Schelling Points

Thomas Schelling noted that the literature on game theory has often portrayed it as a strictly rational and mathematical setup, where each player is incentivized to defect, despite the fact that mutual cooperation would be better for both players. Unlike the entirely rational model of human decision-making in much of game theory, Schelling realized that humans rely on shared intuition, context, and culture to make decisions.

Schelling asked his students where they would go to meet a friend in New York City if they got separated. Out of the countless potential options, only a few were repeatedly mentioned, such as Times Square or Grand Central Terminal. Schelling hypothesized that most people have a default solution they tend to choose in the absence of information. Remarkably, even without explicit coordination, individuals manage to coordinate their actions in mutually beneficial ways.

At the foundation of the concept of Schelling points is the human capacity for empathy. For two individuals to coordinate without direct communication, each must consider the thinking of the other. In fact, each person must consider what the other believes they themselves will do. In this respect, the common knowledge that underlies Schelling points involves knowing that other people know the same facts as yourself.

Schelling points seem to emerge from the nature of human psychology and sociology, since they are predicated on individuals understanding the intentions and thoughts of others. Without shared knowledge or understanding, it becomes increasingly difficult to coordinate without explicit communication. For this reason, different groups of people with dissimilar backgrounds and experiences may share weaker Schelling points, or may not have them at all.

In geopolitics, Schelling points appear to be critical in facilitating cooperation between states. Often, nations, especially adversaries, do not want to share their thinking explicitly with one another to avoid giving an informational advantage. Yet countries with limited communication can exhibit a remarkable level of coordination. The best example of this might be the coordination found in multilateral institutions. Even countries with deep-seated differences and animosities manage to coordinate on shared objectives through these institutions.

Schelling points may also find application in peace negotiations. In the discussions between Iran and the United States, both countries have a shared understanding of each other’s intentions and thought processes. This shared knowledge allows them to make progress towards a deal, even in the context of inauthentic communication between the two countries.