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Find Schelling points in coordination games—explore focal equilibria and convention formation
Coordination games are situations where players benefit from making the same choice, but there are multiple equally valid outcomes. Unlike the Prisoner's Dilemma, the challenge isn't overcoming selfishness but rather coordinating on which of several good outcomes to choose.
Many coordination games have multiple Nash equilibria - strategy profiles where no player can improve by unilaterally changing their strategy. The question becomes: which equilibrium will rational players actually select?
Thomas Schelling discovered that people often coordinate on focal points - solutions that stand out due to salience, cultural convention, symmetry, or other features that make them psychologically prominent. These "Schelling points" emerge even without communication or prior agreement.
Two hunters can either hunt stag together (high reward, requires coordination) or hunt rabbits alone (lower but guaranteed reward). Stag hunting is Pareto optimal but risky - if your partner defects, you get nothing. This represents the tension between efficiency and security.
A couple wants to spend the evening together but prefers different activities. Both prefer coordinating (going to the same place) over not coordinating, but each has a favorite. This game has two pure Nash equilibria, creating a coordination problem with conflicting preferences.
Two people need to meet but lost contact - where should they go? Classic examples include "meet at Grand Central Station at noon" in New York. The solution relies entirely on what both people think is the obvious focal point.
Players are completely indifferent between equilibria and just need to coordinate. Examples include driving on the left vs. right side of the road, or technical standards like USB-C. The challenge is pure coordination without preference conflicts.
Salience makes certain options psychologically prominent:
For a Schelling point to work, it must be common knowledge - not only must I know it, but I must know that you know it, and you must know that I know that you know it, ad infinitum. This recursive mutual knowledge is essential for coordination.
In repeated play, populations can converge to focal equilibria through learning and imitation. Even a small initial bias toward one equilibrium (due to salience) can lead the entire population to coordinate on it, demonstrating how psychological factors influence rational choice.
Coordination games reveal that rationality isn't just about individual optimization - it requires reasoning about what others will do, which depends on what they think you'll do. Focal points show that factors beyond pure payoffs (like salience and common knowledge) play a legitimate role in rational decision-making.