36 out of 40 chose $50. 2 of the remainder chose $49 and $49.99.
These games suggest that focal points have some saliency. These characteristics make them preferable choices to people. Furthermore, people would assume each other has also noticed the saliency and make the same decision.[2]