![]() ![]() Subsequent experimental work on behavior in pure coordination games has been conducted by Mehta, Starmer and Sugden (1994). Schelling (1960) attributed this better-than-chance performance to one of the strategy options Specifically, it appears that the strategy Heads comes immediately to mind more often than Tails, resulting in the focal point outcome Heads-Heads. A large body of experimental evidence demonstrates that people do much better than chance at coordinating in these types of games. 2 A simple example of such a game is one where players each choose between strategies labeled Heads and Tails, receive $1 if their choices match (i.e., are HH or TT), and receive $0 otherwise. One stream, originating with Schelling (1960), examines behavior in pure matching games in which players receive a fixed positive payoff whenever their strategy selections match and a payoff of zero otherwise. Two different streams of literature have addressed this problem. However, traditional game theory offers little guidance on how to systematically predict when coordination will occur. Firms, nations, and individuals frequently face situations where coordination is among the most desirable outcomes, and sometimes such coordination is achieved. Of multiple equilibria is among the oldest and most fundamental in game theory. Introduction The dilemma of how two people can coordinate on the same strategy despite the presence Although theorists often invoke notions of salience when dealing with otherwise intractable problems of equilibrium selection, they do so in a spirit of faute de mieux.” (Gold and Sugden (2006, p. “The concepts of ‘focal point’ and ‘salience’ have become part of the tool-kit of game theory…Despite that, focal points have never been integrated into the formal structure of the theory. Experimental results are presented that test the predictions of the model. ![]() ![]() Finally, the theory specifies when a player is likely to select a strategy based solely on consideration of her own payoffs, and when and why the same player will be prompted to act strategically. It identifies other circumstances in which a non-equilibrium outcome will predominate. The model characterizes situations when Nash equilibria are likely to be played, even in a one-shot interaction, and predicts which equilibrium will obtain in games containing more than one. For the subset of such games involving coordination and asymmetric payoffs, payoff differences identify focal outcomes and strategies in the same way shared social knowledge produces coordination in Schelling’s symmetric games. The model uniquely predicts which outcome will emerge for virtually the entire class of 2x2 normal form games. This paper develops a model of play in 2x2 games where payoff differences determine what strategy players will perceive as “salient” and choose to play. However, focal points remain largely outside the formal apparatus of game theory. Since the classic work of Schelling, the notion of a focal point has been widely applied to explain coordinated behavior. The views expressed are those of the authors and do not necessarily reflect those of the National Science Foundation, the Consumer Financial Protection Bureau or the United States. Research for this manuscript was conducted while Jonathan Leland was on detail as Senior Fellow, Office of Research, Consumer Financial Protection Bureau and while serving at the National Science Foundation. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.Ī Theory of Focal Points in 2x2 Games 1 Jonathan W. The manuscript will undergo copyediting, typesetting, and review of the resulting proof before it is published in its final form. As a service to our customers we are providing this early version of the manuscript. This is a PDF file of an unedited manuscript that has been accepted for publication. Please cite this article as: Leland, J.W., Schneider, M., A Theory of Focal Points in 2x2 Games, Journal of Economic Psychology (2018), doi: ![]() Received Date: Revised Date: Accepted Date:Ģ3 November 2016 31 August 2017 14 March 2018 Leland, Mark Schneider PII: DOI: Reference: Accepted Manuscript A Theory of Focal Points in 2x2 Games Jonathan W. ![]()
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