Focal point (game theory)

[2] Schelling states that "[p]eople 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 (p. 57), so their action would converge on a focal point which has some kind of prominence compared with the environment.

Here is one example: to determine the time and place to meet a stranger in New York City, but without being able to communicate in person beforehand.

Schelling asked a group of students this question, and found the most common answer was "noon at (the information booth at) Grand Central Terminal".

There is nothing that makes Grand Central Terminal a location with a higher payoff because people could just as easily meet at another public location, such as a bar or a library, but its tradition as a meeting place raises its salience and therefore makes it a natural "focal point".

[2] Later, Schelling's informal experiments have been replicated under controlled conditions with monetary incentives by Judith Mehta.

Although the hierarchy of types could be indefinite, the benefits of higher levels would decrease substantially while incurring a much greater cost.

A level-n player from the CH model would assume that their strategy is the most sophisticated and that the levels 0, 1, 2, ..., n-1 on which their opponents play follow a normalized Poisson distribution.

Bacharach argued that people could find a focal point because they act as members of a team instead of individuals in a cooperative game.

[7] In this case, the decision to swerve right can serve as a focal point which leads to the winning right-right outcome.

This was shown by Camerer as, “[when] the game is played multiple times with the same group, the average moves close to 0.” [5] Introducing the iterative aspect to the game forces all players onto higher levels of thinking which allows them all to play guesses trending towards 0.