Rationalizing Focal Points
Focal points seem to be important in helping players coordinate their strategies in coordination problems. Game theory lacks, however, a formal theory of focal points. This paper proposes a theory of focal points that is based on individual rationality considerations. The two principles upon which the theory rest are the Principle of Insufficient Reason (IR) and a Principle of Individual Team Member Rationality. The way IR is modelled combines the classic notion of description symmetry and a new notion of pay-off symmetry, which yields different predictions in a variety of games. The theory can explain why people do better than pure randomization in matching games.
|Keywords||focal points, game theory, individual considerations|
|Persistent URL||dx.doi.org/1010349014718, hdl.handle.net/1765/11658|
Janssen, M.C.W.. (2001). Rationalizing Focal Points. Theory and Decision: an international journal for multidisciplinary advances in decision sciences, 119–148. doi:1010349014718