Focal Point
Prominent strategy in games
A focal point is a prominent strategy in a game that is obvious to all players and is likely to be chosen by all players. It is a concept that is used to select among multiple Nash Equilibria.
- A focal point is a prominent strategy that is obvious to all players.
- A focal point is likely to be chosen by all players.
- A focal point can emerge as a result of common knowledge or shared experiences among players.
- Identify the game and the Nash EquilibriaIdentify the game and the multiple Nash Equilibria.Pro tipUse a game tree or payoff matrix to visualize the game.WarningMake sure to include all possible strategies and payoffs.
- Find the focal pointFind the prominent strategy that is obvious to all players.Pro tipUse the concept of common knowledge or shared experiences among players to identify the focal point.WarningMake sure to check that the focal point is stable and that no player has an incentive to deviate from it.
The meeting game
Two people are told to meet in New York City on a specific day without being told where or at what time. They must find a location and time to meet.
OutcomeThe focal point is found to be the Empire State Building at noon, as it is a prominent location and time that is obvious to both people.
Ignoring the common knowledge among players
Failing to consider the common knowledge or shared experiences among players when identifying the focal point.
Not considering all possible strategies
Failing to include all possible strategies and their associated payoffs in the analysis.
The concept of focal point was first introduced by Thomas Schelling in the 1960s. Schelling showed that in games with multiple Nash Equilibria, a focal point can emerge as a prominent strategy that is obvious to all players.
Source · BOOK
The Art of Strategy: A Game Theorist's Guide to Success in Business and Life