Monday, October 10, 2005

In Stockholm, We'll Meet at the Bank of Sweden

The Richmond Fed had an interview with new Nobelist Thomas Schelling earlier this year:

RF: One of the more famous bargaining situations that you propose in The Strategy of Conflict involves a problem in which communication is incomplete or impossible – the game where two strangers are told to meet in New York City but have not communicated with each other about the meeting place. What does this game tell us about bargaining? And what, if any, are the policy implications?

Schelling: That little exercise, which I designed to determine if people could coordinate without any communication, became fairly famous and now I am usually identified as the originator of the idea of "focal points." My argument was that in overt negotiations something is required to get people to arrive at a common expectation of an outcome. And the ability to reach such a conclusion without communication suggested to me that there was a psychological phenomenon, even in explicit negotiations, which may work to focus bargainers eventually on that commonly expected outcome. By understanding that, I thought, we may be able to more easily facilitate policy negotiations over such matters as what would be an appropriate division of the spoils, an appropriate division of labor, and so forth.

RF: What were the responses when you originally posed this question to people?

Schelling: When I first asked that question, way back in the 1950s, I was teaching at Yale. A lot of the people to whom I sent the questionnaire were students, and a large share of them responded: under the clock at the information desk at Grand Central Station. That was because in the 1950s most of the male students in New England were at men's colleges and most of the female students were at women's colleges. So if you had a date, you needed a place to meet, and instead of meeting in, say, New Haven, you would meet in New York. And, of course, all trains went to Grand Central Station, so you would meet at the information desk. Now when I try it on students, they almost never give that response.

Some cities have more obvious focal points than others. For instance, if I asked people where would you meet in Paris, they probably would have no trouble. Most would go to the Eiffel Tower. But in other cities, it's not so clear.

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